Mr. Valanzano

Business Law

Contract – _____________________________________

Requirements for a transaction to be recognized as a contract:1) _________________________________2) ________________________________3) _____________________4) ____________________5) ________________________6) _______________________

Some contracts are required to be in writing.

Offer – a proposal by an ___________ to do something, provided the _____________ does something in returnOfferor – ________________________________________

________________________________________________Offeree – ________________________________________

To create a valid offer:The offeror must appear

___________________________ ___________________________________

The terms must be ________________________________The offer must be _________________________________

The law will only recognize that an offer exists when the offeror ____________________________________________.

If a reasonable person would ________________________________________________as indicating you intend to contract, _____________________.

If a reasonable person would interpret your conduct interpret your conduct as not serious or as a joke, ___________________________.

This gives jurors and judges an _______________ test rather than a subjective test based on what you say you were thinking.

All offers must identify the __________, ____________, and ________________, either directly or indirectly.

The amount of information which is essential depends upon the complexity of the transaction.

Example: real estate sale Identity of the specific lotPriceFull terms for paymentDate for delivery of possessionDate for delivery of the deed If any of the above terms were missing, there would

not be a valid offer

In some contracts, a term might not be implied by law or common practice.Example: In a sale of good between merchants, when

price is not specified, current market price is the basis for the contract.

Advertisements in newspapers, magazines, on radio or TV, or in the mail are generally not offers. Courts treat them as _______________ _______________ to customers to make offers.

Ads become offers when they are worded in ways that ________________________________________________ or if it asks the offeree to _______________________________.

Revocation by the Offeror – __________________________ ________________________________

An offer can be terminated if the offeror has a ___________ ___________ the offer must be accepted by.

If there is nothing in the offer about a length of time to accept, a reasonable amount of time is determined depending on the type of offer.

The offeree _________________________.

The offeree can ___________________________.

Death or insanity of either the offeror or offeree

Acceptance – ____________________________________ ________________________________________

If an offer is made to only one person, only that person can accept the offer. If an offer is made to a group of people, anyone in that group that knows of the offer can accept it.

To create an enforceable contract, the acceptance must:_____________________________________________________________________________________________________________________

Mirror Image Rule – ____________________________ _____________________________; if it varies any term, it is a ____________________

The mirror image rule applies to contracts for services such as tax preparation and realty.

By statute (___________), the mirror image rule has been changed for the sale of goods

An _______________ contract is a contract that may be oral or written.

When a contract is formed through the actions of the parties, this is called a _______________ contract.

A ______________ contract contains two promises.

A ______________ contract contains a promise by only one person to do something, if and when the other party performs an act.

All contracts may be _________ or ____________._____________________: a law stating certain

contracts must be in writing to be enforceable

Genuine Agreement – ___________________________ ______________________________________

The absence of genuine agreement will make what appears to be a contract voidable (the injured party can rescind).

Rescission – ____________________________________ ________________________________________

Ratification – __________________________________ ____________________________________

Duress – _______________________________________ _________________________________________

A contract resulting from duress is voidable.

Types of threats used to force agreements resulting in duress:______________________________________________________________________________________________________

Undue Influence – ______________________________ ________________________________________________________________________

The two key elements of undue influence are the __________________________________ and the ____________________________________________.

Unfair terms within a contract is usually a strong sign of unfair persuasion.

_______________________ – when one party holds an incorrect belief about the facts related to a contract (usually will not affect validity of a contract)

___________________________ – both parties have an incorrect belief about an important fact (recognized or induced)

Material Facts – ________________________________ ______________________________________________ (subject matter or law)

Misrepresentation – ______________________________ __________________________________________ – the offeror using details they

thought were true but are actually not__________________ – the offeror knowingly using

untrue statements

Statements are considered misrepresentation if:The statement is one of fact or there is active

concealment (substitute for false statement of fact)The statement is material to the transaction or

fraudulentThe victim reasonably relied on the statement

All elements of misrepresentation must be proven in order for fraud to be present.

The misrepresentation must be ____________________ or __________________________.

The misrepresentation or concealment ________________ _________________________________.

Remedies for fraud:__________________________________________________________________ (money awarded in order to

punish the fraudulent party)

Consideration – ________________________________ _______________________________________________

To be consideration, a promise must _______________ _________________________________.

The 3 Requirements of Consideration:Each party must give an act or promise to the

other partyEach party must trade what they contribute to

the transaction for the other party’s contributionWhat each party trades must have legal value (be

worth something in the eyes of the law)

Output Contract - _________________________________________ _____________________________________________________________

____________________________ - when a seller agrees to supply all of the needs for a particular buyer

Liquidated Debt – _______________________________________________ _______________________________________

______________________________ – an agreement where both sides agree to compromise on the terms of a contract

Release – _______________________________________________________

_________________________________ – when someone in debt pays their combined creditors less than the total of what is owed to all of them in exchange for agreeing not to file for bankruptcy

Capacity – _____________________________________ _______________________________________________ __________________________________________________

Minors, mentally handicapped, and the intoxicated lack contractual capacity.

