Business Law Test 1

What are the four requirements/elements of a valid contract?

1) Agreement 2) Consideration 3) Contractual Capacity 4) Legality

Why is a court likely to enforce a shrink-wrap agreement?

A court is likely to enforce a shrink-wrap agreement because the seller proposed a contract by including the terms with the product and the buyer is accepting these terms by using the product.

Discuss agreements to settle claims or discharge debts.

Agreements to settle claims or discharge debts can be done by accord and satisfaction, which is when a debtor offers to pay an amount smaller than what he/she owes the creditor. They may also sign a release or a covenant not to sue.

What is an illusory promise?

An illusory promise is a promise that cannot be enforced and is without consideration. This is because the terms of the contract express too great of uncertainty of performance.

What is unequivocal acceptance?

An unequivocal acceptance is referring to the mirror image rule, which states that in order for an acceptance of an offer to be valid the terms must be exactly the same.

When is consideration legally sufficient?

Consideration is legally sufficient in bilateral contracts.

What is consideration?

Consideration is the value that is given in return for a promise or in return for the performance of something.

What is the difference between a formal contract and an informal contract?

Formal contracts require a special form or method of creation in order to be enforceable. Informal contracts have no such requirement so they include all other contracts.

What is the plain meaning rule?

If a contract's writing is clear and unequivocal a court will enforce it according to its obvious terms.

How does a party distinguish between an executed and an executory contract?

If a contracted has been fully performed it is considered executed, but if it has not it will be considered executory. If one party has fully performed their part of the contract, but the other party didn't then that side of the contracted is considered executed, however the contract will still be considered executory.

What effect does contracting for necessaries have on a minor's right to disaffirm?

If a minor enters into a contract to purchase food, shelter, clothing, medical attention, or other goods or services necessary to maintain his or her well-being they are generally held liable for the reasonable value of those goods and services even if they later disaffirms the contract.

What effect does intoxication have on a person's contractual capacity?

If one or both of the parties were so intoxicated when they enter into the contract that they lack the ability to comprehend the legal consequences of entering into the contract they the contract may be avoided.

When is a contract made by an incompetent person voidable?

If the person has been adjudged mentally incompetent by a court of law if he/she did not know he was entering in a contract or if he/she lacked the mental capacity to understand its nature, purpose, and consequences.

What are the circumstances in which a court will question whether consideration is adequate?

If there is a preexisting duty or in situations involving past consideration.

Name and discuss some exceptions to the rule that a court will not enforce an illegal agreement.

If there is justifiable ignorance of the fact, which means if neither party knew that the contract is illegal than they can recover any benefits conferred in a partially executed contract. Another is members of a protected class. This is when a statute is designed to protect a certain class of people, then a member of that class can enforce a contract in violation of the statute.

What distinguishes a bilateral contract from a unilateral contract?

In a bilateral contract the offeree is able to accept the contract by promising to perform, simply put it is a "promise for a promise". In contrast, a unilateral contract is phrased in a way that requires the offeree can only accept the offer by completing the contract performance, a "promise for an act".

What is the difference between express and implied contracts?

In an express contract the terms of the agreement are fully stated in words, oral or written. An implied contract is a contract that is implied from the conduct of the parties.

Can a preexisting duty satisfy the requirements of consideration? Explain your answer.

In most instances preexisting duty does not fulfill the requirements of consideration. For example, if a woman called the police with information about an investigation then later found out there is a cash reward she doesn't have a right to the cash reward.

What effect does a minor's misrepresentation of age have on his or her right to disaffirm?

In most states misrepresentation of age does not affect disaffirmance. Some states do however prohibit disaffirmance in all cases where the minor misrepresents their age.

What is an exculpatory clause? In what circumstances might exculpatory clauses be enforced? When will they not be enforced?

It is a contractual provision releasing a party from liability, regardless of fault. They will be enforced if they are reasonable, do not violate public policy, and do not protect parties from liability for intentional misconduct. If they violate public policy they will not be enforced.

What public interest might be injured by an overbroad covenant not to compete?

Middle- or upper-level management employees

What is a minor's obligation on disaffirmance?

