Business Law Unit 2 Smartbooks

The Code of Hammurabi is a _______ legal code that dates back to 1754 BC, most of which deals with contract law.

Babylonian

In the _______ v. American Electric Power Services Corp. case, the court ruled _______ who had signed an employment agreement that assigned all of his rights for any invention made in the scope of employment to his employer "in consideration of the sum of One Dollar" even though the $1 was never paid.

Bennet; against the employee

_______ requires both sides to obtain something of value (legal benefit) and to give up something of value (legal detriment).

Consideration

_______ occurs when the minor attempts to avoid obligation under a contract, even though the contract has been partially performed.

Disaffirmance

When a party to an agreement is a member of the class of persons for whose protection the contract was made illegal, he may either: _______ or _______.

Enforce the agreement; obtain restuition

_______ contracts are those where the terms are clearly stated and defined by the parties, either orally or in writing.

Explicit

________ in the United States allows persons to enforce contracts that are freely made and signed.

Freedom of contract

_______ of purpose means that each contract must satisfy a legal purpose to be enforceable.

Legality

In terms of intoxication, in the _______ case, even though the parties had been drinking alcohol, the contract to sell Zehmer's farm was upheld because of _______.

Lucy v Zehmer; Objective intent

_______ is demonstrated when the parties to a contract indicate through words or behavior that they willingly agree to enter into a contract.

Mutual assent

Suppose on Monday 1st, April emails Nicole and offers to sell her car to Nicole for $12,000. The offer expires Friday 5th at noon. Suppose further that Nicole responds to the offer at 3:30pm? Is there a contract?

No, Nicole's response is a counteroffer.

Suppose on September 11, Tom sends an email to Joe revoking Tom's offer. Joe is away from the office, but Joe's administrative assistant receives the email, but Joe never actually sees the email. The next day, from his hotel room in Tokyo, Joe calls Tom to accept Tom's offer made on September 11. Does a contract exist?

No, because Joe made a counter offer; No, because Joe's agent received the email

_______ includes any act that indicates that the minor intends to be bound by his promise; it can be expressed orally, in writing, or it can be implied.

Ratification

______ occurs when the minor, after reaching majority, begins to perform the contract, such as making an installment payment on a loan for a car.

Ratification by implication

An oral contract for the sale of an acre of land valued at $10,000 is not enforceable because it has to be in writing under the __________.

Statue of Frauds

A(n) _______ occurs when changes in the law make a previously legal offer illegal, and terminates the offer by operation of law.

Supervening illegality

Tom, via email, makes an offer to buy Joe's ranch for $125,000. Joe is away for a few days, but before he gets back and reads the email and responds, the ranch was severely burned in a wildfire and is a total loss. In this case, what is the legal status of the parties?

Tom's offer is terminated by law because the fire destroyed the ranch.

True or false: In a unilateral contract, one party's legal detriment arises from its action or inaction rather than a promise.

True

True or false: In a(n) bilateral contract, legal detriment is incurred through the mutual promises the parties make to each other.

True

If Rick and Joe sign a contract for the sale of a $17,500 tractor, the contract most likely will be categorized as a(n) _______.

UCC sales contract

If persons who lack capacity to contract make a promise, that promise is _______.

Voidable

Suppose on September 1, Tom sends Joe an email with PDF attachments offering to buy his ranch for $125,000. And suppose that the offer says he must respond by September 5th. On September 2nd, Joe sends written agreement to the offer by US Mail. Tome receives the acceptance in his office on September 10. Is there a valid contract?

Yes, there is a contract based on the mailbox rule.

If a statute declares that a specific type of contract is prohibited, such contract is _______.

absolutely void

The modern trend in the law recognizes a number of exceptions to the preexisting duty rule, including: _______, and _______,

additional duties; unforeseeable circumstances

For the adversely affected party to cancel the contract, the mistake must concern a _______ on which the contract was made.

basic assumption

In the Carlill v. Carbolic Smoke Ball Co. case, the defendant advertises an herbal inhaler device that claims to prevent the flu as effectively as any flu vaccine, and promises "We will pay $1,000 to anyone who uses the Anti-Flu herbal inhaler for two consecutive weeks and still contracts the flu." Carlill uses the device for three weeks and contracts the flu one day later. In this case, Carbolic would _________.

be obligated to pay Carlill $1,000 because she accepted the offer

Consideration requires both sides to obtain something of value (legal _______) and to give up something of value (legal _______).