Minors gain contractual capacity by being emancipated, getting married, moving out, joining the armed forces, giving birth, and/or getting employed full time

__________________________ – when people who work for an organization have the power to bind the organization to a contract

Disaffirmance – ____________________________________ _______________________________

Types of contracts that can be disaffirmed by those who lack capacity:Contracts for non-necessitiesContracts to pay fair price for necessities

Types of contracts that can NOT be disaffirmed:Court-approved contractsMajor commitments (enlist in army; student loan)Banking Contracts Insurance ContractsWork-related contractsSale of realtyApartment rental

Agreements can be void and unenforceable if they involve contracting for an illegal act.

Types of contracts that are voidable if illegal acts are involved: Contracts made illegal by specific statute Contracts made illegal by specific statute - Illegal

gambling, Charging more than maximum interest rate (usury), Discrimination

Agreements that obstruct legal procedure Agreements that obstruct legal procedure – bribing jurors, paying for false testimony, refraining from informing on an alleged crime

Agreements made without a required license Agreements made without a required license – agreements with doctors, lawyers, brokers, contractors, etc.

Agreements that affect marriage negatively Agreements that affect marriage negatively – an illegal immigrant paying someone to marry them so they can gain citizenship

Agreements that restrain trade unreasonably Agreements that restrain trade unreasonably – price fixing, bid rigging, resale price maintenance, allocation of markets, covenants not to compete

Courts will not enforce the agreement.Courts will leave the parties where they are.Restitution –

____________________________________Under common law, restitution will not be paid

in most instances.Exceptions:

If the law that was violated was designed to protect an injured party

The victim is excusably ignorant (victim does not know contract is illegal, other party does, minor illegality)

A party rescinds before the illegal act occursOnly legal parts of the contract will be enforced

(divisible contract)

Under the UCC governing the sale of goods, it makes agreements or contract clauses that are unconscionable unenforceable.

Unconscionability – ______________________________ ________________________________________________________________________Procedural – shown by ______________________________________________________________Substantive – established by

______________________________________________________Most courts require both types on unconscionability

to be present to determine a contract illegal.When a court finds a contract illegal for

unconscionability it can:Refuse to enforce the contractEnforce only the legal parts of the contractModify the terms of an agreement to make it fair

Requires certain contracts to be _______________ and _____________ in order to be enforceable in court.

When a contract has been fully performed it is considered ____________________________. If there are still parts to be done by either or both parties it is considered __________________________________.

Contracts that must be in writing:Purchase or sale of goods valued at $500 or moreBuying and selling of real estateContracts that will take more than 1 year to

completePromises to pay the debt or answer for a legal

obligation of another personPromises to give something of value in return for a

promise of marriage

Essential terms required to create a valid offer and acceptance:Names of the partiesDescription of the subject matterPriceQuantityOther essential terms (method of delivery, terms

of payment, method of financing, date of transfer, etc.)

SignatureEvidence of a contract (the writing indicates the

existence of a contract)

Under the UCC, the writing must indicate only:The quantity of goodsA contract has been created between the

partiesSignature

A writing signed and sent by 1 party is treated as the writing of the other party if not objected to within 10 days of receiving

The signature may be written, stamped, engraved, or printed

A signature may be any mark that is intended as a signature or authentication of the writing

The purpose us to prevent frauds by requiring proof on the contract’s existence that is hard to fake

Exceptions with contracts to pay a debt or answer for the legal obligation of someone else:when there is a primary promiseprimary promisewhen the executor of a deceased person’s estate agrees

to pay the unpaid debts personally instead of using the deceased’s assets

when a 3rd party promises to pay another’s debt (main main purpose rulepurpose rule)

Under the UCC, a writing and signature is not required for sale of goods of $500 or more when goods: are ordered to be specially manufacturedhave been ordered, paid for, and payment was acceptedhave been received and accepted by the buyer

Exceptions with contracts to buy or sell real estate: when the seller delivers the deed if the buyer made partial or full payment, has occupied

the land, and made substantial improvements to the land

Integration Clause – _____________________________________ _______________________________________________________

Parol Evidence Rule – keeps out ___________________________, _____________________, ______________, and other discussions that are not __________________________________

Parol evidence or statements are usually not admissible in court except: To clarify unclear terms in the writing If the written contract was not intended to be a complete

agreement If a condition necessary to the contract never occurred If fraud, forgery, illegality, mistake, or misrepresentation

occurred To show the parties reached an another agreement or

terminated the contract To show the contract is voidable because one party lacked

capacity

When a contract refers to an amount of money in both words and numbers, the words will be relied on if they do not match.

__________________________ – when courts interpret contracts, they look at the main objectives to see which clauses should prevail over others

The plain and normal meaning of ordinary words will be used to determine the meaning of a contract.

