Legal Environment of Business Exam 3 - CH 9

A promise or a 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, is best described as: a. a promise. b. an agreement. c. a contract. d. none of the above.

a contract.

A manifestation of the intention to act or refrain from acting in a specified way is best described as: a. a promise. b. an agreement. c. a contract. d. none of the above.

a promise

Executory

- Contract has not been fully performed by one or more of the parties

The common law of contracts governs all contracts outside the scope of the UCC a. True b. False

True

The difference between an express contract and an implied in fact contract is the manner in which the parties manifest assent. a. True b. False

True

A contract in which both parties exchange promises is a(n): a. formal contract. b. quasi contract. c. implied in fact contract. d. bilateral contract.

bilateral contract

The remedies provided for breach of contract include: a. compensatory damages. b. punitive damages. c. reliance damages. d. (a) and (c), but not (b).

(a) and (c), but not (b) - compensatory damages - reliance damages

Mutual Assent

- "meeting of the minds, " - The parties must manifest by words or conduct that they have agreed to enter into a contract

Distinguish between a contract and a gift and explain why one is enforceable and the other is not.

- A contract has the element of consideration associated with it. - The duties associated with a contract have been bargained for, whereas the making of a gift is a gratuitous situation and thus not enforceable.

Executed

- Contract has been fully performed by the parties

Express

- an agreement of parties that is stated in words either in writing or orally

What are the two sources of Contract Law?

1. Common law 2. UCC (uniform commercial code)

Breach

A breach is the failure to properly perform a contractual obligation.

The Uniform Commercial Code does not apply to: a. Insurance contracts b. Service contracts c. Contracts involving real property d. All of these e. Employment contracts

All of these

Addison is approached by Archer Enterprises to work as a consultant for a period of two years, and he signs a two year agreement. This contract is governed by: a. State common law b. Article 2 of the UCC c. Federal statue d. The law of quasi contract

State common law

Solomon Tate enters into a contract with William Smith under the terms of which Smith is to pay $7000 and Tate is to build a garage, repair a boat, and build a doghouse. If the doghouse has not yet been built, which term describes the type of contract in existence? a. Executory contract b. Illusory contract c. Executed contract d. Quai contract

Executory contract

A(n) _______ contract is one in which the terms have been definitely and specifically stated and agreed upon. a. Written b. Express c. Implied d. Formal

Express

A contract to provide legal services for a fee is governed by Article 2 of the UCC

False

A contract which fails to satisfy the requirements of the statute of frauds is: a. valid. b. void. c. voidable. d. unenforceable.

unenforceable

Where general contract law has not been specifically modified by the UCC, the common law of contracts continues to apply.

True

Each of the following is an essential element of a binding promise EXCEPT: a. mutual assent. b. consideration. c. capacity. d. a writing signed by the parties

a writing signed by the parties

All of the following are relevant to defining the principles of contract law EXCEPT: a. federal common law. b. state common law. c. Restatements of the Law of Contracts. d. Uniform Commercial Code.

federal common law

Contract

- Binding agreement that the courts will enforce - The Restatement defines a contract as "a promise or a 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."

Unenforceable

- Cannot take the contract to court to enforce, such as if statute of limitations has run (time in which to file lawsuit has lapsed)

Bilateral

- Contract in which both parties exchange promises

Unilateral

- Contract in which only one party makes a promise

Legality of object

- Contract must be for a lawful purpose and not otherwise against public policy

Voidable

- Contract that is not wholly lacking in legal effect - It is a contract, but because of the manner in which it was formed or a lack of capacity of a party to it, the law permits one or more of the parties to avoid the legal duties created by the contract - Minors, mentally incompetent, intoxicated

Valid

- Contract that meets all of the requirements of a binding contract and is, therefore, an enforceable agreement

Implied

- Contract where agreement of the parties is inferred from their conduct.