Minor's have no contractual obligations. They can disaffirm their contractual obligation at any time, but any adult party included in the contract remains bound unless the minor's disaffirmance releases them.

The courts generally do not weigh the sufficiency of consideration according to the comparative economic value of what is exchanged. Should they? Why or why not?

No, the courts should not weigh this because the parties have the opportunity to bargain before there is an agreement on the deal. They would open themselves up to frivolous lawsuits all the time if they considered this.

Discuss the doctrine of detrimental reliance, or promissory estoppel.

Promissory estoppel is when someone who has reasonably and substantially relied on the promise of another person has the ability to obtain some measure of recovery. It is applied to a wide array of contexts.

How does a quasi contract differ from an express or an implied-in-fact contract?

Quasi, or implied-in-law, contracts are not actual contracts, whereas express, or implied-in-fact, contracts are actual/true contracts formed by the words or actions of the parties. Quasi contracts do not arise from any agreement, express or implied, between the parties themselves.

What are some of the other rules regarding the interpretation of contracts?

Some of the other rules include: a word will be given its ordinary, commonly accepted meaning, and a technical word or term will be given its technical meaning, unless the parties clearly intended something else and written or typewritten terms will prevail over pre-printed ones.

When does the Uniform Electronic Transactions Act (UETA) apply, and what is its effect?

The UETA establishes that records, signatures, and contracts may be enforced if they are signed electronically. This covers only electronic records and signatures that relate to a transaction that each of the parties have agreed to conduct transactions electronically. This broadens the scope of enforceability to electronic documents such as emails.

What is the objective theory of contracts?

The objective theory of contracts is how the intent of the contract is determined. It is determined by the objective theory of contracts rather than by the personal or subjective intent or belief of one of the parties.

How do the parties terminate an offer?

The offer can be terminated by revocation, rejection or counteroffer.

Who may accept an offer?

The offeree may accept an offer from the offeror.

In most circumstances, parties are free to make whatever promises they wish, but only those promises made with consideration may be enforced as contracts. What is the purpose of this requirement?

The purpose is for no one to get taken advantage of. If there is a set value on it then the one suing cannot sue for more than the set value.

If it were possible to reform a covenant not to compete, what might be changed, or how might it be redrawn, to be reasonable?

The specified period of time may be cut short or the geographic restrictions could be modified in order to make the distance restrictions shorter.

What are the requirements of an implied contract?

The three requirements for an implied contract are: the plaintiff furnished some service or property, the plaintiff expected to be paid for that service or property, and the defendant knew or should have known that there was an expected payment, and the defendant had a chance to reject the services or property and did not.

What is the minor's right to disaffirm a contract?

They can disaffirm a contract at any time during minority or for a reasonable amount of time after they turn of age.

On what reasoning might a court refuse to enforce a shrink-wrap agreement?

They court can refuse to enforce a shrink-wrap agreement if the buyer does not expressly consent to the terms.

Why must a contract have "reasonably definite terms" and how "definite" must the terms be?

They must have reasonably definite terms so the court will be able to decide if there was a breach of contract and will be able to give the correct remedy. The definitiveness is termed by 4 criterions: 1) the identification of parties, 2) The identification of the object or subject matter of the contract (also the quantity, when appropriate) including the work to be performed, with specific identification of such items as goods, services, and land

In the context of an offer, how are intent and its seriousness determined?

This is determined by what a reasonable person in the offeree's position would conclude that the offeror's words and actions are meant.

What are some of the exceptions to the preexisting duty rule?

Unforeseen difficulties during the performance of the contract are an exception to the preexisting duty rule and the court will also recognize rescission and a new contract if agreed upon by both parties.

Can parties to a contract that would otherwise be covered by the UETA choose to waive its provisions? Explain your answer.

Yes parties can waive all provisions provided by the UETA other than rules concerning good faith, diligence, and public policy.

Is a court likely to enforce a click-on agreement? Why or why not?

Yes they are because the user agrees to all the terms by clicking something that says "I accept the terms" or "I agree" and all the terms are given to the buyer.