MGMT Exam #2

Temporary Impossibility

An occurrence or event that makes performance temporarily impossible operates to suspend performance until the impossibility ceases. Once the temporary event ends, the parties ordinarily must perform the contract as originally planned.

Mistakes

the party who is mistaken is still liable for holding up their end of the contract. The contract is still enforceable. Exceptions where the contract is not enforceable: 1) The other party knew or should have known that a mistake was being made 2) The error was a substantial mathematical error ex) someone makes an error in totaling costs and undersells the material

Online Acceptances

- Click-on Agreements - Shrink-wrap Agreements - Browse-wrap Terms

Generally, oral and written contracts are equally enforceable. Which contracts MUST be in writing?

1) Real estate contracts (contracts involving interest in land) 2) Contracts with terms longer than 1 year While it is not illegal to have verbal contracts for these types it is not enforceable by a judge in a court of law

Requirements of the Offer

1. The offeror must have a serious intention to become bound by the offer. A reasonable person would realize that such offers were not made seriously. Because these offers are not effective, an offeree's acceptance does not create an agreement 2. The terms of the offer must be reasonably certain, or definite so that the parties and the court can ascertain the terms of the contract. 3. The offer must be communicated to the offeree.

Requirements for Implied Contracts

1. The plaintiff furnished some service or property. 2. The plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected. 3. The defendant had a chance to reject the services or property and did not.

Liquidated Damages vs Penalty To determine if a particular provision is for liquidated damages or for a penalty, a court must answer two questions:

1. When the contract was entered into, was it apparent that damages would be difficult to estimate in the event of a breach? 2. Was the amount set as damages a reasonable estimate and not excessive?

Condition

A condition is a qualification in a contract based on a possible future event. The occurrence or non-occurrence of the event will decide the performance of a legal obligation or terminate that obligation. Ex) "We will buy your house IF we get a loan from the bank. If the loan is not received, they will be discharged.

How an Offer Dies: Destruction, Death, or Incompetence.

An offer is automatically terminated if the specific subject matter of the offer (such as a smartphone or a house) is destroyed before the offer is accepted. An offeree's power of acceptance is also terminated when the offeror or offeree dies or is legally incapacitated—unless the offer is irrevocable.

How an Offer Dies: Lapse of time

An offer terminates automatically by law when the period of time specified in the offer has passed. If the offer states that it will be open for a number of days, this time period normally begins to run when the offeree receives the offer (not when it is formed or sent). If the offer does not specify a time for acceptance, the offer terminates at the end of a reasonable period of time.

The writing requirement

An valid contract may still be unenforceable if it is not in the proper form. Certain types of contracts are required to be in writing or evidenced by an electronic record. The writing requirement does not mean that an agreement must be a formal written contract. Emails also suffice.

Implied Contract

Conduct of the parties implied a contract was being formed (dentist example)

Compensatory damages - General

Damages that compensate the nonbreaching party for the loss of the bargain

Situations in Which Intent May Be Lacking: Expression of an Opinion

Expressions of opinion: An expression of opinion is not an offer. It does not indicate an intention to enter into a binding agreement.

Sale of Goods

In a contract for the sale of goods, the usual measure of compensatory damages is the difference between the contract price and the market price. Sometimes, the buyer breaches when the seller has not yet produced the goods. In that situation, compensatory damages normally equal lost profits on the sale, not the difference between the contract price and the market price

Damages

In contract law, damages compensate the nonbreaching party for the loss of the bargain. Often, courts say that innocent parties are to be placed in the position they would have occupied had the contract been fully performed.

Pre-existing duty lacks

Legally sufficient value

Anticipatory Breach

Notified that a party to the contract will not fulfill their part of the contract prior to the required time of fulfillment. Will be treated the same as a material breach and the non-breaching party may sue for damages before the due date of the contract.

Voidable Contract

One or both of the parties are able to get out of the contract. Ex) Intoxicated when signing the contract

Situations in Which Intent May Be Lacking: Preliminary negotiations

Preliminary negotiations. A request or invitation to negotiate is not an offer. It only expresses a willingness to discuss the possibility of entering into a contract. Statements such as "Will you sell your farm?" or "I wouldn't sell my car for less than $8,000" are examples.

Recission and Restitution

Rescission is essentially an action to undo, or terminate, a contract. I.e. to return the contracting parties to the positions they occupied prior to the transaction. Restitution returns something to its rightful owner. Generally, to rescind a contract, both parties must make restitution to each other by returning goods, property, or funds previously conveyed.

Equitable Remedies for Contract Breach

Sometimes, damages are an inadequate remedy for a breach of contract. In this case, they may ask the court for recission and restitution.

Situations in Which Intent May Be Lacking: Statement of future intent

Statements of future intent: A statement of an intention to do something in the future (such as "I plan to sell my Verizon stock") is not an offer

Performance + Discharge

The most common way to be discharged from a contract is by performing those duties.

Gambling

Traditionally, the states deemed gambling contracts illegal and thus void. Today, many states allow certain forms of gambling, such as horse racing and charity-sponsored bingo. Even in states that permit certain types of gambling, though, courts often find that gambling contracts are illegal.

If one party has fully performed but the other has not, the contract is said to be executed on the one side and executory on the other, but the contract is still classified as executory.

