Chapter 7 Vocab

Merchant: someone who deals in the kind of goods contracted for or who otherwise holds themselves out as having special knowledge or skill related to the goods involvedContract: a legally enforceable promiseAgreement: evinced by an offer and an acceptanceOfferor: makes an offer to the offereeOfferee: the person to whom the offer was madeConsideration: the legal value provided in a bargained-for exchange of a promiseContractual capacity: the capacity required by law to enter into contractsLegal subject matter: a requirement that a contract not accomplish an illegal goal or actExpress: either verbal or written contractImplied: contract inferred from the actions of the parties and is not evinced by an oral or written agreementExecutory: contracts for which one party still owes performanceExecuted: contracts where both parties have performed and no performance is still dueVoidable: contracts for which one party has the option of nullifying the contract or enforcing itVoid: contract is no contract at all. Cannot be enforced by a courtFormal: contracts that are required to conform to additional requirements imposed by the law, such as the need for a writing signed by the defendant, to be enforceableInformal: contracts that are not subject to formal requirements under the law.Unenforceable: contract that contains all the elements of a valid contract but are unenforceable by a courtUnilateral: contract that contains an offer that can be accepted by providing complete performance onlyBilateral: contract is accepted by a return promiseOfferor: the person making an offerOfferee: person receiving the offerExpression of opinion: generally, not an offerStatement of future intention: a statement of future intention is not considered a legally binding offerSolicitation of bids: common example of a statement of future intentionsAdvertisement: generally not a legally binding offer unless it contains words of limitations such as limiting the quantity of the item being sold or the number of people who can acceptAuction: the auctioneer places an item for sale and solicits bids from those in attendanceWith reserve: the seller or auctioneer may withdraw the item any time before the auctioneer accepts the highest bid and declares the item to be soldWithout reserve: neither the auctioneer nor the seller can withdraw an item once bidding has started.Options contract: a contract under which the offeror promises to keep her offer open to the offeree until a specified dateFirm offer: Under UCC, an offer can become a firm offer if:

1. The offer was made by a merchant2. There is a signed writing 3. And the writing clearly states the offer is to remain open

After a reasonable amount of time: offers terminate after a reasonable amount of time depending on the facts and circumstances of each caseRejection: offeree’s statement or other conduct that states the offeree’s desire to reject an offer and refuse acceptanceCounteroffer: rejects the original offer and makes a new offerInquiry: not a counteroffer; doesn’t terminate the original offer just inquires a lower price or something similar (an adjustment to the original terms of the offer)Mirror-image rule: prohibits the offeree from accepting an offer while adding additional terms.Mutual Assent: the agreement is sometimes referred to as mutual assentClick-on agreement: used to describe these transactions because the user must click on the box to certify their assentShrink-wrap agreement: exists when the terms and conditions of the contract are contained in a product’s packaging but the terms cannot be accessed until the plastic wrap is removed from the box. Once the plastic wrap is removed the purchaser cannot return the productOutputs contract: one in which the buyer agrees to purchase all of the output a seller producesRequirements contract: a contract in which the seller agrees to sell the buyer all the product a buyer would needGood faith: “honesty in fact and the observance of reasonable commercial standards of fair dealing.”

Chapter 8 Vocab

Consideration: something of legal value offered in bargain for a promisePast consideration: consideration that would be legally sufficient to form a contract but the consideration was given before the offer was madePreexisting duty: a duty that one already legally owesIllusory promise: a promise that appears to be consideration but is not, as the promise itself does not legally obligate the promisor to a specific detrimentDoctrine of unforeseen circumstances: allows a contract to be modified from its original terms without requiring additional consideration, if the unforeseen circumstance was not foreseeablePromissory estoppel: another example of an agreement that is enforceable even though it lacks considerationA promise to pay for a debt: not legally required to be paid; often enforceable in courts even if no consideration is present. Mutual rescission: occurs when both parties agree to return to their pre-contracting positions and suspend performance under their previous contract through a new contractNovation: occurs when a party agrees to discharge their duties under a previous contract by substituting a new contract that creates new obligations on the behalf of the partiesModification or Release: a novation in which a new obligation replaces a preexisting obligation Accord and satisfaction: an agreement where the parties agree to satisfy a preexisting duty by imposing a new contractual dutyMinor: someone who has not reached the age of majority (18 in most states, 19 in some)

