Contracts and Agreements Overview
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Questions and Answers

What is a promise?

A promise is a manifestation of an intention to act in a specified way, so made as to justify a promisee in understanding that a commitment has been made.

A statement of intent is the same as a promise.

False (B)

What does the legal term "Contra Proferentem" mean?

It means that when a written instrument contains ambiguous language, the language will be construed against the party who selected the words.

What are the two key components of the "Mixed Test of Contract Formation"?

<p>Objective reasonable person standard and the party's inner meaning (C)</p> Signup and view all the answers

What is a bargain?

<p>A bargain is an agreement between parties for an exchange. It can be a good deal for both parties, or it can be a bad deal for one party.</p> Signup and view all the answers

What is consideration?

<p>Consideration is a bargained-for exchange. It is the element that makes a promise enforceable.</p> Signup and view all the answers

What is a contract?

<p>A contract is an enforceable promise. It is enforceable when there is consideration, meaning that the parties are exchanging something of value for the other party's promise.</p> Signup and view all the answers

What is forbearance?

<p>Forbearance is a promisor's receiving a right, interest, profit, or benefit, or a promisee's undertaking a forbearance, detriment, loss, or responsibility in exchange for a promise.</p> Signup and view all the answers

What are the two parts of the "Two Part Test for Consideration"?

<p>Did the promisor receive a right, interest, profit, or benefit? OR Did the promisee undertake a forbearance, detriment, loss, or responsibility? (C)</p> Signup and view all the answers

What is an offer?

<p>An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.</p> Signup and view all the answers

What does it mean for "The offeror commits to the terms of the offer if and only if the offeree accepts?"

<p>It means that the offeror is bound by the terms of the offer if and only if the offeree accepts the offer. It is a binding commitment to the other party in the contract.</p> Signup and view all the answers

What are the four ways an offeree's power of acceptance can be terminated?

<p>The offeree's rejection or counteroffer, Lapse of time, The offeror's revocation, or The offeror's or offeree's subsequent death/incapacity (C)</p> Signup and view all the answers

A price quote always constitutes an offer.

<p>False (B)</p> Signup and view all the answers

What does the legal term "defense of incapacity" mean?

<p>It refers to a situation where a person entering into a contract is unable to comprehend the nature and consequences of the contract due to intoxication or other incapacity.</p> Signup and view all the answers

A person who claims they were joking is always able to invalidate their acceptance or offer.

<p>False (B)</p> Signup and view all the answers

What are "preliminary negotiations"?

<p>Preliminary negotiations are a series of communications between potential parties to a contract that do not constitute a valid offer until one party makes a definitive and certain offer.</p> Signup and view all the answers

A purported offer is always a valid offer.

<p>False (B)</p> Signup and view all the answers

According to the legal principle of "Offeror is Master of the Offer", what is the role of the offeree?

<p>The offeree can only accept the offer as it was originally presented (C)</p> Signup and view all the answers

Which of the following are possible forms of acceptance invited by an offer?

<p>An affirmative answer in words, or by performing/refraining from performing a specified act (A)</p> Signup and view all the answers

An offer can only be accepted in the same manner and by the same medium invited by the offer.

<p>False (B)</p> Signup and view all the answers

Explain what "The Mirror Image Rule" is.

<p>The Mirror Image Rule states that an acceptance must be on the terms proposed by the offer without any variation. It requires that the offeree's acceptance exactly mirror the offeror's offer.</p> Signup and view all the answers

An offeree can add additional terms to an acceptance and still form a valid contract.

<p>True (A)</p> Signup and view all the answers

What is a "Merchant Firm Offer Rule"?

<p>The Merchant Firm Offer Rule is an exception to the general rule that an offer is revocable. It applies only to the sale of goods and only if the offeror is a merchant.</p> Signup and view all the answers

What does a "Duty to Read Rule" mean?

<p>The Duty to Read Rule states that any party entering into a contract has a duty to read and understand all the written terms of the contract. A party is presumptively bound to the terms of that contract, whether they read them, understood them or even wanted to agree with all the terms.</p> Signup and view all the answers

What is a "Battle of the Forms"?

<p>A &quot;Battle of the Forms&quot; occurs when parties exchange forms with negotiated material terms but different boilerplate terms. Both parties may not actually read the terms of the contract. They then act as if a contract was formed, even when their forms do not meet the requirements of the “Mirror Image Rule.”</p> Signup and view all the answers

Under the “Common Law”, the last form sent prior to performance dictates the terms of the contract.

<p>True (A)</p> Signup and view all the answers

Under the “UCC 2-207“, a contract is formed if the negotiated terms are the same.

<p>True (A)</p> Signup and view all the answers

Which of the following is not one of the three subsections of UCC 2-207?

