LEGS 3010 Exam 2
How is price determined if it's not specified in a contract?
"Reasonable price" at time of delivery
How is the time of performance determined if it's not specified in a contract?
"Reasonable time"
Typically, how much is awarded for nominal damages?
$1 to $5
What is the fifth rule of consideration?
A promise to do something one is already legally obligated to do is not valid consideration
What is the pre-existing duty rule?
A promise to do something one is legally obligated to do
What are the ways to discharge by operation of law?
Alteration of Contract, Bankruptcy, Tolling of statute of limitations, Impossibility of performance - objective standard, Commercial Impracticability, Frustration of Purpose
For a court to enforce a promise, who must offer consideration?
Both sides
What are liquidated damages?
Damages specified as a term of the contract, before a breach of contract occurs
The Liggett Restaurant Group, Inc. v. City of Pontiac Michigan Court of Appeals case is an example of which way to discharge by operation of law?
Frustration of purpose
What makes a contract valid?
Has all four elements
What makes an illegal contract void?
Has no legal purpose/subject matter and violates state/federal statutes
Oliver is a sixteen-year-old who would like to disaffirm his automobile purchase contract with Henry's Used Cars, LLC (Henry's). What must Oliver do to disaffirm?
He must manifest an intention to rescind the contract either by words or by actions.
What is the third rule of consideration?
Illusory promise does not constitute consideration
What does it mean to discharge by novation?
The substitution of a 3rd party for one of the original parties; the duties remain the same, but one party is discharged and the 3rd party takes that original party's place
What is the mirror-image rule?
The terms of the acceptance must exactly mirror the terms of the offer
What are the elements of a valid offer? (2/3)
There are definite and certain terms (subject matter & price)
What is the age of majority according to the Ohio Revised Code?
18+, capable of contracting
What are adhesion contracts?
A contract created by a party on a take-it-or-leave-it basis
In which of the following situations may court order specific performance by the breaching party?
A contract for the sale of a rare coin that the defendant now refuses to sale.
What is a contract for necessary?
A contract that supplies the minor with the basic necessities of life
What is an injunction?
A court order either forcing a party to do something or prohibiting a party from doing something
What is intentional misrepresentation?
A false representation of a material fact made by a party who either knows/believes that the factual claim is false or knows there Is no basis for the assertion. Scienter is clear
What is fraudulent misrepresentation?
A false representation of a material fact that is consciously false and is intended to mislead the other party
What is innocent misrepresentation?
A false statement about a fact material to an agreement that the person who made the statement believed to be true
What's the first element to intentional misrepresentation?
A false statement about a past or existing fact that is material to the contract
What is negligent misrepresentation?
A false statement of material fact made by a party who thinks it is true but who would have known the truth about the fact had they used reasonable care to discover/reveal it
What is discharge by material breach?
A substantial breach of a significant term/terms of a contract that excuses the nonbreaching party from further performance under the contract and gives the nonbreaching party the right to recover damages
What does an agreement consist of?
A valid offer and valid acceptance
When does reformation occur?
A written contract does not reflect the parties' actual agreement or there are inconsistencies, in which the document may be rewritten to reflect what the parties agreed on
What is ratification?
Accepting the terms of a contract (entered into as a minor) after reaching the age of majority
The promise to perform the new duty is called the ______, and the actual performance of that new duty is called the ______.
Accord; satisfaction
What's an example of procedural unconscionability?
Adhesion contracts
What are some exceptions to the statute of frauds?
Admission (such as land), partial performance, promissory estoppel, merchants, customizable goods
When does an express ratification occur?
After reaching the age of majority, a person states that he or she intends to be bound by a contract
What are the four elements of contract law?
Agreement, consideration, capacity, and legal object
What is complete performance?
All aspects of parties' duties carried out perfectly
Relating to undue influence, who might persuade an individual in this type of situation?
An attorney, doctor, guardian, relative, or anyone else in a relationship involving a high degree of trust
What is a unilateral mistake?
An error is made by only one party about a material fact
What is an express contract?
An oral or written agreement
What is misrepresentation?
