Business Law Deck Five
In the formation of a valid contract, all four essential elements must be met. ____________ of the parties means that the parties involved in a contract must be legally competent.
Capacity. Capacity of the parties is one of the four essential elements to a valid contract. It means that the parties need to be legally competent to be bound by the contract. Minors, insane people, and sometimes intoxicated people may not be considered legally competent.
For a contract to be finalized, there must be clear and unqualified ______________ of the contract.
Acceptance. Acceptance must be clear and unqualified. If the offeree tries to qualify the offer he accepts or makes a conditional acceptance--i.e. agrees to accept something different from exactly what was offered, this is seen as a counteroffer and a rejection, and the original offer is dead. For example, if a man offers to wash your car for $7, and you say "I'll pay you $5," that is a counteroffer, and the $7 offer is dead--it no longer has the potential to bind the offeror.
A ______ contract does something illegal or against public policy--neither side can enforce it because it is not a valid contract in the first place.
Void. A void contract is one which has no validity, so it cannot be enforced by either party. An example is a contract to buy illegal drugs, or a contract made under the threat of violence. This is different from a voidable contract, in which one party has the right to end the contract.
A ____________ contract is one in which one party has the right to end the contract.
Voidable. An example of a voidable contract is a contract made by minors.
For an agreement involving the sale of goods to be covered by the Statute of Frauds on the basis of its value, it must be selling for at least ____________ dollars.
500. The Statute of Frauds covers agreements for the sale of goods for a price of $500 or more (increased to $5,000 as of 2003, but so far, no states have adopted this yet). It also covers agreements that are not to be performed within one year, agreements for the sale of land, a promise by one person to pay another person's debt, and a promise by the administrator of an estate to pay a debt of the estate out of his own funds.
One of the four essential elements to a valid contract is mutual assent. It is indicated by the presence of an offer, and an ______________.
Acceptance. An offer and an acceptance indicate mutual assent, or mutual agreement. Both are legal concepts with specific definitions as to what constitutes a valid offer or acceptance.
An offer may be withdrawn anytime before it is ____________.
Accepted. An offer may be withdrawn anytime before it is accepted. However, there are exceptions. Option contracts and unilateral contracts are two types of contracts which have limitations on when they can be withdrawn. Also, the Uniform Commercial Code exception and the doctrine of Promissory Estoppel provide two other exceptions.
____________ of consideration in an agreement--or how valuable or equal the consideration is--is not usually evaluated by a court.
Adequacy. Adequacy of consideration is not usually a concern. The exception is if the agreement involves paying money in return for a different amount of money--in that case, the difference in amounts could be considered an agreement to make a gift, and is usually unenforceable.
Most _____________ do not qualify as offers, in the sense that they indicate mutual assent towards a contract.
Advertisements. Advertisements are not usually legally considered an offer, in the context of contracts, because either they are not sufficiently definite, or they are directed at a general audience--not communicated to a specific person or persons. However, an advertisement which meets the three requirements can be an offer--i.e. it offers a free gift to an identifiable individual, such as the first person in the store on Labor Day.
A contract is a legally enforceable ______________.
Agreement. A contract is a legally enforceable agreement. In the context of contracts, an "agreement" is a meeting of minds, a mental agreement. A contract sometimes involves a written document, but it does not have to--the true nature of a contract is that it is mental; proof of it is seen in actions, or by oral or written words. For example, riding a taxi, or making an appointment with a doctor involve contractual relationships.
______________ is a method for settling disputes out of court, and involves a third party which has the power to make a final, binding decision.
Arbitration. Arbitration is one of the two major methods for settling a dispute out of court. The other is mediation. Mediation involves a third party helping the two parties to reach an agreement, but the mediator does not have the power to impose a settlement. On the other hand, an arbitrator helps resolve a dispute, but has the power to make a decision which binds the two parties.
Contracts can be categorized based on the number of promises involved. A ___________ contract is an agreement in which the parties exchange promises for each to do something in the future.
Bilateral. A bilateral contract involves promises from both sides--one side promises payment in return for the other side's promise to perform some kind of work. This is in contrast to a unilateral contract, in which only one side makes a promise.
A mutual agreement is indicated by an offer and an acceptance. There are three requirements to an offer--it must indicate a clear intent to form a contract, it must be definite enough to show the intent of the parties, and it must be _____________ to the other party.
Communicated. The offer must be communicated to the offeree, whether it be by words, spoken or written, or through actions. A court must be able to determine the actual intent of the parties, so the offer should be definite.
One of the main elements of a valid contract is ______________--something of value that is given in exchange for a promise.
Consideration. A valid contract includes a "consideration," which is something of value, such as money or personal services, given by one party to another in exchange for an act or promise.
A promise to give someone a gift counts as an unenforceable contract because there is no ______________ involved.
Consideration. There is no "consideration" involved--a consideration is something of value that is given in exchange for a promise. A valid, enforceable contract must have four essential elements: capacity of the parties, mutual agreement or meeting of the minds, consideration, and legality of subject matter.