<p>Formation of a contract by mutual assent (B)</p> Signup and view all the answers

What is the “Knock-Out Rule“?

<p>The Knock-Out Rule states that common terms will govern and all different terms will be knocked out of the contract and replaced by UCC gap fillers, course of performance, course of dealing, and trade usage.</p> Signup and view all the answers

What is "Promissory Estoppel"?

<p>Promissory Estoppel is a legal doctrine that enforces a promise even though there is no consideration when a promisee has reasonably relied on a promise and the promisor had reason to expect reliance.</p> Signup and view all the answers

A person who receives a benefit solely as a gift can enforce the promise to pay for that benefit through promissory estoppel.

<p>False (B)</p> Signup and view all the answers

What is a "Standardized Contract"?

<p>A Standardized Contract, also known as an adhesion contract, is a contract where one party has little or no power to negotiate the terms.</p> Signup and view all the answers

It is always a good idea to never actually read the terms of a contract.

<p>False (B)</p> Signup and view all the answers

Explain what a "Battle of the Forms" is.

<p>A “Battle of the Forms” occurs when businesses exchange forms that contain some negotiated terms but different boilerplate terms. If both parties then act as if a contract was formed, despite not meeting the requirements of the “Mirror-Image Rule”, then they may have a legitimate contract.</p> Signup and view all the answers

The “Knock-Out Rule” can be used to determine a contract’s terms if the contract was formed solely through oral communications.

<p>True (A)</p> Signup and view all the answers

What are the three types of contract damages?

<p>The three types of contract damages are: (1) Expectation Damages, (2) Reliance Damages, and (3) Restitution Damages.</p> Signup and view all the answers

Briefly explain what "Expectation Damages" are.

<p>Expectation Damages are awarded for the economic loss that a party has suffered due to the breach of a contract.</p> Signup and view all the answers

Briefly explain what "Reliance Damages" are.

<p>Reliance Damages are awarded for the economic loss a party has suffered due to reasonable reliance on a promise that was not kept by the other party.</p> Signup and view all the answers

Briefly explain what "Restitution Damages" are.

<p>Restitution Damages are awarded to prevent a party from being unjustly enriched by retaining a benefit they received due to the conduct of the other party.</p> Signup and view all the answers

Which of the following is NOT a requirement of the “Promissory Estoppel Rule”?

<p>The promisor is financially capable to avoid the burden of fulfilling the promise (D)</p> Signup and view all the answers

What is “Unjust Enrichment”?

<p>Unjust Enrichment is a legal doctrine that prevents a party from obtaining a benefit that they do not deserve at the expense of another party.</p> Signup and view all the answers

What is the “Past and Moral Consideration Rule”?

<p>The Past and Moral Consideration Rule states that a promise made in recognition of a benefit previously received by the promisor from the promisee is usually not enforceable.</p> Signup and view all the answers

Forbearance to sue rule states that, a promise to forbear from suing can constitute consideration even if the promisor does not reasonably or honestly believe that the claim was valid.

<p>False (B)</p> Signup and view all the answers

The “Naked Promises Rule” is an exception to the general rule that a promise is only enforceable if it is supported by consideration.

<p>True (A)</p> Signup and view all the answers

What is a "Contract Modification"?

<p>A contract modification is an agreement between parties to change the terms of an existing contract. It is itself a contract, and requires consideration to be legally enforceable.</p> Signup and view all the answers

The “Preexisting Duty Rule” states that, a contract modification is supported by consideration when there is only a preexisting legal duty already owned under a contract.

<p>False (B)</p> Signup and view all the answers

In the realm of "Contract Modification“, the “UCC d/n require consideration for contract modifications”, is a general rule.

<p>True (A)</p> Signup and view all the answers

If a contract is modified, then as a general rule, the modification is enforceable if it is “fair and equitable” given the circumstances.

<p>True (A)</p> Signup and view all the answers

A party to a contract can always contract around “good faith” requirements.

<p>False (B)</p> Signup and view all the answers

What are the two main ways an offer can be made irrevocable?

<p>By forming a “option contract”, or “Offeree’s Detrimental Reliance” (A)</p> Signup and view all the answers

The “Merchant Firm Offer Rule” applies to any type of contract.

<p>False (B)</p> Signup and view all the answers

The “Promissory Estoppel Rule” is an exception that can override a requirement for consideration to form an enforceable contract.

<p>True (A)</p> Signup and view all the answers

The “Unjust Enrichment Rule” is an exception to the “Past and Moral Consideration Rule”

<p>True (A)</p> Signup and view all the answers

Which of the following is not a type of non-promissory unjust enrichment?

<p>Express Contracts (E)</p> Signup and view all the answers

The “Non-Promissory Unjust Enrichment Rule” can only occur when there is clear evidence of a formal contractual agreement.

