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Business Law > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

Sources of contract law

A

Common law
uniform commercial code (UCC0
International Sales Contract Law (CISG)

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2
Q

UCC governs…

A

contracts for the sale and lease of goods

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3
Q

what makes a contract

A

a legally binding agreement between two or more parties who agree to perform or refrain from performing some act now or in the future
-promises, favors, gifts and contracts

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4
Q

requirements for common law contracts

A
  1. agreement
  2. consideration
  3. contractual capacity
  4. legality
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5
Q

define “agreement”

A

an offer and an acceptance

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6
Q

define “consideration”

A
  • “bargained for” consideration
  • something of value received or promised such as money to convince the person to make the deal. -does not have to be of equal value, but must show there was exchange e.g. selling a house for $1
  • prior contracts or something you already have a legal obligation to do is not a sufficient consideration
  • negated by being able to demonstrate fraud, coercion or distress, language barrier, mental capacity or anything that would make them an inferior bargaining party
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7
Q

define “contractual capacity”

A

law must recognize the parties as possessing characteristics that qualify them as competent

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8
Q

define “legality”

A

purpose of contract must be to accomplish something legal, and not against public policy

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9
Q

unilateral contract

A

one side has all the risk. one side will perform and the other will pay later
e.g. any service contract
NOT a simultaneous promise for a promise
high risk for the common man so special rules are in place

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10
Q

bilateral contract

A

both parties perform at the same time

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11
Q

executory contract

A

one that has not been performed yet

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12
Q

executed contract

A

one that has already been performed

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13
Q

illusory consideration

A

fiction, imagined
consideration for the act never actually happened
e.g. loose promise for a bonus “we’ll see”

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14
Q

accord and satisfaction

A

even though performance wasn’t exactly as specified, the parties agree it’s good enough to satisfy the contract
-some money is paid based on contract

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15
Q

release

A

release the right to sue over a contract

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16
Q

covenant not to sue

A

typically included as part of a release

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17
Q

rescission

A

reverses a contract.

-can be reversed as of today, or reverse it back to the very beginning of the contracg

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18
Q

compensatory damages

A

covers direct losses.

  • you buy something and its defective, you’re awarded cost of what you paid plus the time value of money.
  • pay your own court costs
  • usually written into a contract to protect you incase it comes up
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19
Q

mitigation of damages

A

you must try to do everything in your power to come to court with clean hands. must show you’ve tried to help yourself, try to solve your own problem and minimize the damages to you

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20
Q

nominal damages

A

suing for a small amount just to prove that the other party has done wrong and prove a point.
it’ll create a record of their breach of contract and wrong-doing

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21
Q

waiver of breach of contract

A

even though the other party breached, you agree not to sue

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22
Q

Hadley v. Baxendale

A

limitations on consequential damages.

-where special circumstance apply, the parties must communicate them, you can’t assume the other party just knows

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23
Q

bad faith

A

breaking a contract to sell to someone else at a higher price

  • illegal in the US
  • not necessarily illegal outside the US
24
Q

damages in equity

A

court forces a non-monetary payment. requires specific performance

  • doesn’t apply well to labor contracts–seems too much like slavery (except union contracts)
    e. g. union strike- can order teachers back to work
25
Q

anticipatory repudiation

A

you must communicate with the other party as soon as you anticipate a breach.

  • gives either side time to cancel the contract and find a substitute before the breach actually occurs
  • also gives you a chance to amend the contract. the goods will be late–can you work around that?
26
Q

novation

A

substitute a new buyer or seller into the contract (3rd party) so no breach occurs

27
Q

consequential damages

A

breaching party is responsible for lost profit damages or direct yet unforeseeable damages that arise from the breach
e.g. homeowners rental fees from our negotiating exercise

28
Q

punitive damages

A

monetary damages to punish and deter wrongdoing and prevent it from happening again
-gives warning to chill the industry

29
Q

rescission ab initio

A

restore both parties to before the contract even started

30
Q

rescission ab initio

A

restore both parties to before the contract even started

31
Q

reformation

A

the court becomes involved in rewriting the contract

32
Q

liquidated damages clause (LD clause)

A

consequential damages cannot run between parties e.g. any breach will be considered a substantial breach and if so you’ll be liable for $25 million

  • heavy handed LD clauses like this are usually not enforceable in a court of law, unless
    - exact damages would be difficult to figure out due tot he nature of the agreement
    - they were uncertain at the time the contract was drawn up
33
Q

disaffirmation of a contract /liability to disaffirm

A

entering into a contract with someone who never had capacity to. e.g. a minor. parents can disaffirm

34
Q

limitation of liability loss

A

limits to tort damages. evil actions between parties. helps you to predict what types of losses can be charged against you. you will only have a case if you’re monetarily out for it. distress claims would not be valid

35
Q

limitation of liability loss

A

limits to tort damages. evil actions between parties. helps you to predict what types of losses can be charged against you. you will only have a case if you’re monetarily out for it. distress claims would not be valid

36
Q

offer

A
  • a promise that is clearly communicat4ed
37
Q

counteroffer

A

a rejection of the original offer and the simultaneous making of new offer

38
Q

Revocation

A

offer’s act of withdrawing an offer

39
Q

lapse of time

A

offer terminates automatically after a set period of time

40
Q

destruction of subject matter

A

offer terminates when specific subject matter is destroyed before the other is accepted

41
Q

effect of a mistake on a contract (unilateral)

A

contract is still enforceable, unless

  1. other party knew or should have known of mistake
  2. mistake was due to a substantial math error that was inadvertent and without gross negligence
42
Q

effect of a mistake on a contract (bilateral)

A

(both parties made a mistake)

contract can be rescinded by either party

43
Q

distinguishing features of a common law contract

A
  • favors inexperienced parties
  • mirror image rule of agreement
  • rejection of a contract is a counteroffer
  • final form is all that is considered
  • should be written
44
Q

common law interpretation rules

A
  1. plain meaning rule
  2. 4 corners rule
  3. final form controls
  4. parol and extrinsic evidence
  5. statue of frauds
45
Q

plain meaning rule

what happens when the contract contains ambiguity?

A
  • terms are stacked against drafter
  • interpreted as a whole
  • terms subject to separate negotiation carry more weight
  • handwritten terms given more weight
  • prior usage and course of dealings are admissible consideration
46
Q

ways to measure performance

A 
timeliness
delay
satisfaction to a 3rd party standard
reasonably person standard
satisfaction of one of the parties
47
Q

material breach

A

the non-performance of a contractual duty when performance is at least not substantial

48
Q

anticipatory remediation

A

Before either party has duty to perform, one party may refuse to carry out their contractual obligations

49
Q

commercial impracticability or impossibility

A

Anticipated performance must become significantly more difficult or costly than was anticipated at time of contract formation. * must not have been known at formation

50
Q

substantial performance

A

Performance that doe s not vary greatly from that required in the contract.

51
Q

mutual rescission

A

contract terminated and parties returned to their original positions

52
Q

amended agreement

A

amend contract to allow for performance

53
Q

third party novation

A

substitute a 3rd party for one of the original 2 parties

54
Q

frustration of purpose

A

contract discharged is if supervening circumstances make it impossible to attain original purpose of contract

55
Q

bankruptcy

A

filing bankruptcy nullifies most debtor contracts

56
Q

limitation of liability clause

A

you’re limited to whatever money you’re out. wont be granted distress claims

Business Law (1 decks)

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