BUS-233: Exam 3

• contract


  an agreement based upon genuine assent for a lawful purpose between competent parties
• What kind of an agreement is a contract?

  legally-binding
• The four elements of a valid and enforceable contract are:

  (1) Competent parties

  (2) Voluntary agreement on all terms

  (3) Adequately-identified legal subject matter

  (4) Consideration
• competent parties

  > 18 years of age or older or otherwise emancipated

  > an ability to understand they are getting into an agreement with rights and responsibilities

  > competent at the time the agreement was entered
• voluntary agreement on all terms

  > each of the parties entered the contract free from undue influence, duress, or coercion

  > the contract will still be considered voluntary if one or both parties were intoxicated by alcohol or under the influence of drugs
• adequately-identified legal subject matter

  the substance of the transaction must be known without question
• consideration

  > the benefit of the bargain for each party
• promisor


  > a person who makes a promise

  > also known as an obligor because they are obligated to do something
• promisee


  > a person to whom a promise is made

  > also known as an obligee because someone is obligated to do something for them
• Every deal begins with an...

  offer.
• In order for a contract to be formed, there has to be a...

  willingness to enter into an agreement and the terms with specifics that are acceptable to the party making the offer (the offeror).
• To test an offer, one may ask,...

  "Would a reasonable person believe there was willing intent?"
• Once made, the offer can only be accepted by...

  the person to whom it was made (the offeree).
• What happens to a contract if an offeree suggests any differing term or condition?

  The original offer has been rejected and the suggestion is considered a counter offer.
• If no specific time is stated, how long will an offer stay open for?

  a reasonable time under the circumstances
• If there is a specific time stated, how long will an offer stay open for?

  until the occurrence of that date or time
• When can an offer be rescinded?

  at any time prior to acceptance under the common law unless it is an option
• option


  a contract within a contract to have something available for a stated period of time
• executory contract

  a contract that has not yet been fully performed or fully executed
• executed contract

  a contract that has been fully performed or fully executed by all parties involved
• mirror image rule


  the rule that states the way in which a contract can be accepted under common law has to be in the same manner the offer was made
• mailbox rule


  the rule that states that if an offer is mailed and received and a response is mailed but not received, it is assumed that the response is received regardless if it is or not
• four corners doctrine


  the rule that states that if one wants something in a contract, it must be put in the contract
• parol evidence rule


  the rule that states oral testimony be not be offered in the court to contradict any portion of a written agreement
• Why might oral testimony be offered?

  to explain ambiguous terms in a contract
• How can a written agreement be modified?

  only by a subsequent writing
• To satisfy the obligation of sufficiently identifying the subject matter of a contract, an offeror can...

  incorporate by reference.
• What are advertisements in newspapers considered?

  not valid offers, but rather offers to negotiate
• Criss-crossing offers...

  do not form a contract.
• In addition to revocation (the withdrawal of an offer) or rejection (usually a counter-offer), offers may dissipate as a result of...


  death or disability of either party prior to their acceptance but not prior to the contract being fully performed or fully executed.
• What is one situation that may render a contract void?

  subsequent illegality
• A contract may be void if the contract was made involving:

  > gambling

  > usery

  > performing services that require a license that is not had by the individual performing the service

  > performing a crime or tort (illegal subject matter)

  > unreasonably restraining trade

  > unconscionable positions

  > exculpatory language

  > the opposing of a marriage
• Contracts, such as noncompete clauses, may restrain trade if they are...

  reasonable in time, distance, and scope.
• compensatory damages


  damages paid to compensate or repay someone for damage done
• punitive damages


  damages paid to punish someone
• liquidated damages


  > damages that are generally not enforceable because it basically says a certain amount is to be paid if a contract is breached

  > usually found in situations of unequal bargaining power (unconscionable contracts)
• contract privity


  the ability to enforce a contract
• Who has contract privity?

  only the parties to the contract
• Who may obtain the right to bring a contract to action?

  assignees, beneficiaries, and third parties if specified in the contract
• Do incidental parties have the right to bring a contract to action?

  no