An untruthful assertion by one of the parties about a material fact
After Company X enters into a contract with Company Y, it advises Company Y of its intent to not honor its contractual obligations. This is an example of:
Anticipatory repudiation
What is duress?
Any unlawful act or threat exercised on a person whereby the person is forced to enter into an agreement or perform some other act against their will
What is anticipatory repudiation?
Before the actual time of performance, a party decides not to complete contract obligations, can occur express or action
What is a bilateral/mutual mistake?
Both parties make an error about a material fact
What does it mean when a contract has been executed?
Both parties performed
When does frustration of purpose occur?
Both parties recognize the contract is intended to fulfill a particular purpose and if, due to factors beyond parties' control, the event does not occur, & neither party assumed the risk of the event's nonoccurrence
The Thrifty Rent-A-Car System v. South Florida Transport is an example of which way to discharge by operation of law?
Commercial impracticability
What are the two sources of contract law?
Common law and Uniform Commercial Code (UCC)
What are the elements of a valid offer? (3/3)
Communication of the offeror to offeree (or offeree's agent)
What are punitive damages?
Compensation awarded to a plaintiff that's imposed to punish the defendant and deter such conduct in the future
What are the legal remedies (monetary damages) available for a breach of contract?
Compensatory Damages (aka Expectation Damages), Consequential (Special) Damages, Liquidated Damages, Nominal Damages, Punitive Damages
What are types of contracts that don't allow minorities to get out of them?
Contract for necessaries, fraud/poor intent, education, health insurance, etc.
______ are legally enforceable promises
Contracts
Which one of the exceptions to statute of frauds is under the UCC?
Contracts between merchants/customized goods
Article 2 of the UCC applies to what?
Contracts for the sale of goods
What is the second rule of consideration?
Courts rarely consider adequacy of consideration
_______ is an agreement not to compete against a party for a set period of time within a designated geographic area
Covenant Not to Compete/Restrictive Covenant
Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his employment, he will not work for another computer store within twenty-five miles for a period of two years. This type of agreement is called a(n) _____.
Covenant not to compete
What are the three main situations in which courts find objective impossibility?
Destruction of subject matter, death/incapacity of a party who's services are needed, & subsequent illegality
Minors are able to _____ contracts
Disaffirm
What are the four ways parties can discharge by mutual agreement?
Discharge by mutual recession, substituted contract, accord & satisfaction, and novation
Silence does/does not constitute acceptance.
Does not
The obligation of the plaintiff to demonstrate that they used reasonable efforts to minimize the damage resulting from a breach is called...
Duty to mitigate one's damages
Once all the terms of the contract have been fully performed, the contract has been _________. As long as some of the terms have not yet been performed, the contract is ________.
Executed; executory
What type of ratification occurs when a person states that they intend to be bound by a contract entered into as a minor?
Express
T/F: A minor cannot enter into a valid contract since they are not 18+
False
T/F: An offer cannot be terminated if there is a death/incapacity of offeror
False, can be terminated
T/F: Express ratification has to be in writing
False, can be written or oral
T/F: A contract is not voidable anymore if a minor turns 18
False, is still voidable after a reasonable point in time
T/F: A contract is valid if a person is adjudicated insane
False, it is void
T/F: If the subject matter of an offer is destroyed, the offer is not terminated.
False, offer is terminated immediately
T/F: Contract law is largely dominated by federal law
False, state law
T/F: The statute of frauds is federal-level
False, state-level
T/F: In a lease, there's a transfer of possession and title of the good
False, the owner still has title
T/F: Adhesion contracts are illegal
False, they are legal but can be rescinded on the grounds of unconscionability & lack of free will
T/F: When a bilateral mistake occurs, the parties cannot rescind contract
False, they both can rescind contract
T/F: Under the UCC, contracts cannot have additional terms and must follow the Mirror-Image Rule
False, they can have additional terms & do not follow that rule
T/F: When anticipatory repudiation occurs, the non-breaching party discharged from obligations under contract and cannot sue
False, they can sue immediately
What is the first rule of consideration?
For a contract/promise to be legally enforced, it must have consideration
What are consequential damages?