Disaffirm: to declare the voidable contract will not be honored or abided (for minors)Ratification: a minor chooses to not disaffirm the contractRestitution: restoring the other party to their original positionEmancipation: the legal process by which a minor becomes independent of their parents under the law, thereby losing their status as a minorLucid: to understand the consequences of one’s actions (in the context of a contract negotiation)Unconscionable contracts: contracts that ‘shock’ the conscience of the court

Substantive unconscionability: contracts whose terms a court finds to be egregious or extremely unfairProcedural unconscionability: contracts that are created as part of a process that a court finds to be unconscionable

Exculpatory clause: relieves a party from liability in the event an injury results from performance of the contractAdhesion contract: a contract in which one party has a superior amount of bargaining power that eliminates the other party from bargaining for better terms in a contract

Chapter 9 Vocab

Prenuptial agreement: to determine what will happen to each party’s assets in the event of a divorce or death after the two parties are married (subject to the Statute of Frauds)Palimony: the promise to pay alimony to a pal who is not a spouseAlimony: court-ordered requirement of payment to be made by a divorced spouseParole Evidence Rule: disallows evidence of prior oral negotiations prior to the integration of their agreement into a written contract if the purpose of the evidence of prior oral negotiations is to contradict the terms of the written contractSubsequent modification: a modification that occurs after the written agreement is signedCourse of performance: how the parties have interpreted terms in a contract as evinced by performance under the contractCourse of dealing: how the parties have acted in previous dealings with one anotherUsage of trade: a court will look to see how those engaged in the type of business involved in the contract dispute define similar terms Consent: (for purposes of contract law) to agree to the terms of the contractual agreement Unilateral mistake: occurs when only one party to a contract is mistakenBilateral mistake (Mutual mistake): when both parties to contract are mistaken; to serve as a defense against contract enforcement, a mutual mistake must be material and not trivialMisrepresentation: occurs when a party to a contract makes a misstatement of a material fact upon which the other party relies and suffers damages because of their reliancePuffing: the process by which a seller overstates or exaggerates the value or performance of a goodInnocent misrepresentation: when a party makes a representation that turns out to be false but does not do so intentionally

Negligent misrepresentation: occurs when a party breaches their duty of care toward another by stating something that is untrueUndue influence: a party to contract is unfairly influenced (persuaded) and agrees to contractual terms that the party would not normally consent to absent the undue amount of influence

Chapter 10 Vocab

Complete performance: means a party has performed the duties under the terms of the contract; relieves a party of further contractual liabilitySubstantial performance: a party has not provided complete performance but has not committed a material breachMaterial breach: occurs when a party does not perform a significant duty under their contractCondition precedent: a condition that must be satisfied before performance is required by another party under a contractCondition subsequent: a condition that requires performance until a condition is no longer satisfiedConcurrent conditions: if both parties are subject to conditions (mutual conditions)Express condition: a written or verbal condition to a contractImplied condition: a condition which is neither written nor oral but nonetheless exists as a part of the contract and can be inferred from the facts surrounding the contractObjective condition: contains a reasonableness standard in regards to determining or judging when the condition has been metSubjective condition: determined to be satisfied by the subjective opinion of a party to a contractCompensatory damages: meant to compensate or reimburse the plaintiff for what they have lostExpectation damages: the difference between the position where the plaintiff expected to be and where the plaintiff was left after the breachReliance damages: compensate the plaintiff for expenses they have incurred by relying on the contract that was breached by the defendantRestitution damages: equal to the amount of value the defendant has receivedGeneral damages: must be reasonably foreseeable; the defendant must not have actual notice of the possibility of damages if the damages are general in natureSpecial or consequential damages: damages which require notice to be received by the defendant Specific performance: to do specifically as promisedInjunction: a court order that demands a defendant stop performing an actionRescission: the act by which a court cancels or undoes a contractReformation: an equitable remedy that a court uses to change or modify the terms to a contractScrivener’s error: a typographical errorPunitive damage: a damage that is not meant to compensate a party for a loss suffered from the breach of contract, but is instead designed to punish the breaching party for improper behaviorLiquidated damages: damages provided in a contract that are meant to compensate the non-breaching party in the event of a breach of contract

