Chapter 7: The Nature and Creation of Contracts Flashcards Preview

J - B LAW 301 > Chapter 7: The Nature and Creation of Contracts > Flashcards

Flashcards in Chapter 7: The Nature and Creation of Contracts Deck (43)
Loading flashcards...
1
Q

Contract

A

An agreement that contains legally enforceable rights and obligations.

2
Q

Meeting of the Minds

A

Is s shared decision to enter into a legal transaction on a particular basis.

3
Q

Exchange of Value

A

Occurs when the parties each give something up.

4
Q

What are the three elements required for a contract?

A
  1. Intent to create legal relations.
  2. Offer and acceptance.
  3. Consideration.
5
Q

Intention to Create Legal Relations

A

Arises if a reasonable person would believe that the parties intended to create a legally enforceable agreement.

6
Q

Rebuttal of Presumption

A

Disproval of a presumption (such as that contracts usually occur in a commercial setting).

7
Q

Comfort Letter

A

A business owner sends a letter to a bank promising to help out even if the company folds in order to get a loan. Creates a moral obligation, but not a legal one.

8
Q

Offer

A

An indication of a willingness to enter into a contract on certain terms.

9
Q

Offeror

A

A party who offers to enter into a contract.

10
Q

Offeree

A

A party who receives an offer to enter into a contract.

11
Q

Invitation to Treat

A

An indication of a willingness to receive an offer.

12
Q

Revocation

A

Occurs if the offeror withdraws an offer. Has to be communicated to the offeree.

13
Q

Firm Offer

A

Occurs when the offeror promises to hold an offer open for acceptance for a certain period.

14
Q

When can a firm offer not be revoked?

A

When the promise was placed under seal, or if the offer paid for the right to accept within a certain period.

15
Q

Option

A

A contract in which the offeror is paid in exchange for a binding promise to hold an offer open for acceptance for a specific period.

16
Q

Tender

A

An offer to undertake a project on particular terms.

17
Q

Why do cities use tenders instead of normal contracts?

A

It need assurance that the offers will remain open while it considers them.

18
Q

Contract A

A

Offer by city to hold a fair tendering process.

Acceptance by company of offer.

19
Q

Contract B

A

Invitation to treat issued by city.
Offer by company to build library.
Acceptance by city of offer.

20
Q

How long is an offer typically open?

A

For a reasonable period.

21
Q

An offer is automatically revoked if either the offeror or the offeree dies. True or false?

A

Most of the time it is true.

22
Q

What is an exception to the rule that an offer is automatically revoked if either the offeror or the offeree dies.

A

If the contract pertains to the sale of land (as opposed to the performance of a concert).

23
Q

Rejection

A

Occurs when the offeree refuses an offer.

24
Q

Can you change your mind once you reject a contract?

A

No.

25
Q

Counter-Offer

A

Occurs when an offeree responds to an offer by indicating a willingness to enter into a contract but on different terms.

26
Q

How do you avoid the harshness of using a counter-offer (which involves rejecting the first offer)?

A

Phrase your counter-offer as a harmless inquiry.

27
Q

Battle of the Forms

A

Occurs when each party claims to have entered into a contract on the basis of its own standard form document.

28
Q

Bilateral Contract

A

Occurs when a promise is exchanged for a promise.

29
Q

Acceptance

A

Occurs when an offeree agrees to enter into the contract proposed by the offeror.

30
Q

Say you sent a letter to a seller offering to buy their car for $5000. At the same time, they send you a letter offering to sell their car to you for $5000. Does a contract result?

A

No, since there are two offers with no acceptance. There is no meeting of the minds.

31
Q

Can silence be considered acceptance?

A

Not unless it has been previously agreed upon.

32
Q

An ___ takes into effect when and where it is received.

A

Acceptance.

33
Q

General Rule

A

States that acceptance by instantaneous communication is effective when and where it is received by the offeror.

34
Q

Instantaneous Communication

A

Any form of communication in which there is little or no delay in the interaction between the parties.

35
Q

Non-Instantaneous Communication

A

Any form of communication that involves a substantial delay between the time that it leaves one person and reaches another.

36
Q

Postal Rule

A

States that an acceptance that is communicated in a non-instantaneous way is effective where and when the offeree sends it.

37
Q

How do you mitigate the risks involved with the postal rule?

A
  • Draft your business proposals to ensure they are invitations to treat, not offers.
  • Postal rule only applies if it is consistent with the parties’ intentions. You may eliminate the postal rule.
  • Postal rule does not apply where it is unreasonable.
38
Q

Postal rule applies only to ___.

A

Acceptances.

39
Q

What is the rule for an offer, a revocation, a rejection, or a counter-offer?

A

Effective only when and where it is received by the offeree.

40
Q

Unilateral Contract

A

Occurs when an act is exchanged for a promise.

41
Q

In unilateral contracts, no contract exists unless and until the offeree ___ performs.

A

Fully.

42
Q

In unilateral contracts, if the offeree performs and the contract is created, the ___ is the only one with an outstanding obligation to perform.

A

Offeror.

43
Q

Do courts prefer unilateral or bilateral contracts, and why?

A

Bilateral, as neither party has to worry about wasting time and expense. Unilateral contracts may operate unfairly (see hypothetical Carbolic Smoke Ball Co. case).