Common Law

- Contracts are primarily governed by state common law. - Developed through the court system as disputes arose; courts made decisions on what law should be; decisions used as legal precedence for future disputes -- Used for most contract EXCEPT contracts for the sale of goods -- So covers services, employment, real estate, patents, copyrights, insurances, etc. -- if there is not a provision in the UCC for a contract issue (such as "when does a person have capacity," ) then the default law is the common law --Summary of contract law is found in Restatement of Contracts (not a law itself)

Promissory Estoppel

- Doctrine enforcing noncontractual promises where there has been justifiable reliance on the promise and justice requires the enforcement of the promise. - Do NOT have a contract (missing element is frequently consideration); but courts MIGHT enforce a promise because 'justice requires enforcement,' consists of: 1) promise made 2) that other party justifiably relied upon 3) acted to his detriment 4) and made a material change in position because of it EX: You promised to make a large donation to charity & they started a major construction project because of your promise. If you back out, court MIGHT make you pay.

Consideration

- Each party must intentionally exchange a legal benefit or incur a legal detriment as an inducement to the other party to make a return exchange.

Void

- No contract at all and is without legal effect

Capacity

- Parties must have contractual capacity. - Parties must be able to understand the meaning of the contract and that is binding

Arthur Accountant orally agrees to serve as an accountant for Clem Client in exchange for Clem's promise to pay Arthur an annual salary of $15,000. Describe this contract in terms of the following classifications: (a) express and implied; (b) unilateral and bilateral; (c) valid, void, voidable, and unenforceable; and (d) executory and executed.

- The contract to provide accounting services to Clem for $15,000 involves an oral manifestation of willingness by both parties to enter into a contract. - Therefore the contract is express, even though not in writing. - The contract also involves an exchange of promises. - Arthur promised to provide accounting services for one year in exchange for Clem's promise to pay $15,000 to Arthur. Therefore the contract is bilateral. - There is no evidence that the contract is void, voidable, or otherwise unenforceable. Therefore it is valid. - Finally, since, at its inception, neither party has performed any of its duties, the contract is executory.

Discuss how state common law, the Restatements of the Law of Contracts, and Article 2 of the UCC combine to form the law of contracts.

- The law of contracts is governed primarily by state common law. - An often-cited source of this law is found in the Restatements of the Law of Contracts promulgated by the American Law Institute. - In all states except Louisiana, however, Article 2 of the UCC governs sales. - A sale is a contract involving the transfer of title to goods from seller to buyer for a price. - In all transactions to which Article 2 does not apply, and in all those governed by Article 2 but where general contract law has not been specifically modified by the Code, contract common law continues to apply

Quasi Contract

- This is an obligation not based upon contract that is imposed by law to avoid injustice; also called a contract implied in law - The elements of recovery are: 1) benefit conferred upon a defendant by a plaintiff 2) knowledge of the benefit by the defendant 3) acceptance or retention of the benefit, where it would be unfair for the defendant to keep the benefit without paying for its value EX: Pizza delivered in error to your apartment, not neighbors. If you keep it, you can be required to pay reasonable value of it. EX of exception where courts presume you would have made contract but were unable to do so: Injured in car wreck and unconscious. If you get medical care, will have to pay reasonable value even though you did not make a contractual offer which was accepted.

Explain why and how certain promises are enforceable even though they do not meet all the requirements of a contract.

- Under the doctrine of promissory estoppel and the theory of quasi-contract, promises are sometimes enforced even though they do not meet contractual requirements. - Under promissory estoppel a noncontractual promise will be enforced where there has been justifiable reliance on the promise and justice requires enforcement. - A quasi-contract is not actually a contract at all because it is based neither on an express nor an implied promise but rather is an obligation imposed by law to avoid injustice.

UCC (Uniform Commercial Code) Article 2

-- Is a state law (statute) that has been adopted by most states (not La) -- Article 2 governs sales of goods. -- A sale is a contract involving the transfer of title to goods from seller to buyer for a price. -- Goods are tangible personal property. Personal property is any property other than an interest in real property (land or anything attached to the land). -- Is for the purpose of 'streamlining commercial activity' and has 'gap-filler' provisions. If have a contract, can fill in missing terms (such as price, delivery & when payment is due) -- Make it easier for someone in one state to buy goods in another state -- UCC presumes parties are acting in "good faith" and in a "commercially reasonable manner" (what would you normally do?)