Nominal damages: small amount of damages awarded in a contract breach case that are intended to establish liability on the part of the breaching party but not necessarily compensate the party for damages realizedIncidental damages: damages arising because of the breach of the seller and include costs such as shipping the goods back to the seller or having the goods inspected by a third partyConsequential damages: damages that compensate the injured party for costs or lost profits caused because of the breach or damages and that the seller knew would result or had reason to know would resultAnticipatory repudiation: occurs when a party to contract informs the other party to a contract that it will be unable to perform under the terms of the contractObjective impossibility: a legal doctrine that discharges a party from their contractual duties if it is impossible to perform such duties and the difficulty was not foreseeable at the time of contracting Commercial impracticability: a legal doctrine where a court discharges a party from their contractual duty because it is commercially impractical but not objectively impossibleFrustration of purpose: a legal doctrine that discharges the duty of parties to perform where the original purpose of their contract can no longer be achievedIntended beneficiary: a party whom the original parties to contract intend to benefitIncidental beneficiary: a party whom the original parties did not intend to benefit with their contractCreditor beneficiaries: owed performance by one of the parties because of a preexisting obligation owed to the intended beneficiaryDonee beneficiaries: not owed a performance because of an existing duty but because a party to the contract has decided to provide them a benefitAssignment: occurs when a party transfers its rights under a contract to a third partyAssignor: the party who transfers a rightAssignee: the party receiving the rightObligor: a party who owes a performance under a contractDelegator: the party who delegates a dutyDelegatee: the party to whom a delegation of duty has been madeObligee: the person to whom a duty is owed

Important to know

1. What are the four requirements of a contract?a. Agreement- includes an offer and an acceptanceb. Consideration- legal value provided in a bargained-for exchangec. Contractual capacity- all parties must have it; assumed to be presentd. Legality- contract must not accomplish an illegal goal or purpose

Court CasesChapter 7

Carlill vs. Carbolic Smoke Ball Co.Facts:

Carbolic Smoke Ball Company offers an award of 100 pounds to anyone who used their product three times a week and still obtained influenza

Plaintiff used the smoke ball three times a week and still obtained influenza Company claims their advertisement was not an offer

Ruling: Court disagrees and states this was an offer for a unilateral contract. Plaintiff accepted offer by using the smoke ball as directed.

Significance: Advertisements can be legally binding when promise for action (Unilateral)

Lucy vs. Zehmer Facts:

Lucy and Zehmer were drinking. Lucy wants to buy land from Zehmer. Zehmer agrees to sell the land to Lucy and writes down the “contract” on a piece of paper/napkin.

Zehmer then claims it was a “joke” Ruling:

Court said Zehmer and Lucy formed a legally enforceable contractSignificance:

It met an objective standardo Mr. Zehmer “I was intoxicated” o Court “you weren’t that intoxicated because you could write out the contract”

Roto-Lith Ltd. Vs. F.P. Bartlett & Co. Facts:

Plaintiff mails an order form to defendant ie “offer” Defendant prepares and mails both an acknowledgment and an invoice

o Documents disclaimed warranties related to the goods Plaintiff accepts goods but states the disclaimer of the warranty is not valid

Ruling: Court says Plaintiff became bound by disclaimer because they accepted the goods

Significance: Acceptance of goods = Acceptance of contract

Shelton vs. Oscar Meyer Food CorporationFacts:

Plaintiff was accused of smoking marijuana on the job at Oscar Meyer Plaintiff alleged the firing was not in accordance with the handbook

Ruling: South Carolina Appellate Court states there is a duty of good faith and fair dealing required in this

situation even though it was an employment contract Significance:

The firing was not in good faith. They can and should fire but need to follow their process

Chapter 8

Hamer v. SidwayFacts:

Uncle promises nephew $5,000 if he can refrain from drinking, using tobacco, swearing and playing cards or billiards for money until age 21. Nephew fulfills promise to refrain

Uncle Dies. Sidway, executor for the Estate of the Uncle refuses to pay Hamer with argument there was no consideration given in exchange for the promise.