______________________ – contracts written by a stronger party (_________) with the help of lawyers who favor the interests of their clients; the weaker party (_______) must “take it or leave it” and the terms of the contract are non-negotitable Examples: purchasing something on credit, life insurance

Contractual Rights – ____________________________ _______________________________

Contractual rights can be transferred to others. The transfer of contractual rights is called an ________________________________.

The party who transfers the contractual right is the ____________________________ and the party who receives it is called the ____________________________________..

A party may assign contractual rights as long as performance will not be materially changed.

Performance – ________________________________________________

State statutes require that certain assignments be in writing, but no consideration is necessary to make a valid assignment.

Contractual rights may not be assigned if performance would be materially changed or if performance would become substantially more difficult.

Rights that may not be transferred include: A right created under a contract that prohibits the transfer of

contractual rights Claims for damages for personal injuries Claims against the United States Rights to personal services, especially those of a skilled

nature, or when personal trust and confidence are involved Assignments of future wages, as limited by state statutes

Contractual Duties – __________________________________

The transfer of duties is know as ______________________________________________.

Obligor – ___________________________________________

“__________________________________________________.” – this means that the assignee receives exactly the same contractual rights and duties as the assignor had.

If the obligor breaches, the assignee, not the assignor, must sue for the breach.

Discharge – _________________________________________ ____________________________

Breach of Contract – __________________________________ _______________________

When one party commits a major breach, the other party can consider their obligation discharged. When this happens in a sales contract under the UCC, it is called ________________________________.

___________________________ – when most duties are performed, but only a minor duty remains (contract not discharged)

Defaults – _____________________________

When a party notifies the other party that they will default before the time of performance, this is called an __________________________________________.

By ______________________:On a specified date of terminationUpon the occurrence or failure of a specified event to

happenAt the free will of either party upon giving ample notice If both parties agree to rescission, they will attempt to

be put back into the position they were in prior to contracting.

Substitution – replacing an existing contract with a new one

An agreement to change the obligations of the original contract is called accord accord and the performance of the new obligation is called satisfactionsatisfaction.

Novation – a party releasing the other from their duty and accepting a substitute party

By _______________________________:Destruction of the subject matterPerformance declared illegalDeath or disability

A contract can be discharged by operation of law in the following ways:Promisor’s debts are

______________________________Time for performance elapsed due to

________________ _____________________________________ – a material change in the

terms of a written contract without consent of the other party (must be material, intentional, made by a party or authorized agent of a party to the contract, and without consent of the other party)

Tender – ___________________________________________

If the duty requires the doing of an act, a tender made in good faith but is rejected will discharge the obligation of the one offering to perform.

If the obligation requires the payment of money, rejection of an offer to pay the money does not discharge the debt or prevent the creditor from collecting.

Legal Tender – ____________________

The law divides breaches of contract into 2 categories: ________________________ and ________________.

Remedy – __________________________________________ ______________________________________________

The significance of the breach in relation to the entire contract will determine if the breach is major or minor.

Basic remedies for a major breach:_______________________________________________________________________________________

How does a minor breach affect the victim’s duties? The party injured by a minor breach usually must continue

to perform their contractual duties. Most likely, the victim will receive money damages to

recover the cost of completing their duty. Recovering damages to recover lost costs is called

recovering through offsetoffset.

How does a major breach affect the victim’s duties? The injured party does not need to continue performing

their contractual duties. The victim can also choose a remedy such as: restitution,

money damages, and specific performance.

What are rescission and restitution? Rescission –

_________________________________________________ Restitution – ___________________________________________

___________________________________________________________

_____________________ – seeks to place the injured party in the same financial position they would have been in if there had been no breach

Consequential – ____________________________________ __________________________________________________

__________________ – used when the parties agree that a certain amount of money will be paid if a certain breach occurs

Punitive – ______________________________________________ _________________ (used in cases of fraud and intentional torts)

_______________ – a small damage awarded to punish the failure to perform a contractual duty even when there is not actual injury

When money damages are not an adequate remedy for breach of contract a court may issue a _____________ _____________ ____________________________________________.

Under this decree, the court orders the breaching party to __________________________________________________.

Specific performance is an ___________________________.

“___________________” – the injured party that is seeking damages is blameless for the breach and acted reasonably throughout the transaction

An injured party must elect a remedy when suing. Specific performance and damages can’t be recovered for the same breach.

Specific performance is not available when damages are an adequate remedy.

Combining rescission and restitution and damages can only happen under a contract for the sale of goods governed by the UCC.

If the injured party does not act to minimize their injuries or ___________________________.

By intentionally and explicitly giving up a contractual right by using a ________________________________.

If a lawsuit to recover damages is not in place within the time stated by a state’s ____________________________________________________________.

If the debtor’s assets are cleared through _______________. This is where the debts are evenly shared by each creditor they are owed to.

Rescission & Restitution

Damages Specific Performance

Waiver Injunction

Compensatory

Consequential

Liquidated

Nominal Punitive

• Injunction - ___________________________________________ ______________________________________________________