Foreseeable damages that result from special facts and circumstances arising outside the contract itself
What are "gap fillers" purpose?
If terms aren't specified in contract, the UCC fills them in
Under UCC, when do contracts for the sales of goods need to be in writing?
If the price of the good(s) are $500 or more
What is a merchant's confirmation memorandum?
If two merchants have an oral agreement, a written memo from either party to the other satisfies the statute of frauds
Suppose Shawn offers to sell Molly his skis for $300. Molly responds, "I'll look at them in the morning, and if I like them, I'll pay you." What kind of promise has Molly made?
Illusory promise
When does a covenant not to compete occur?
In the sale of an ongoing business and/or in an employment agreement
Who has limited capacity?
Infancy (minors), Incapacitated (mentally) persons, and intoxicated persons
What is scienter?
Intent or knowledge
What's the second element to intentional misrepresentation?
Intent to deceive
Examples of statute of frauds?
Interest in land, marriage (such as prenups), sale of goods (over $500)
What is commercial impracticability?
Is used when performance is still objectively possible but would be extraordinarily injurious or expensive to one party
Why isn't a quasi-contract considered a contract?
It does not meet the four elements of a contract
Why is an illusory promise not really a promise?
It is optional, not committing
What two factors makes an unenforceable contract?
It's against public policy and is unconscionable
What's the third element to intentional misrepresentation?
Justifiable reliance on the false statement by the innocent party to the agreement
Suppose Joey and Mikey enter into a contract together. Joey says he will pay Mikey $100,000 to kill one of Joey's enemies. Both parties know this contract involves the undertaking of an illegal act. Under which element of a contract is this contract not enforceable?
Legal object
What is the statute of frauds?
Legislation that addresses the enforceability of contracts that fail to meet the requirements set forth in the statute
The Kent State University v. Ford case is an example of what kind of legal remedy for a breach of contract?
Liquidated damages
The S. Brooke Purll, Inc., T/A Purll Construction v. Patrick Darrell case is an example of what kind of legal remedy for a breach of contract?
Liquidated damages
An offer immediately terminates in all of the following situations, except:
Manifestation of intent to be bound.
What is a quasi-contract?
Means implied in law, imposes parties to fulfill obligations for justice
According to the ________ rule, if the terms of the acceptance of an offer are not identical to the terms of the offer, no contract is formed
Mirror-image
What is a mistake?
Misunderstandings regarding material facts of contract at time agreement made
What is a plaintiff seeking if they request legal damages?
Monetary damages
What are nominal damages?
Monetary damages awarded to a plaintiff in a very small amount
What are compensatory damages?
Money awarded to a plaintiff as reimbursement for their losses; based on the amount of actual damage/harm to property, lost wages or profits, pain & suffering, etc.
What do the parties typically bargain for?
Money in exchange for product/service
Suppose James agreed to cater a reception for Bill's son, but it appears that the child is not going to graduate when planned. James agrees not to hold Bill responsible for paying him the agreed-upon cost for catering in exchange for Bill's agreement not to expect James to cater the reception; this is known as a(n)...
Mutual recession
What are the elements required for a writing to satisfy the statute of frauds?
Name of parties, subject matter, consideration, essential terms, & signature of parry against whom action is brought
What is substantial performance?
Nearly all terms of agreement completed, honest effort to complete all terms, & no "willful departure" from terms of agreement
Suppose that someone offers a reward for the capture of a suspected criminal and a police officer arrests the suspect. Is the police officer's entitled to the reward?
No, b/c he was already obligated as part of his public duty to apprehend the suspect
Business-wise, is it smart to enter into a contract with a minor? Why or why not?
No, b/c they can walk away from contract
Frank works as a cellphone salesman. He has worked at the same company for the past two years, and one day his boss approaches him with good news. He says because Frank has sold so many phones lately, he is going to give Frank a $500 bonus. Three weeks later, Frank has still not received the bonus. Can Frank sue his boss to enforce the promise?
No, this is an example of past consideration.