Ruling: Court disagrees and says the action of refraining from a legal right is consideration

Significance: What constitutes consideration? In this case refraining from a legal action was. Courts don’t care about the amount of consideration unless it is a peppercorn

Shields vs. GrossFacts:

Actress/model Brooke Shields was photographed in a bathtub a child Shields tried to prevent the republication of the photos because they’re embarrassing

Ruling: Contract for the photos was not voidable at the option of Shields under NY state law

Significance: New York law allowed her mother to consent on her behalf Minor entering into contracts

First State Bank of Sinai vs. HylandFacts:

Hyland had signed a promissory note, the proceeds of which had been released to his son who did not make the required payments. First State Bank sued defendent.

Defendant claims he was intoxicated at the time he signed the promissory noteRuling:

Court agrees that the contract was voidable at his option because of intoxication Court then finds defendant ratified the contract by making payments of interest

Significance: Disaffirmance must be prompt once lucid

Tunkl v. Regents of University of CaliforniaFacts:

Mr. Tunkl was a patient at a university hospital and he signed a contract with the hospital that contained an exculpatory clause

Mr. Tunkl dies at the hospital and his wife bring a lawsuit Ruling:

Court says it is permissible in California to shift risk through a contract However, court found the exculpatory clause used by the hospital violated the public interest (public

policy) Significance:

Shifting risk through contract is permissible, however it must keep public interest in mind

Chapter 9

Wright vs. WrightFacts:

Plaintiff gives birth to a son. The baby’s Grandfather is the defendant. Defendant agrees to pay plaintiff is she will marry his son (baby’s father). The son leaves

plaintiff. Defendant argues he shouldn’t have to pay plaintiff because there was no consideration

Ruling: Court disagrees and holds for plaintiff

Significance: Courts don’t care about the amount of consideration unless it is a peppercorn

Aydin Corp v. US Facts:

NAVALEX solicited orders for radio sets and Aydin submits a bid for $158,800 per radio NAVALEX selected plaintiffs bid, then plaintiff learned of a competitors much higher bid

Ruling Court states the plaintiff appears to have made an error in judgment not calculation per

seSignificance:

Courts don’t provide relief for errors in judgement

Kase vs. French & French Facts:

Olivia McWilliams becomes friends with Mr. & Mrs. French and sell’s her house to them with a 1% seller financed loan

The French’s give Ms. McWilliams an apartment within the houseRuling:

Court ruled the French’s owed a duty of good faith & did not engage in undue influenceSignificance:

Undue influence only works as a defense when one party has a lot of influence on another

Chapter 10

Jacobs & Young vs. KentFacts:

Plaintiff built a house for defendant and was supposed to use “Reading” pipe but used another type of pipe.

Defendant moves in and refuses to make the final payment and demands reconstructionRuling:

Court holds plaintiff used a similar quality of pipe and provided substantial performance. Damages are the difference between value of what was provided versus promised

Significance: Substantial performance is made in good faith but not to the exact letter of the contract Material breach happens only when a party fails to perform a significant duty under their contract

Hawkins vs. McGeeFacts:

Plaintiff underwent surgery to repair scarred tissue on hand. Doctor had promised 100% good hand Doctor grafted from a part of the body that grew hair

Ruling: Court uses expectation damages measure and the basis was the difference between a good hand and

the hand receivedSignificance:

Example of expectation damages; difference between where plaintiff expected to be after performance and where they were after the breach

Bain vs. Gillispie Facts:

Bain is a referee who makes a bad call during an important Hawkeye basketball game Gillespie operates a T-shirt shop and create a t-shirt with the words “Jim Bain Fan Club” and the

picture of a man in a noose Bain sues Gillispie’s and requests injunctive relief Gillispie’s file a counterclaim for breach of contract

Ruling: Court finds Gillispie’s were not an intended beneficiary

Significance: The ref was not hired to benefit them; they were an incidental beneficiary. Only intended

beneficiaries can sue for breach of contract.