In order to be legally binding, contracts must always be in writing or they cannot be proven. a. True b. False

False

Thomas says to Steve, "If you will paint my garage, I will pay you $75." Steve replies, "Would you make it $85?" Under these facts, Thomas and Steve are both promisors and promisees.

False

As defined by the UCC, a sale is the transfer of title to goods from seller to buyer for a price.

True

The courts will presume that the parties intended to form a bilateral contract when it is unclear whether a unilateral or a bilateral contract has been formed.

True

Jun offers to sell a puppy to Cecile for $300 and that he can get the puppy on May 1st when it is six weeks old. Cecile says he will buy the puppy on May 1st since he will have received a paycheck at that time to cover the cost. A contract is formed: a. When Cecile gets the money from his paycheck to cover the cost b. When Cecile tells June he will buy the puppy c. When Cecile picks up the puppy on May 1st d. When June gets the $300

When Cecile tells June he will buy the puppy

You are really hungry and just want a large pepperoni pizza to share with your dog for supper. You call up your favorite restaurant, Pizza Café, and tell them your order. They respond with "Got it! Should be ready in 30 minutes." Which statement is NOT correct? a. You did not make a valid contract since you did not discuss price, payment, or delivery terms. b. If they did not agree to deliver the pizza, then the UCC specifies you will pick it up at the restaurant. c. If no discussion is made about payment, then you will have to pay for the pizza when you receive it.

You did not make a valid contract since you did not discuss price, payment, or delivery terms.

Bill Businessman places an ad in the local newspaper saying, "Reward: $50 for return of my golden retriever named Fido." The ad lists his address and telephone number. If Tim Teenager finds Fido and returns him to Bill, there will be: a. an executed contract requiring that Bill pay Tim $50. b. a bilateral contract, because two people are involved. c. an implied in fact contract requiring that Bill pay Tim $50. d. a unilateral contract, because Bill has promised to pay $50 but Tim hasn't promised anything

a unilateral contract, because Bill has promised to pay $50 but Tim hasn't promised anything

What is promissory estoppel? Explain your answer.

- Promissory estoppel is an equitable doctrine under which noncontractual promises will be enforced where there has been justifiable reliance on the promise by the injured party and justice requires enforcement.

Simone offers to pay Andrea $150 if Andrea wil paint her apartment while she (Simone) is out of town on vacation for two weeks. Andrea makes no promise but tells Simone that she will think about it. While Simone is out of town, Andrea paints the apartment. This is best described as: a. A quasi contract b. An implied in fact contract c. A unilateral contract d. A bilateral contract

A unilateral contract

Which of the following is NOT always necessary in order for a valid contract to be formed? a. Mutual assent b. Competent parties c. A writing d. Legality of purpose

A writing

A valid contract may be unenforceable for which reason(s)? a. Both failure to satisfy the statute of frauds and running of the statute of limitations b. A valid contract is always enforceable c. Failure to satisfy the writing requirement of the statute of frauds d. Running of the statute of limitations time period.

Both failure to satisfy the statute of frauds and running of the statute of limitations

The concept of consideration contract law includes: a. All of these b. That each party to a contract must unintentionally exchange a legal benefit c. That each party takes out an insurance bond if the possibility of damages is above $500 d. An inducement to each party to make a return exchange

An inducement to each party to make a return exchange

Which of the following is NOT generally required in order to have a valid contract? a. Parties who have contractual capacity b. Mutual assent c. Fairness of the bargain d. A lawful purpose

Fairness of the bargain

A bilateral contract results from the exchange of a promise for an act, whereas a unilateral contract results from the exchange of a promise for a return promise.

False

A contract may be formed orally or by a writing, but it may not be inferred merely from the conduct of the parties.