True

Void Contract

What is being exchanged during the contract is illegal. A void contract is no contract at all.

Nominal Damages

When no actual damage or financial loss results from a breach of contract and only a technical injury is involved, the court may award nominal damages to the innocent party. Awards of nominal damages are often small, such as one dollar, but they do establish that the defendant acted wrongfully. Simply for the principle.

Undue Influence

When one party mentally influences another into entering into a contract. A contract entered into under excessive or undue influence lacks voluntary consent and is therefore voidable. This is most typical of guardian-ward, doctor-patient, husband-wife, and parent-child relationships.

Performance to the Satisfaction of Another

When the subject matter of the contract is personal, the obligation is conditional, and performance must actually satisfy the party specified in the contract. For instance, contracts for portraits, works of art, and tailoring are considered personal because they involve matters of personal taste. Therefore, only the personal satisfaction of the party fulfills the condition. Most other contracts need to be performed only to the satisfaction of a reasonable person.

Licensing Statues

Whether a contract with an unlicensed person is legal and enforceable depends on the purpose of the licensing statute. If the statute's purpose is to protect the pub-lic from unauthorized practitioners (such as unlicensed architects, attorneys, and electricians), then a contract involving an unlicensed practitioner is generally illegal and unenforceable. If the statute's purpose is merely to raise government revenues, however, a court may enforce the contract and fine the unlicensed person.

Statute Of Frauds

denies enforceability to certain contracts that do not comply with its writing requirements. The following types of contracts are generally required to be in writing or evidenced by a written memorandum or electronic record: 1. Contracts involving interests in land. 2. Contracts that cannot by their terms be performed within one year from the day after the date of formation. 3. Collateral, or secondary, contracts, such as promises to answer for the debt or duty of another and promises by the administrator or executor of an estate to pay a debt of the estate personally—that is, out of her or his own pocket. 4. Promises made in consideration of marriage. 5. Under the Uniform Commercial Code, contracts for the sale of goods priced at $500 or more.

Silence as Acceptance

generally does not indicate acceptance of the offer. However, if the offeree has had prior dealings with the offeror, then silence CAN constitute an acceptance. Example: Marabel's restaurant routinely receives shipments of produce from a certain supplier. That supplier notifies Marabel's that it is raising its prices because its crops were damaged by a late freeze. If the restaurant does not respond in any way, the silence may operate as an acceptance, and the supplier will be justified in continuing regular shipments.

Mitigation of damages

injured party cannot recover unreasonable expenses related to their injury when they could have avoided such expenses with reasonable effort.

Material Breach of Contract

non-performance of contractual duties. Excuses non-breaching party from any contractual duties. They can also sue the breaching party for any damages that occurred as a result of the breach. If the breach is minor (not material), the nonbreaching party's duty to perform is not entirely excused, but it can sometimes be suspended until the breach has been remedied. Once the minor breach has been cured, the non-breaching party must resume the performance of the contractual obligations.

Agreement

offer and acceptance + consideration, capacity, legality Acceptance is a voluntary act by the offeree that shows assent (agreement) to the terms of an offer. The offeree's act may consist of words or conduct.

Punitive Damages

punitive damages are designed to punish a wrongdoer and set an example to deter similar conduct in the future. Rarre to be used in contract law, especially in breach of contract. When a person's actions cause both a breach of contract and a tort (such as fraud), however, punitive damages may be available

Contractual Capacity

the legal ability to enter into a contractual relationship

Bankruptcy

the legal proceeding by which a bankrupt person's assets are distributed among those to whom he or she owes debts. Once the assets have been allocated, the debtor receives a discharge in bankruptcy. A discharge in bankruptcy ordinarily prevents the creditors from enforcing most of the debtor's contracts.

Past Consideration lacks

something that is being exchanged, in other words, nothing is being bargained

Specific Performance

specific performance calls for the performance of the act promised in the contract. This remedy is attractive to a non-breaching party because it provides the exact bargain promised in the contract. specific performance will not be granted unless the party's legal remedy (monetary damages) is inadequate.

Express Contract

the terms of the agreement are fully and explicitly stated in words, oral or written ex. A signed lease for an apartment or a house is an express WRITTEN contract A classmate calls another on the phone and agrees to buy her textbooks for $200 --> express ORAL contract

Delegation

the transfer of contractual duties to a third party

Assignment

the transfer of contractual rights to a third party. However, if the third-party messes up in any way, the person who signed the contract is liable, not the third party.

Duress

threats to force a party to enter into a contract. This can include physical threats, blackmail, or extortion. To establish duress, there must be proof of a threat to do something that the threatening party has no right to do. Generally, for duress to occur, the threatened act must be wrongful or illegal. Exercising a legal right, such as threatening to sue, is not duress.

Usury

when a lender makes a loan at an interest rate higher than the lawful maximum

Unilateral Contract

when the offer is phrased so that the offeree can accept the offer only by completing the contract performance Hence promise in exchange for an act

Bilateral Contract

when the offeree can accept (thus making the contract binding) by simply PROMISING to perform, hence a promise for a promise. No performance, such as payment of funds or delivery of goods, needs to take place for a bilateral contract to be formed.