Practice Exam1. Ryan hires Sarah to clean his house this upcoming Saturday. The two agreed on $80

compensation. Ryan has paid Sarah, but Sarah hasn’t cleaned yet. What type of contract?a. Executory – one party has yet to performb. Formal – in writing and meets certain requirements of the lawc. Unilateral – promise for actiond. Void – contract that is not valid

2. Assume Iowa has a requirement that all employment contracts for a period of greater than one year must be in writing. If you are entering into a 2 year contract, what type would it be?

a. Executory b. Formal c. Unilateral d. Void

3. Assume Kendal hires Kyle to steal a rare car from a local museum. They type up a contract laying out the compensation and time line for the agreement. What type of contract do Kendal and Kyle have?

a. Executory b. Formalc. Unilateral d. Void

4. Professor said in class, “I would like to sell my car for $45,000.” Rachel replied “I’ll buy it.” What type of contract do the two parties have?

a. They don’t have a contract- professor made an expression of opinionb. Informalc. Formald. Unilateral

5. Tony is at a livestock sale that is without reserve. A piglet is up for auction. Tony and other bidders have started making offers to purchase. Then, the seller walks out with his crying 4 year old daughter and declares the piglet will be going home with them. What result?

a. The piglet would go home with the little girl because she is cryingb. The piglet would stay in the auction because the auctioneer dislikes kids and won’t let

the little girl take the pigletc. The piglet would go home with the little girl because a seller may withdraw their item

any time before the auctioneer accepts the highest bid and declares the item to be soldd. The piglet would stay in the auction because the bidding has started

i. Without reserve = cant pull items once placed for bidii. With reserve = seller or auctioneer can pull item any time up until final gavel

6. On January 1, Justin offers to sell Kullen his prized Pokémon collection for $799. Kullen pays Justin $49 in return for Justin’s promise to keep the offer open until April 1. What type of contract is this?

a. Requirements contract - a contract in which the seller agrees to sell the buyer all the product a buyer would need

b. Options contract - a contract under which the offeror promises to keep her offer open to the offeree until a specified date

c. Inquiry - not a counteroffer; doesn’t terminate the original offer just inquires a lower price or something similar (an adjustment to the original terms of the offer

d. Outputs contract - one in which the buyer agrees to purchase all of the output a seller produces

7. Henry agrees to buy all of the milk Jerry, a dairy farmer, can produce on his farm. What type of contract?

a. Requirements contractb. Options contractc. Inquiryd. Outputs contract

8. Historically, courts will not consider the value of consideration unlessa. The amount of consideration is extremely small, a peppercornb. The amount of consideration is very large, a berryc. The courts always consider the value of considerationd. The courts never consider the value of consideration

9. John contracts with Makenna to build her a new dog house for $500. He promises to have the dog house done prior to November 1. On October 1, John says to Makenna, “If you want the dog house done by November 1 I will need an additional $100.” Makenna agrees. Upon completion of the project, Makenna gives John $500 cash. John demands the other $100. Could John successfully take Makenna to court over this matter?

a. Yes, Makenna made a return promise which constitutes considerationb. No, Makenna’s promise was an illusory promisec. Yes, this is promissory estoppeld. No, John already had the duty to finish the job by 11/1 and provided no

additional consideration10. Clint and Brad have a contract under which Brad is to buy Clint’s prized pig. The pig

becomes sick and both Clint and Brad agree the pig will not be sold. This is an example of?

a. Novation - occurs when a party agrees to discharge their duties under a previous contract by substituting a new contract that creates new obligations on the behalf of the parties

b. Accord and satisfaction - an agreement where the parties agree to satisfy a preexisting duty by imposing a new contractual duty

c. Contractual change – made upd. Mutual rescission - occurs when both parties agree to return to their pre-contracting

positions and suspend performance under their previous contract through a new contract

11. Mike hires Rita to mow his lawn while he is on vacation to Europe for 8 weeks and agrees to pay her $50 each time she mows, but she should only mow as the grass needs it. A drought occurs while Mike is on vacation. He assumes she mowed the lawn one or two times. She claims she mowed it twice a week and he owes her $800. Mike offers $100 instead of $800. If she accepts, can Rita successfully take Mike to court in hopes of getting the additional $700?