What are the elements of a valid offer? (1/3)
Offeror has to intend to be bound by the "reasonable person" standard
What makes a contract voidable?
One or both parties can get out of it and they don't have to perform
What does it mean when a contract is executory?
One or both parties still have to fulfill their obligations
What does it mean to discharge by accord & satisfaction?
One party wishes to substitute a different performance for their original contractual duty; party's duty under contract not discharged until new duty performed
When does undue influence occur?
One person takes advantage of their dominant position in a relationship to persuade the other person unduly to the extent that the dominant persons's persuasive efforts have interfered with the other person's ability to make their own decision
How long does a statute of frauds have before it has to be in writing?
One year
What does it mean to discharge by mutual recession?
Parties agree to simply discharge each other from their mutual obligations and therefore rescind or cancel the contract
What is the fourth rule of consideration?
Past consideration does not institute a present contract
What kinds of behaviors can trigger a successful request for recession on grounds of duress?
Physical harm/extortion, one party threatens to file a criminal lawsuit unless consent is given for k, & economic interests are threatened
Age is determined at the...
Point of contract
Two requirements for partial performance? (statute of frauds)
Portion of sales price and improvements/possession
There's a transfer of _____ in a lease
Possession
A door-to-door hearing aid salesman specifically targets elderly clients. When the clients ask questions about the contract, the salesman is not truthful with them entirely. The answers to their questions are usually found on the tiny, hard-to-read print on the very back of the long contract the clients must sign. The salesman knows that his clients have poor vision and hearing, and uses this to his advantage in his sales techniques and with the small contractual terms. The scenario above is a possible example of which type of agreement?
Procedural unconscionability
What is the exception to the first rule of consideration?
Promissory estoppel
If the offer is for a unilateral contract, the offeree can accept only by __________________.
Providing the requested performance
A contractual obligation imposed by court to prevent unjust enrichment is a(n)...
Quasi-contract
If a person who has reached the age of majority legally affirms a contract made as a minor, he or she is said to have ______ the contract
Ratified
When a written contract does not reflect the parties' actual agreement, the plaintiff may file for __________.
Reformation
When a contract is voidable, it may be ______, or canceled.
Rescinded
What are the equitable remedies available for a breach of contract?
Rescission, Restitution, Specific Performance, Injunction, Reformation
How is delivery determined if it's not specified in a contract?
Seller's place of business
Common law applies to ______, while UCC applies to ______.
Services; goods
What do minors need to do to disaffirm?
Show intent, through words and/or actions, to rescind contract AND return any consideration received (if still in minor's possession/control), regardless of condition
Why is the statute of frauds in writing?
So that it's enforceable, people understand the terms, and to limit fraud
An order of the court requiring a breaching party to fulfill the terms of the contract is called ______.
Specific performance/enforcement
How is the amount of liquidated damages which may be awarded by a court determined?
Specified in the contract
Two types of discharge by performance?
Substantial and complete
What is the mailbox rule?
The acceptance of an offer is valid when it is placed in the mailbox
How is quantity determined if it's not specified in a contract?
The contract fails for lack of definiteness
What is objective impossibility?
The court decides it is in fact not possible to lawfully carry out one's contractual obligations
What is subjective imposibility?
The court decides it would be very difficult to carry out the contract
What does the second rule of consideration mean?
The court does not care if parties made a good deal or not
When does an implied ratification occur?
The former minor takes some action after reaching the age of majority that is consistent with an intent to ratify the contract
Suppose a pool contractor agrees to build a pool for a homeowner by June 1. In May, the contractor informs the homeowner that he will not be able to complete the project by June 1 unless the homeowner pays him an additional $5,000 to hire more workers. Under objection, the homeowner agrees. Does the homeowner have an obligation to pay the contractor the additional $5,000?
The homeowner is not legally obligated to pay the $5,000 since the contractor had a pre-existing contractual duty to complete the pool by June 1
Article 2(A) of the UCC applies to what?
The lease of goods
What does it mean to disaffirm a contract?
The legal avoidance, or setting aside, of a contractual obligation
What is promissory estoppel?
The legal enforcement of an otherwise unenforceable contract due to a party's reliance on the contract
What is contractual capacity?