An agreement to do one's duty, a moral obligation, past consideration, and illusory promises are all examples of situations in which ______________ may be absent in a contract, making it unenforceable.
Consideration. These are examples of situations which lack consideration. For example, a policeman cannot collect the prize money for capturing a criminal because he is doing his duty. An agreement to support relatives is often a moral obligation, it has no legal substance. If someone performs an act for a person without expectation of reward, and then the person promises to pay for that act which already occurred, there is no consideration--past consideration is not valid.
A ___________ is an agreement between two or more parties which is legally enforceable. It can be either express or implied.
Contract. A contract consists of four main elements: capacity of the parties, mutual agreement or meeting of the minds, consideration, and legality of subject matter.
Most federal cases are initially tried and decided in the U.S. ___________ courts, the federal courts of general trial jurisdiction.
District. The U.S. District Courts are the general courts at the federal level which handle most federal cases.
The actual contract exists in the mind--a written document, or actions taken by the parties are merely ___________ of this mental condition which constitutes a contract.
Evidence. Written documents, or actions are merely evidence of the actual contract. For example, when a person gets into a taxi and tells the driver his destination, a contract has been formed--the passenger and the driver have reached a "meeting of minds--"the driver will take the passenger in return for payment. No papers were signed, the action of getting into the car and saying a destination is proof of the contract.
The Statute of Frauds only applies to ____________ contracts--which means that once an oral agreement was made and partially and fully performed, it is not covered by the Statute.
Executory. Executory contracts are covered by the Statute of Frauds. Executory contracts are unperformed contracts. However, the Statute of Frauds is strictly applied, and if at all possible, a court will favor enforceability.
Contracts can be categorized based on whether it has been carried out or not. A ______________ contract is one that has been entered into but not yet performed.
Executory. In an executory contract, the promises have not yet been completely been fulfilled; one or both of the sides still have things left to do to fulfill their side of the contract. Once the contract is complete, and all the promises have been fulfilled, it becomes an executed contract, instead of an executory contract.
Contracts can be classified by type of formation. An ___________ contact is an oral or written contract in which the parties state the contract's terms and express their intentions in words.
Express. This is known as an express contract--the terms are openly stated. Contracts can also be implied-in-fact, and implied-in-law (also known as quasi).
If a merchant forcibly detains a suspected shoplifter without reasonable cause for suspicion, the merchant could be sued for _______ imprisonment.
False. He could be sued for false imprisonment, which qualifies as an intentional tort. However, the merchant is not automatically guilty--if he had reasonable grounds for suspicion, and the confinement is for a reasonable amount of time, he is protected from false imprisonment charges.
The Statute of __________ originates from the British Parliament's "Act for the Prevention of Frauds and Perjuries" passed in 1677.
Frauds. The Statute of Frauds followed by many states today is the original statute passed by the British Parliament in 1677. Basically, this statute is a requirement that certain categories of contracts must be demonstrated by a memorandum, which is specified written evidence of the contract.
Promises to answer for the debt or duty of another, contracts not to be performed within one year from the making thereof, and contracts to sell any interest in real property are all covered by the statute of ________.
Frauds. These are some types of contracts covered by the Statute of Frauds. Contracts not to be performed within the lifetime of the promisor, and the provisions of UCC (Uniform Commercial Code) 2-201 are also covered. UCC 2-201 covers contracts for the sale of goods for the price of $500 or more. Including UCC 2-201, there are six main types of situations which are covered by this statute.
If a person makes a purely oral agreement to work for a company for 10 years, under the _________________, he is not bound by this contract.
Frauds. Under the Statute of Frauds, an agreement to be performed for more than a year requires a written memorandum. Therefore, a purely oral agreement to work ten years, or even two years, is not binding.
Contracts can be classified by type of formation. An ______________ contract is a contract that is established or implied from the conduct of the parties, not their written or spoken words.
Implied. This is known as an "implied-in-fact" contract. In contrast to an express contract, which involves an exchange of written or oral promises, an implied-in-fact contract is based merely on actions and behavior. The three types of contracts classified by type of formation are express contracts, implied-in-fact contracts, and implied-in-law or quasi contracts.
The basic principle of contract interpretation is to determine the ____________ of the parties--the court may determine that there was a meeting of minds and hence a contract, but what the agreement was in the minds of the two parties must be established.
Intent. The court must determine the "intent" of the parties--not just from an isolated event, but from the overall picture--the words or actions as a whole. That is why obscurely placed fine-print in a document will be given less weight than actions which show a different intent--the agreement is in the minds of the parties, and may not necessarily be accurately reflected in the document.
If an offer contains the four essential elements to a valid contract, then acceptance by the offeree will make it binding, provided that a real ____________ to enter into a valid contract is proven.
Intent. There must be real intent by both parties to enter into a valid contract--i.e. it cannot be made under great emotional stress, threat of physical violence, etc.. If there is no clear and real intent to enter into a contract, the offer is not valid.