benefit; detriment

All parties to a contract must have legal _______ to enter into the contract or the contract may become voidable.

capacity

If Carol and Becky have a purchase and sale contract for 10 acres of land, generally the contract can be categorized as a(n) _________ contract.

common law

Commitment in a contract relates to the required element of _______.

consideration

When Jill, a homeowner, hires Tom to mow her lawn, the exchange of the cash paid and the service rendered (mowing the lawn) is the contract _______.

consideration

Proper _______ require(s) that the parties suffer some type of _______ that the law recognizes as adequate.

consideration; detriment

A(n) ______ occurs when the offeree rejects the original offer and proposes a new offer with different terms.

counteroffer

An offer is terminated if the offeree rejects the offer outright, or makes a(n) _______ rejecting the original offer and making a new offer.

counteroffer

Examples of illusory promises include: _______, _______, and ______.

death bed promises; promises of love;

Suppose Lupita submits a bid via email to Luis to paint his house. She has done painting for him before. Before she hears from Luis she buys paint and supplies. Lupita may have an irrevocable offer based on ________.

detrimental reliance

When a minor _______ a contract, the majority of states would that the minor is still entitled to the return of the consideration he parted with.

disaffirms

A contract is a legally _______ promise or set of promises.

enforceable

If Bruce and Carolyn have a contract that was based on Bruce's mistake as to what was being purchased, the contract may be _______ if Bruce can prove a legal mistake.

enforceable

For a contract to be ________ it must meet the requirement of _______, and both the subject matter and the performance of the contract must be legal.

enforceable; lagality

Promissory _______ arises most often in employment situations where an employer makes a promise of employment and then revokes the promise before the employee's start date.

estoppel

A mistake is an erroneous belief about a (n) _______ fact, not an erroneous belief as to what will happen in the future. Erroneous beliefs about the future are covered by doctrines of _______ and impracticability,

existing; impossibility

Revocation is consummated through an _______ of the offer or by some act ________ with acceptance that would give reasonable notice from the offeror to the offeree that the offer no longer exists.`

express reputation; inconsistent

A(n) _______ by a merchant is _______ under the Uniform Commercial Code.`

firm offer; irrevocable

To create a _____ offer the offeror agrees to hold an offer open for a certain period of time in exchange for _______.

firm; consideration

Suppose that your neighbor's child is playing catch with her friends and she hits a ball through your front window. You and your neighbor agree that if she pays for the cost of replacement, you'll promise not to file an insurance claim. Your promise not to file a claim, also called _______, is legal consideration.

forbearance

_______ can be a bargained-for exchange and valuable consideration by giving up a legal right.

forbearance

Absent evidence of _______, _______, oppression, or _______, courts generally do not interfere with the contracting process.

fraud, mistake, lack of legal purpose

Some promises do not support the bargained-for exchange aspect of consideration and are considered _______.

illusory promises

A(n) _______ contract lacks explicit terms and is solely implied by the parties' behavior or through social custom.

implied

The first step in determining whether a valid offer exists is analyzing the offeror's objective _______ when making the offer.

intent

Today, courts would look at a price tag on a product in the store is a(n) ________ and not an offer to sell at that price by the business.

invitation to accept the offer of the store

One way to make an offer ________ is for the offeror to grant the offeree a(n) _______ to enter a contract.

irrevocable; option

Partial performance can render an offer temporarily _______ because the offer converts to a unilateral offer if the offeror makes clear that acceptance can only occur with _______.

irrevocable; performance

A person _______ because of a mental illness or defect if the person is unable to understand the nature or consequences of a contract or is unable to act in a reasonable manner.

lacks capacity

An offer may be terminated by certain happenings or events covered by operation of law, including the following: _______, _______, and _______.`

lapse of time; death or incapacity of either party; destruction of the subject matter before acceptance

Suppose Joe was in an accident and has a right to sue the other party, but instead agrees to accept a cash settlement in lieu of filing a lawsuit. This is an example of consideration, or ________.

legal detriment

_______ is characterized by long, complex sentences written in a passive voice with many embedded clauses that employ obscure archaic terms such as "hereby," "sayeth," or "witnesseth".