The mental ability to understand one's rights
When is acceptance effective?
The offeree communicates to offeror (can be by email, fax, phone, etc.)
What does acceptance of an offer mean?
The offeree's intent to be bound to terms of offer
What is revocation of an offer?
The offeror can revoke the offer before acceptance
What does it mean when a contract is unilateral?
The offeror wants a performance to form the contract
What does it mean to discharge by substituted contract?
The parties substitute a new agreement in place of the original; immediately discharges their obligations under old contract
When does restitution occur?
The parties want any property given up under a contract to be returned
When does a recession occur?
The parties want to have the contract terminated
Why is land an exception to the statute of frauds?
The party can't back out if they've agreed to buy the land
What do nominal damages signify?
The plaintiff has been wronged by the defendant
Consideration must be __________.
The product of a bargained for exchange
What does it mean when a contract is bilateral?
There's an exchange in promises between parties
Who has no capacity to contract?
Those adjudicated insane, those adjudicated habitually intoxicated, and those with appointed legal guardians
There's a transfer of _____ when there's a sale of a good
Title
T/F: A minor cannot get out of a contract for necessary
True
T/F: A unilateral contract is not binding until the party does the act/performance
True
T/F: An illusory promise is not a promise at all
True
T/F: Anticipatory repudiation discharges the nonbreaching party from his obligations under the contract.
True
T/F: Extra work is consideration on a promise for additional money as a basis for a contract
True
T/F: If the offeror does not specify a time period that an offer will be valid, the offer terminates after a reasonable period of time.
True
T/F: If there's no quantity specified in the terms of a contract, it is not a valid offer
True
T/F: One way to terminate an offer is rejection by the offeree
True
T/F: Only an incapacitated person can disaffirm, but return all consideration
True
T/F: Punitive damages go beyond reimbursement for actual losses
True
T/F: Quasi-contracts are not actually a contract
True
T/F: The one party gets compensated for what wasn't done when substantial performance has ocurred
True
T/F: When a unilateral mistake occurs, the contract is generally still binding
True
T/F: When discharge by novation occurs, all three parties must agree
True
T/F: contracts can be written and/or oral
True
What is procedural unconscionability?
Unconscionability that derives from conditions that would impair one party's understanding of a contract/contract terms
What is substantive unconscionability?
Unconscionability that derives from one-sided, unjust, or overly harsh substance in a contract
A contract where the powerful party dictates the terms of the agreement and eliminates the other party's free will are considered __________.
Unconscionable
What does it mean to discharge by impossibility of performance?
Unforeseen event occurs that makes it physically/legally impossible for a party to carry out the terms of the contract
Are contracts with a reward typically unilateral or bilateral?
Unilateral
A contract is _______ when a person's mental deficiency simply impairs their judgment about the desirability of the contract but does not prohibit them from understanding their obligations
Valid
If the intoxication is such that it impairs only the intoxicated person's judgment but not their understanding of their contractual obligations, a contract is ______.
Valid
A contract is ______ when an intoxicated person been adjudicated a habitual drunkard.
Void
A contract is ______ when the sober party's aware the intoxicated person is so impaired that they're unable to understand their legal obligations under the contract they're entering into
Voidable
After a football game, Tyler and Austin want to enter into a contract together. Tyler is completely sober, but he knows Austin is very intoxicated and is so impaired that he is unable to understand the terms of the contract. If they enter into a contract, the contract would be ________.
Voidable
Contracts are _____ by minors
Voidable
If a person is suffering from mental deficiencies that prevent them from understanding their legal obligations under a contract, the contract is _______.
Voidable
If a person is under the age of majority, a contract is _______.
Voidable
Because their contracts are _____, minors have the right, until a reasonable time after reaching the age of majority, to _____, or avoid, their contracts.
Voidable; disaffirm
What is consideration?
What a person will receive in return for performing a contract obligation
How is payment determined if it's not specified in a contract?
When the buyer receives the goods
Under UCC, when do lease contracts need to be in writing?
When the lease requires payments of $1,000 or more