The four elements necessary to an enforceable contract are competent parties, mutual agreement, consideration, and ___________.
Legality. Legality is the fourth essential element. This means that the contract must be made to accomplish some goal that is legal and not contrary to public policy or statute.
One of the reasons a court may rule a contract to be unenforceable is that too much time has past since the breach of contract--in other words, it is beyond the statute of _____________.
Limitations. The statute of limitations sets a time limit on how long after a breach of contract the case can be taken to court.
Any type of contract covered by the Statute of Frauds must be evinced by a ______________.
Memorandum. The Statute of Frauds requires that certain contracts be evinced by a memorandum, which is a written document which provides evidence of the contract. It does not necessarily require that the entire contract be written down, but simply that there be written evidence that clearly shows that the essential parts of the transaction were agreed on. Also, the party which is being charged in a dispute must have signed the memorandum.
A contract is based on a "meeting of ________," or agreement.
Minds. A meeting of minds, also known as an agreement, is the basis of a contract. A contract, informal or formal, express or implied, is legally enforceable. In a court of law, when looking for evidence of a contract, the court is not necessarily looking for a document, but for this mental condition--a meeting of minds, a mental agreement. Proof of this will either be found in actions, or by oral or written words.
Consideration is based on the idea of quid ____________, which is Latin for "something for something," and is usually a requirement for a contract to be enforceable.
Pro Quo. Quid pro quo, "something for something," is the basis of Consideration. Consideration is something of value that is given in exchange for a promise.
____________ Estoppel is the doctrine allowing recovery on a promise made without consideration when the reliance on the promise was reasonable, and the promisee relied to his or her detriment.
Promissory. Promissory Estoppel is a situation where a promise cannot be withdrawn because the offeree reasonably relied on the offer being held open, and will suffer some kind of detriment if it is withdrawn. The offeree must have reasonably relied--unjustified reliance on a promise does not result in promissory estoppel.
Contracts can be classified by type of formation. An _______________ contract is where the law implies a contract where one does not exist to prevent unjust enrichment of one party at expense of the other.
Quasi. An implied-in-law contract, also known as a quasi contract, is created by law--the court basically implies a contract. This is a special case, and does not fit the definition of a true contract--there was no meeting of minds or agreement.
The ______ Amendment concerns the right to keep and bear arms.
Second. The 2nd Amendment states that "the right of the people to keep and bear Arms shall not be infringed."
With the exception of certain circumstances, ____________ does not constitute acceptance.
Silence. Silence is not counted as acceptance of an offer except in certain cases. If the offeree takes action in response to an offer, despite his silence, there may be a contract. Other cases involve some kind of agreement between the parties that silence counts as an acceptance, and that a rejection must be clearly made.
___________ is an intentional tort that involves unauthorized entry onto a person's land.
Trespass. Trespassing is any case where a person makes unauthorized entry onto a person or private company's property. People have the right to decide who they choose to allow on their property, and the same applies for private companies. If a group of people try to hold demonstrations in a company's parking lot, the company has the right to have them removed.
There are five main types of contracts specifically defined and covered by the Statute of Frauds. The sixth type, defined by _______ 2-201, is also covered by this Statute.
UCC. UCC 2-201 (Uniform Commercial Code) provides for contracts for the sale of goods for the price of $500 or more. A promise made in consideration of marriage--i.e. prenuptial agreements--are one of the types defined by the Statute of Frauds. The other types are contracts involving selling or interest in land, contracts not to be performed within a year, a promise to pay the debt of another, and executors' contracts.
Contracts can be categorized based on enforceability. An _______________ contract is one which a court will not enforce because there is no consideration involved, a promise was made jokingly, it does not meet Statute of Frauds requirements, or too much time has past since the breach of contract.
Unenforceable. This is called an unenforceable contract. A promise to give someone a gift has no consideration involved--consideration is something of value that is given in exchange for a promise. A jokingly made promise shows no contractual intent. The statute of limitations sets a time limit on how soon a breach of contract must be brought to court.
Contracts can be categorized by the types of performance obligations, or the number of promises involved. A _____________ contract is an agreement to pay in exchange for performance, if the potential performer chooses to act--i.e. a man offers his neighbor $1000 to take his car from Raleigh to Richmond.
Unilateral. In a unilateral contract, the offeree is not obligated to perform--he cannot be sued for breach of contract. The offeror is the one liable and can be sued if he does not fulfill the promise. This is in contrast with a bilateral contract, in which both sides exchange promises--both sides have obligations.
_____________ laws protect people who report illegal conduct by a co-worker, employer, or other person or company.
Whistleblower. Whistleblower laws are designed to protect people who report wrongdoing by a company or someone in the company. They may either report it to a supervisor in the company, or to a government agency with responsibility to investigate the alleged wrongdoing. These laws are designed to protect these people from any retaliation or discrimination as a result of their "whistleblowing."