False

A voidable contract is an agreement that does not meet all of the requirements of a binding contract; thus, it is no contract at all and has no legal effect.

False

As defined by the UCC, goods are movable, tangible and intangible personal property.

Flase

Adonia and Merv enter a contract for the sale of a computer. If Merv breaches the contract and Adonia waits until the time specified in the statute of limitations has passed, the contract is now: a. Executory and enforceable b. Unenforceable c. Void d. Voidable

Unenforceable

The Uniform Commercial Code a. Only applies to contracts when the price of is over $500 b. Only applies to commercial contracts made by merchants c. Presumes the parties are acting in good faith and in a commercially reasonable manner d. Requires that all contract terms be clear and specific

Presumes the parties are acting in good faith and in a commercially reasonable manner

A contract is a binding agreement that the courts will enforce. a. True b. False

True

A quasi contract is not a contract, but rather is an obligation imposed regardless of the intention of the parties in order to assure a just and equitable result.

True

An executory contract is one in which there are one or more unperformed promises by any party to the contract.

True

Which of the following contracts is covered by Article 2 of the Uniform Commercial Code (UCC)? a. A sale of automobile insurance b. An employment agreement c. The sale of a house d. The sale of a new car

The sale of a new car

UCC Article 2 applies to contracts involving which of the following? a. The services of an accountant b. An employment relationship c. The sale of a television set d. The sale of a private residence

The sale of a television set

In a "quasi-contract" situation, the remedy granted will be similar to a breach of contract remedy

True

In certain circumstances, noncontractual promises are enforced under the doctrine of promissory estoppel in order to avoid injustice.

True

Most contracts are primarily governed by state common law.

True

Nearly every business transaction is based on contract, and even the most common transactions may involve multiple contracts.

True

Asher is involved in an automobile accident and is injured. while he is unconscious, the police call an ambulance which takes him to the hospital. Asher is treated at the hospital and is released a day later. The hospital sends him a bill for $4,500 which Asher refuses to pay, claiming it is too high and he never consented because he was unconscious. Asher: a. Has entered into an implied in fact contract with the hospital b. Will have to pay the hospital the reasonable value of their services because this is a quasi-contractual agreement c. And the hospital have entered into a bilateral contract, the terms of which require that he pay the bill d. Has entered into a unilateral contract with the hospital and therefore will have to pay the bill

Will have to pay the hospital the reasonable value of their services because this is a quasi-contractual agreement

An executed contract is one in which: a. all duties under it have been performed by all parties to the contract. b. at least one party has performed all of its duties under the contract. c. there are one or more unperformed promises by any party to the contract. d.the contract is wholly unperformed by one or more of the parties

all duties under it have been performed by all parties to the contract

A contract in which the parties indicate their assent in words is a(n): a. quasi-contract. b. implied contract. c. express contract. d. unlawful contract.

express contract

Contract law: a. has more relaxed requirements today than in the nineteenth century. b. has more rigid requirements today than in the nineteenth century. c. has remained static throughout the nineteenth and twentieth centuries. d. is governed primarily by the Uniform Commercial Code.

has more relaxed requirements today than in the nineteenth century

Sometimes Need a Writing

real estate, services over a year, UCC sale contract for over $500, etc.

The Uniform Commercial Code defines goods as: a. tangible and intangible personal property. b. tangible personal property. c. land and anything attached to it. d. none of the above.

tangible personal property

Kay, an art collector, promised Hammer, an art student, that if Hammer could obtain certain rare artifacts within two weeks, Kay would pay for Hammer's post-graduate education. At considerable effort and expense, Hammer obtained the specified artifacts within the two-week period. When Hammer requested payment, Kay refused. Kay claimed that there was no consideration for the promise. Hammer would prevail against Kay based on: a. unilateral contract. b. unjust enrichment. c. public policy. d. quasi contract.

unilateral contract

A contract in which one party seeks an act in exchange for a promise is a(n): a. quasi contract. b. unilateral contract. c. implied in fact contract. d. bilateral contract.

unilateral contract.