Business Law Exam 3
What are the exceptions to the statute of frauds?
1. Admission 2. Partial Performance 3. Promissory Estoppel
What are three elements to a valid offer?
1. Intent by the Offeror to be Bound 2. Reasonably Definite Terms 3. Communication to the Offeree
What are the elements of acceptance?
1. Intent to be bound by acceptance (Objective Test Again) 2. Terms of offer and acceptance or define and certain 3. Acceptance is communicated to offeror
What are integrated contracts?
A contract that is integrated is intended to be the complete and final representation of the parties' agreement
What are the elements of fraudulent misrepresentation?
A false statement Intent to deceive Justifiable reliance
Which of the following is true of an offer made in jest?
A joke is treated as a serious offer if the outward manifestation of intent would lead a reasonable person to believe it was intended as a serious offer.
What is negligent misrepresentation?
A person makes a false statement of material fact believing said fact to be true, but if she had used reasonable care she would have discovered the statement to be inaccurate.
What is legal assent?
A promise that courts will require parties to obey
What is preexisting duty?
A promise to do something that you are already legally obligated to do is NOT valid Consideration
Which of the following is not a type of consideration?
A promise to think about doing something
What is an illusory promise?
A situation where a party appears to commit to something but really has not committed to anything. It's not actually a promise and as such does not create valid consideration.
Which of the following is not a required element of a valid offer?
A written document setting forth offer terms
Which of the following is false regarding written contracts?
ALL contracts must be in writing to be enforceable
Which of the following consists of an offer by one party and an acceptance of the terms by another party?
Agreement
What is a valid contract?
All elements of contract formation satisfied
What is an executed contract?
All terms of contract fully performed
What is mistake of fact?
An erroneous belief about the facts of the contract at the time the contract is concluded Legal assent is missing when a mistake of fact occurs
What is revocation?
An offeror can revoke his or her offer at anytime prior to acceptance by the offeree. Revocation is effective when the offeree receives it
What is misrepresentation?
An untruthful assertion by one of the parties about a material fact that leads the other party to be in error about said fact
What is the rule for minors that enter a contract?
As a general rule, any contract entered into by a minor is voidable by the minor until he or she reaches the age of majority or reasonable time thereafter.
What are the main purposes of the statute of frauds?
Attempts to ease contractual negotiations by requiring sufficiently reliable evidence to prove the existence and specific terms of a contract. Prevent unreliable oral evidence from interfering with a contractual relationship Prevent parties from entering into Contracts with which they don't agree
What is mutual mistake of fact?
BOTH parties are mistaken about a material fact
According to these chapters of the text, which of the following is the definition for consideration?
Bargained for exchange
What is an implied contract?
Based on conduct or actions Three Elements: 1. Plaintiff provided some property or service to the Defendant 2. The plaintiff reasonably expected to be paid for such property or service 3. The Defendant had the opportunity to reject the service but did not Example: Sitting down at a restaurant and ordering food.
Which of the following is an element of a legally binding contract?
Capacity
What is an express contract?
Clearly set forth Based on written or spoken words
What are the sources of contract law?
Common law, SD Contract Law, and Uniform Commercial Code
What is fraudulent misrepresentation?
Consciously false representation of a material fact intended to mislead the other party. The party making the misrepresentation either knows or believes that the factual claim is false or knows there is no basis for it
Which of the following is true of consideration?
Consideration is required in all contracts
A[n] _____ is a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.
Contract
What is an option contract?
Contract to keep an offer open.
What is the general rule regarding contracts and intoxication?
Contracts made by intoxicated persons are voidable Must be intoxicated to the point of mental incapacity
What is the one year rule?
Contracts that cannot be performed within one year from the date of their making by their own terms
What is satisfaction?
Debtor's payment of the reduced amount
Where does the statute of frauds come from?
English law
What is a bilateral contract?
Exchange of promises I.E. Promise is exchanged for another promise
A promise to stop doing something you otherwise are legally allowed to do is not valid consideration.
False
An invitation to negotiate is an offer because it expresses a willingness to be bound by acceptance.
False
An offeror has no right to revoke an offer before receiving a reply.
False
Consideration is an "optional" element of every contract.
False
If a minor enters into contract with an adult, both parties may disaffirm a contract based upon the minor's lack of majority.
False
In relation to contracts, the term "consideration" pertains to parties acting in an ethical manner.
False
There are no exceptions to the statute of frauds.
False
To satisfy the writing requirement of the statute of frauds contracts must be signed in blue ink.
False
What is innocent misrepresentation?
False statement about a material fact to an agreement that the person making the statement believes to be true
What are advertisements?
Generally treated as offers to make offers
What is a void contract?
Illegal object or serious defect
When someone has some sort of mental or physical defect that prevents him or her from being able to enter into a legally binding contract, what term is used?
Incapacity
What are preliminary negotiations?
Invitations to negotiation and inquiries are not offers.
What is the parole evidence rule?
Involves a situation where there is a written contract in place, but one party asserts that the writing is in some way deficient
What is absent when a mutual mistake of fact occurs?
Legal Assent
What is the objective test?
Look at outward manifestations and use reasonable person standard
What is contractual capacity?
Mental ability to understand rights and obligations established by contract, with the presumptive ability to understand how to comply with the terms of the agreement
Who has limited capacity for a contract?
Minors Those suffering from mental deficiency that renders them incapable of understanding the nature and obligations of contracts Those who are intoxicated
What is disaffirmance?
Minors' right, until reasonable time after reaching age of majority, to disaffirm/avoid their contracts
What is general rule of law?
Natural persons over the age of majority (18 in most states) are presumed to have the full legal capacity to enter into binding legal contracts
What are unforeseen circumstances?