legalese

A valid contract has the following basic elements: _______, _______, ______, and _______,

legality, consideration, mutual assent, capacity

The _______ provides that the acceptance of an offer is generally effective upon _______ of the acceptance when sent in a commercially reasonable manner, and not when acceptance is received by the offeror.``

mailbox rile; dispatch

Generally, the offeror is the '_______' of the offer, and the offer has to be _______ by the offeree.

master; properly accepted

Mutual assent is typically referred to as a(n) "________" because the parties have agreed to certain promises and obligations.

meeting of the minds

Parties to the contract who are _______, _______, or ______ may lack the required capacity to enter into an enforceable contract.

minors, intoxicated, mentally incapacitated

Generally, a(n) _______ is defined in contract law as a belief that is not in accord with the facts.

mistake

A valid offer and acceptance is usually how parties demonstrate _______.

mutual assent

An exception to the rule that the minor must return the consideration occurs in the case of _______.

necessaries

The modern trend is that advertisements appearing in the mass media, in store windows, or in display cases are _______.

not offers; invitations to make an offer

An _______ is a promise or commitment to do (or refrain from doing) a specified activity such as selling a good at a certain price or offering to provide services at a given rate.

offer

An offer is irrevocable if it is in the form of a(n) _______ contract or is detrimentally _______.

option; relied upon

When one party promises to do what she is already legally obligated to do, the law considers this a(n)_______ and not valid consideration.

preexisting duty

Legality of ______ means that contracts that are contrary to existing laws or public policy are likely to be rendered unenforceable.

purpose

A contract with the language: "WHEREAS, the Company wishes to enter into a contract with the Representative for sales representation services for its products"would be an example of a(n) _______.``

recital

Under the theory of promissory estoppel a relying party may recover damages if: (1) _______, (2) ________, and (3) ________.

reliance was reasonably foreseeable; there is a reasonable promise by promisor; there is justified reliance by promise

If Karen is a schizophrenic under a doctor's care, she lacks capacity to sign a contract because of mental illness or defect if either: (1) _______ or (2) _______, and _______.

she is unable to understand the nature and consequences of the contract; she is unable to act in a reasonable manner in relation to the transaction; the other party has reason to know of her condition

Suppose on Monday 1st, April emails Nicole and sell her car to Nicole for $12,000, and the offer expires Friday 5th at noon. What is the status of the offer at 2pm on Friday 5th?`

the offer is terminated by lapse of time

One important issue with revocation is the _______ of the revocation, since most states hold that revocation is effective only _______ by the offeree.(

timing; upon receipt

_________, although rare, may occur in the case where a contract is so burdensome to one party that it can provide a legal defense to enforcement.

unconsciounability

If a contract has all the required elements and be considered valid, it may be still be _______ if one party asserts a legal defense to performance of the contract.

unenforceable

Suppose Joe contracts with Marvin to frame out a shop at Joe's ranch for $10,000. During the framing Marvin discovers the costs of framing will be $2,500 more than he anticipated, and threatens to walk off the job unless Joe agrees to pay the additional $2,500. Joe agrees to the price increase. Most courts today would hold the agreement to pay the additional $2,500 to be _____ the agreement based on a(n) _______.`

unenforceable; preexisting duty

In a contract containing a(n) _______ mistake only one party has an erroneous belief about a basic assumption in the terms of the agreement.

unilateral

The primary exception to the rule that advertisements are invitations to negotiate occurs when the advertisement is specific enough to constitute a(n) _______ contract.

unilateral

Suppose Bill, a homeowner, promises to pay ABC Roofing $10,000 to install a new roof on a September 3, 2019 but ABC Roofing fails to install the roof. The parties have a _______ contract and Bill ______.`

unilateral; owes nothing

When a contract has the required elements, it is called a(n) _______ contract.

valid

Tim and Joe, both 22, make promises to each other about a loan for a car. If the agreement has all the required elements, it will be considered a(n) ______ contract.`

valid; enforceable

An agreement is _______ if it lacks one of the required elements or has not been formed in conformance with the law from the outset.

void

Generally, an illegal contract is automatically _______, so neither party may enforce it against the other.

void

Jan and Carol agree to rob a bank and split the loot. The agreement is ______ from the outset.

void

A contract is _______ when the law gives one or more parties the right to cancel an otherwise valid contract under the circumstances.

voidable

Paul and Janine have a _______ contract if Paul has a legal right to cancel their contract under the circumstances.

voidable

In general, the contracts of minors (persons younger than 18 years of age) are ________.

voidable at their option