<p>False (B)</p> Signup and view all the answers

When is the legal concept of "Emergency Care" appropriate?

<p>When a beneficial service is provided during a medical emergency without the knowledge or consent of the recipient. (A)</p> Signup and view all the answers

A service provider is always entitled to compensation for services, regardless of whether the recipient consented to the services or was aware of the service provision.

<p>False (B)</p> Signup and view all the answers

The “Expectation of Payment” presumption can be used to justify payment for services in all situations, even if those services are provided gratuitously.

<p>False (B)</p> Signup and view all the answers

An “Implied-in-Law Contract” is always found when a party expressly contradicts the substance of a promise with words.

<p>False (B)</p> Signup and view all the answers

What is the "Promise for Benefit Received Rule"?

<p>The Promise for Benefit Received Rule states that a promise made in recognition of a benefit previously received by the promisor is enforceable to the extent necessary to prevent injustice.</p> Signup and view all the answers

In the “Promise for Benefit Received Rule”, the recipient’s promise is always limited to the value of the benefit received.

<p>False (B)</p> Signup and view all the answers

The UCC does not recognize the concept of “good faith” as a basis for contract enforcement.

<p>False (B)</p> Signup and view all the answers

A party to a contract can always waive their “good faith” requirements.

<p>False (B)</p> Signup and view all the answers

Contract modifications are typically enforced even when the modification is not “fair and equitable,” given the circumstances.

<p>False (B)</p> Signup and view all the answers

The “Merchant Firm Offer Rule” is not applicable to oral contracts.

<p>True (A)</p> Signup and view all the answers

The “Merchant Firm Offer Rule” requires that the offer be made in writing and be signed by the merchant.

<p>True (A)</p> Signup and view all the answers

A party that detrimentally relies on a promise to perform a service will always be entitled to “Expectation Damages”

<p>False (B)</p> Signup and view all the answers

“Unjust Enrichment” is the same as “Unfair Enrichment,” but a legal doctrine that does not have to be proven to enforce the promise.

<p>False (B)</p> Signup and view all the answers

Flashcards

Promise

A manifestation of intent to act in a certain way, creating a justifiable expectation of commitment.

Statement of Intent

An expression of a state of mind, not a promise; doesn't invite or justify reliance.

Contra Proferentem

If a contract's language is unclear, it's interpreted against the party who chose the words.

Mixed Test of Contract Formation

A contract is formed if a reasonable person would interpret a party's words as acceptance, and the other party actually understood it that way.

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Bargain

An agreement where parties exchange promises or actions.

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Consideration

Something of value exchanged between parties in a contract.

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Contract

A legally enforceable promise supported by consideration.

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Forbearance

Giving up a legal right as consideration.

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Offer

A manifestation of willingness to enter a contract, inviting acceptance.

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Termination of Offers

Ways an offer can end, including rejection, lapse of time, and revocation.

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Incapacity (Defense)

A legal defense where a party lacked the mental capacity to understand a contract due to intoxication.

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Preliminary Negotiations

Discussions that aren't offers because the parties don't intend to be bound yet.

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Reasonably Certain

Contract terms must be clear enough to determine a breach and remedies.

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Offeror is Master of the Offer

The offeror controls the terms and who may accept the offer.

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Mirror Image Rule

Acceptance must be exactly the same as the offer.

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Additional Terms (Acceptance)

Adding terms to an offer in an acceptance can create a contract if the offeror agrees

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Unilateral Contract

Acceptance is by performance of an act.

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Bilateral Contract

Acceptance is by promising to perform.

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Implied-in-Fact Contract

A contract formed through actions, rather than explicit words.

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Option Contract

A separate contract where something of value is exchanged to make an offer irrevocable.

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Promissory Estoppel

A promise is enforceable even without formal consideration if it justifiably induces detrimental reliance.

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Unjust Enrichment

When someone receives something of value without giving fair compensation.

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Unconscionability

A contract term so unfair to one party as to be unenforceable.

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Merchant Firm Offer

A written offer by a merchant to sell goods, which promises to stay open, is irrevocable for a stated time (or a reasonable time).

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UCC 2-207

A rule that addresses the "battle of the forms" in sales contracts.

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Study Notes

Promises and Agreements

  • A promise is a manifestation of intent to act in a specific way, justifying the promisee's understanding of a commitment. Promises can also be about refraining from action. Manifestation can be through words, actions, or a combination.

  • Pappas v. Bever (1974): Common/ordinary meanings of words in a document determine their legal meaning.

  • Statement of Intent: This is an expression of state of mind, not a promise. It neither invites nor justifies action in reliance.

