Ch 7 - Contracts

valid contract

A majority of the contracts entered into business transactions are of this type

entire contract

Also known as an indivisible contract, it has two or more parts. Each part is dependent on the others for satisfactory performance. Such a contract must be completely performed.

formal contract

Also referred to as specialty contract, it is a written contract under seal. The seal may consist of simply the word Seal or L.S. (locus sigilli), a scroll, a wafer, or an impression on the paper.

void contract

An agreement that lacks one or more of the essential elements of a contract is a void contract.

voidable contract

An agreement that may be rejected by one of the parties (for a legally acceptable reason) is a voidable contract.

consideration

Each party to a contract must promise to give up something. The exchange of promises (where each party gives the other something of value) is called consideration.

executed contract

If all the terms of the agreement have been fully performed by both parties, it is an executed contract.

oral contract

Not in writing or signed by the parties, but it is a real contract created entirely by the conversation of the parties

expressed contract

One that specifically states the agreement of the parties (either written or oral).

written contract

Reduced to writing on a permanent surface

proper form

Requirements for contracts are known as proper form. Contracts must not only be in writing but also follow a prescribed form, such as containing the signatures of the parties.

mutual agreement

The parties must have a clear understanding of what they are undertaking and the contract must show mutual agreement.

competent

The parties to a contract must be competent and capable of understanding what they are doing. (Example: legal age, mentally stable)

implied contract

The terms and actions of the parties dictate an implied contract.

contract

legally enforceable agreement that is created when two or more competent parties agree to perform

offer

made by one party and accepted by another party

offeror

person who makes the offer

offeree

person who receives the offer

tangible personal property

personal property that can be moved, such as a vehicle, kitchen table, or compute

acceptance

the act of accepting the offer

executory contract

It is a contract where a future act or obligation remains to be performed under its terms.

simple contract

It is an informal contract made without seal (even though the subject matter of the contract may be extremely complex and may involve huge amounts of money).

divisible contract

It is made up of two or more parts, and each part is independent of the others

legality of purpose

the intent of the contract must not violate the law. The courts will not enforce a contract that violates the law.