a. Yes, they agreed on $50 per mow and she mowed 16 times. b. No, they agreed on an accordc. Yes, she thought the $100 was just a first paymentd. No, courts never get involved in contract law

12. Sarah is extremely intoxicated and sells her grandmas diamond ring to Pauline for $125. Sarah didn’t understand the consequences of her actions. Is this contract voidable?

a. Yes, Sarah wasn’t lucid when entering into the contractb. No, contracts are never voidablec. Yes, but only if Sarah is a minord. No, voluntarily consuming alcohol isn’t an excuse and selling her grandmas ring

is a natural consequence of her actions13. Assume Mitchel is extremely desperate for employment. Stan offers Mitchel

employment but Mitchel must work in his salt mine for 15 years and will receive only minimum wage with no opportunity for advancement in return for his labor. Mitchel agrees because he needs the money to feed his family. If Mitchel quits his job before 15 years’ time and Stan sues him for breach of contract, a court may hold?

a. This was a bad contract but Mitchel should have known better and they never get involved in contractual disagreements like this

b. The terms of the contract were so unfair that the contract must be considered unconscionable and unenforceable against Mitchel

i. substantivec. Mitchel deserves no more than minimum waged. This contract was created as a process that courts find to be unconscionable

i. Procedural14. A prenuptial agreement is subject to

a. The statute of marriageb. The statute of divorcec. The statute of fraudsd. The statute of bilateral promises

15. Marty agrees to rent an apartment from Sherry for the months of January, February, March, and April. Is this 4-month lease subject to the Statute of Frauds?

a. Yes, interest in an apartment contract is always subject to the statute of Fraudsb. No, because apartment contracts are never subject to the statute of fraudsc. Yes, leases over one month must be in writingd. Probably not, many states say leases of property for one year or less aren’t

subject to the statute of frauds16. Which of the following is a reason parties cannot enter into an agreement

a. a bilateral promise was madeb. consideration was providedc. capacity is assumedd. a party was mistaken, tricked, or threatened

17. Courts look at how the parties have been interpreting the contract terms to date as they have performed under the contract

a. Course of performanceb. Course of dealings - how the parties have acted in previous dealings with one anotherc. Usage of trade - a court will look to see how those engaged in the type of business

involved in the contract dispute define similar termd. Mistake of law

18. Which is not part of the test for intentional (fraudulent) misrepresentation?a. Misrepresentation of a material fact – three part tese (1)b. An intent to deceive (2)c. Puffery of a factd. The innocent party must rely on the misrepresentation (3)

19. Lance hires Drew to put a new seat on his racing bicycle. Drew puts the new seat on and Lance pays Drew $50. What type of contract do Lance and Drew have?

a. Implied b. Express c. Executed d. Unenforceable

20. Juan promises to hire Grace as long as Grace becomes a surgeon. This is an example ofa. Conditions precedentb. Conditions subsequentc. Concurrent conditionsd. Express conditions

21. The transfer of contractual duties to a third party is known as:a. Delegationb. Assignmentc. Transferald. Beneficial contract

22. When can contractual duties NOT be delegated?a. When the obligor is not involved in any wayb. When special trust has been placed in the obligor or performance depends on the

obligorc. When the obligor is at high riskd. When the delegate does not perform his/her duties

23. Which is NOT a requirement for a quasi-contracea. The party has conferred a benefit on the other partyb. The party receiving the benefit would be unjustly enriched by retaining the benefit

without paying for itc. The party did not act as a volunteer in conferring the benefitd. The party is not allowed to be a minor

24. The party who assigns their rights under a contract is known as the?a. Assignorb. Assigneec. Obligord. Oblige

25. Which type of damages are used to cover indirect and foreseeable losses?a. Compensatoryb. Consequentialc. Punitived. Nominal

26. What is an equitable remedy when both parties have imperfectly expressed their agreement in writing?

a. Reformationb. Rescission – not equitable remedy, undoes contraction

c. Restitution- payment to one party to make wholed. Liquidation