Neither party could reasonably foresee an issue that increased the amount of work and therefore compensation.
What is an accord?
New agreement to pay less than what is owed
What is liquidated debt?
No dispute as to amount of money owed
What is a quasi-contract?
Not actually contracts, but imposed in certain cases to avoid unjust enrichment Court treats parties AS IF they had a valid contract
What is Objective Theory of Contracts?
Objective Reasonable Person Standard is Used to Interpret Contract Existence Existence and interpretation of contract is based on outward manifestations of intent by parties
What is duress?
Occurs when one party is forced into an agreement by a wrongful act of another
What is lapse of time?
Offer has a specific time limit that it will exist. Time goes by. Offer is terminated. If no time limit specified Court will determine a "reasonable time".
What is acceptance?
Once an offer has been made the offeree has what is called the "Power of Acceptance".
What is rejection?
Once the offeree rejects an offer it is terminated. Can't later change mind unless offeror willing to accept new offer.
What is a mistake?
One or both parties to a transaction may think they have consented to exchange a specific thing only to find out later that there was not a "meeting of the minds".
What is promissory estoppel?
One party makes a promise and either knows or should know that the other party will reasonably rely on it The other party does reasonably rely on the promise The only way to avoid injustice is to enforce the promise Legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract.
Are parents liable for their children's contracts?
Parent's are not liable for the contracts entered into by their children. Exceptions: Necessities Surety (co-signing)
What is partial performance?
Partial performance in real estate contracts involves when one of the parties has provided partial payment under the contract's terms, taken possession of the land, and made permanent changes to the real estate.
What is a voidable contract?
Parties can withdraw from or enforce contract
What is unliquidated debt?
Parties, in good faith, either dispute fact money owed, or dispute amount owed
What is additional work?
Party agrees to do more work than the contract required
What is incapacity?
Possession of a mental or physical defect that prevents a natural person from being able to enter into a legally binding contract
What is a unilateral contract?
Promise in return for performance of act I.E. For a contract to exist the Offoree has to actually do something instead of just make a promise.
What are Unconscionable Contracts?
Refers to a contractual agreement that is so unfair to one party that it is "void of conscience".
What is the mailbox rule?
Rule determining at which point acceptance made though the mail becomes effective Rule states that acceptance is valid when the offeree places it in the mailbox
What is detrimental reliance?
Significant Partial Performance of a Unilateral Contract
What is a counter offer?
Simultaneously terminates the original offer and creates a new one. Offeror and offeree switch roles.
What is lack of proper form?
Some contracts require specific formalities If the formality requirement has not been met that non-conformance can be used a defense against the contracts enforceability
What is an executory contract?
Some duties under contract not performed by one/both parties
What is consideration?
Something of value, given in exchange for something else of value, that is the product of a mutually bargained-for exchange *REQUIRED FOR ALL CONTRACTS
What is undue influence?
Special relationships in which one person takes advantage of a dominant position in a relationship to unfairly persuade the other and interfere with that person's ability to make his or her own decision.
What is admission?
Statement that is made in court, under oath, or at some stage during a legal proceeding in which a party against whom charges have been brought admits that an oral contract existed, even though contract was required to be in writing.
What are reasonably definite terms?
TO have a valid offer and acceptance the terms of the offer must be definite and certain. I.e. all the MATERIAL TERMS must be included Material terms include: Subject matter Price Quantity Quality Parties
Is the adequacy of consideration important to court?
The Court normally does NOT consider the adequacy of consideration.
What is usury?
The lending of money at an exorbitant or unlawful rate of interest
What is communication to the offeree?
The offer must be communicated to the offeree. Only the offeree can accept the offer.
What are conditions on Acceptance by offeror?
The offeror controls the offer and can put conditions on how the offeree can accept.
What is the mirror image rule?
The terms of the acceptance must mirror the terms of the offer. If there is a material change the "acceptance" is actually a counter-offer.
What is lack of genuine assent?
This is where the "Agreement" element has not been satisfied because the Contract has not been entered into "freely" by both parties
As a general rule, parents are not liable for contracts entered into by their minor children.
True
Generally, a unilateral mistake does not cause a contract to become voidable.
True
Reasonably definite terms are one of the elements of an offer.
True
The statute of frauds includes in its scope contracts related to an interest in land.
True
Threatening physical harm or extortion to gain consent to a contract is classified as duress.
True
When the party making the statement would have known the truth about the fact had he used reasonable care to discover or reveal it, a negligent misrepresentation results.
True
What is an unenforceable contract?
Valid, but courts cannot legally enforce contract ex. Statute of Limitations
What is past consideration?
When consideration is in the past it has already occurred there is nothing given in exchange for this new contract. -No consideration
What are auctions?
With Reserve Seller is expressing intent to receive offers and can withdraw item from auction ay anytime before the hammer falls. Bidder may also revoke bid before that point. Without Reserve Seller has made offer to accept highest bid and therefore must accept it regardless of how low.
What are the 4 elements of a contract?
agreement, consideration, capacity, legal object
According to the text, a person who has legal ________ to contract is one who has the mental ability to understand his or her rights and obligations under a contract and, therefore, will presumably be able to understand how to comply with the terms of the agreement.
capacity
The Allen Iverson case we looked at in class did not result in a valid contract because the consideration was:
in the past
A mistake that is shared by both parties to an agreement is a[n] ________ mistake.
mutual
The person who makes an offer is called a[n] ______.
offeror
What is unilateral mistake of fact?
only ONE party is mistaken about a material fact
The parol evidence rule makes _____ evidence of an agreement inadmissible if it is made before at the same time as the writing that the parties intend to be the complete and final version of their agreement.
oral