  • Partial performance: Does not automatically transform a statement of intent into a promise.

  • Contra Proferentem: Ambiguous language in a contract is construed against the party that drafted the problematic language.

  • Mixed Test of Contract Formation: An objective reasonable person standard is used to determine if a contract was formed, not a party's subjective intention.

  • Embry v. Hargadine, McKittrick: Objective reasonableness of words/actions determines if contract was renewed.

  • Mixed Test: Objective intent, not subjective intent, is critical to contract formation.

Contract

  • A contract is an enforceable promise where consideration was bargained for. For consideration to exist, a promisor must seek one thing in exchange for another.

  • Hamer v. Sidway: Forebearing on certain activities can be considered a detriment, and valid consideration.

  • Two-part test for Consideration: Must identify (1) whether the promisor received some right, interest, profit, or benefit OR (2) whether the promisee undertook a forbearance, detriment, loss, or responsibility. It must be met from both sides.

  • Offer: Clear manifestation of a willingness to form a bargain, inducing the other party to believe acceptance will form the contract. The offer commits to the specified terms.

  • Termination of Offers: Offers can end from various factors: rejection, counteroffer, lapse of time, offeror's revocation, and incapacity of either party.

Contract Formation (Continued)

  • Incapacity: Intoxication is a possible defense to a contract, but only if the intoxicated person lacked comprehension of a contract's nature and consequences, and the other party knew this.

  • Preliminary Negotiations/R2K: A manifestation of willingness isn't an offer if the person making it isn't intending to enter a contract.

  • Fairmont Glass Works v. Crunden-Martin: A price quote can be an offer, especially when it invites acceptance.

  • Lucy v. Zehmer: The subjective intent of a person entering a contract doesn't negate the existence of a valid contract if a reasonable person in their situation would've believed the deal was valid.

  • Option Contract: A contract that prevents the offeror from revoking an offer for a specified time. Consideration must be present for an option contract.

  • Mutual Assent: A meeting of the minds (both offeror and offeree agree to the agreement) is needed to form a enforceable contract.

Offers, Acceptance, and Performance

  • Mirror Image Rule [Traditional): Offeree's acceptance cannot create a contract if it differs in any way from the terms of the offer. (Traditional contract theory).

  • Additional Terms: In acceptance, the recipient can propose additional terms unless the offer explicitly states it won’t accept any changes.

  • Adams v. Lindsell: Acceptance is effective once sent, even if it doesn't reach the offeror.

  • Mailbox Rule: Acceptance is effective as soon as it's sent (provided the method of acceptance was acceptable based on the offer).

  • Unilateral Contract: Acceptance occurs through performance, not promise. "I will do X if you do Y."

  • Bilateral Contract: Acceptance occurs by making a promise. "I will do X if you promise to do Y."

  • Implied-in-Fact: The contract is inferred from the parties' conduct.

  • Implied-in-Law (Quasi-Contract): When a contract is not formed but one party is unjustly enriched at the other’s expense.

Consideration and Modification

  • Kirksey v. Kirksey: Gratuitous promises aren't enforceable.

  • Consideration and Bargained-for Exchange: Consideration needs to be mutually sought and exchanged for a promise.

  • Preexisting Duty Rule: Modification of a contract isn't enforceable if one party was already obligated by the contract.

  • Alaska Packers Association v. Domenico: Additional consideration for preexisting duty is required for contract modifications.

  • Webb v. McGowin: Material benefit rule; benefit received can be consideration for a promise.

Contract Formation - Additional Points

  • Modification of Executory Contracts: A promise can modify an executory contract without additional consideration if it's fair and sensible under the circumstances (pre-performance). UCC does permit modifications without additional consideration for sales of goods.

  • Merchant Firm Offer Rule: A merchant's signed promise to keep an offer open is binding without consideration. (UCC rule: 2-205).

  • Promissory Estoppel: A promise can be enforceable even without consideration if the recipient reasonably relies on the promise to their detriment and injustice can be prevented. (R2K Section 90).

Problems with Contracts

  • Unconscionability: A contract term/contract as a whole is unreasonably favorable to one party that lacks meaningful choice, and often results in a remedy.

  • Illegality: Contracts for illegal activities aren't enforceable.

  • Duress: Contracts entered under duress are voidable.

Remedies

  • Expectation Damages: A plaintiff is put in the position they would have been in had the contract been performed.

  • Reliance Damages: Compensate a party for losses incurred by reliance on a promise.

  • Restitution Damages: Restore the breaching party's gains. Usually, unjust enrichment.

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Explore the key concepts of promises and agreements in contract law through this quiz. Understand the significance of intent, partial performance, and the implications of ambiguous contract language with landmark cases. Test your knowledge on the essential principles of contract formation and interpretation.

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