legally enforceable contract
If one party fails to perform as promised, the other party can use the court system to enforce the contract and recover damages or other remedy.
contract
a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty
offeror
the party who makes the offer
offeree
the party to whom an offer is made
electronic commerce
the sale and lease of goods, the sale of services, and the licensing software over the internet
bilateral contract
a promise made by one party in exchange for the promise of another party; a promise for a promise
unilateral contract
when only one party makes a promise for an act of another; a promise for an act
formal contract
A contract that requires a special form or method of creation.
informal contract
A contract that is not formal. Valid informal contracts are fully enforceable and may be sued upon if breached.
valid contract
a contract that contains all the essential elements to establish a contract; a contract that is enforceable by at least one of the parties
void contract
A contract having no legal force or binding effect.
voidable contract
A contract where one or both parties have the option to avoid their contractual obligations. If a contract is avoided, both parties are released from their contractual obligations.
ratification
the act of a minor after the minor has reached the age of majority by which he or she accepts a contract entered into when he or she was a minor
unenforceable contract
a contract in which the essential elements to create a valid contract are met but there is some legal defense to the enforcement of the contract
executory contract
A contract that has not as yet been fully performed by either or both sides
executed contract
A contract that has been completely performed by both parties.
express contract
a contract statement that may be oral or written
implied in fact contract
contract where agreement of the parties is inferred from their conduct
quasi contract
an equitable doctrine whereby a court may award monetary damages to a plaintiff for providing work or services to a defendant even though no actual contract existed. The doctrine is intended to prevent unjust detriment to the plaintiff.
agreement
the manifestation by two or more persons of the substance of a contract
offer
the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it
objective theory of contracts
A theory that says the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties.
auction with reserve
when auctioneer may withdraw the property at any time until he or she announces the completion of the sale. The potential bidders are the offerors
auction without reserve
An auction in which the seller expressly gives up his or her right to withdraw the goods from sale and must accept the highest bid.
revocation of an offer
withdrawal of an offer by the offeror which terminates the offer
rejection of an offer
express words or conduct by the offeree that reject an offer. Rejection terminates the offer
counteroffer
a response by an offeree that contains terms and conditions different from or in addition to those of the offer. This terminates the original offer
Destruction of the subject matter
the subject matter of an offer is destroyed prior to acceptance through no fault of either party
death or incompetency
prior to acceptance of an offer, either the offeror or the offeree dies or becomes incompetent
supervening illegality
prior to the acceptance of an offer, the object of the offer is made illegal by statute, regulation, court decision, or other law
lapse of time
an offer terminates upon the expiration of a stated time in the offer. If no time is stated, the offer terminates after a "reasonable time
acceptance
a manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts.
mirror image rule
requires that the terms in the acceptance must exactly match the terms contained in the offer
mailbox rule
A rule providing that an acceptance of an offer becomes effective on dispatch (on being placed in a mailbox), if mail is, expressly or impliedly, an authorized means of communication of acceptance to the offeror.
consideration
something of legal value given in exchange for a promise
legal value
support for a contract when either 1. the promisee suffers a legal detriment or 2. the promisor receives a legal benefit
bargained-for-exchange
exchange that parties engage in that leads to an enforceable contract
gift promise
a promise that is unenforceable because it lacks consideration. Also known as a gratuitous promise.
Illegal consideration
A promise to refrain from doing an illegal act. Such a promise will not support a contract.
illusory promise
A contract into which both parties enter but one or both of the parties can choose not to perform their contractual obligations. Thus the contract lacks consideration.
moral obligation
a promise made out of a sense of moral obligation, honor, love, or affection
preexisting duty
this is a promise to perform an act or do something that a person is already under and obligation to do
past consideration
a promise based on the past performance of the promisee.
infancy doctrine
A doctrine that allows minors to disaffirm (cancel) most contracts they have entered into with adults.
disaffirm a contract
to rescind a contract under the infancy doctrine. Disaffirmance may be done orally, in writing, or by a minor's conduct
adjudged insane
declared legally insane by a proper court or adminstrative agency. A contract entered into by a person adjudged insane is void.
insane but not adjudged insane
being insane but not having been adjudged insane by a court or an adminstrative agency. A contract entered into by such person is generally voidable. Some states hold that such a contract is void.
intoxicated person
a person who is under contractual incapacity because of the ingestion of alcohol or other drugs to the point of incompetence
illegal contract
a contract that has an illegal object. Such contracts are void.
contract contrary to public policy
a contract that has a negative impact on society or that interferes with the public's safety and welfare
exculpatory clause
a contractual provision that relieves one (or both) of the parties to a contract from tort liability for ordinary negligence. Also known as a release of liability clause.
unconscionable contract
a contract that courts refuse to enforce in part or in whole because it is so oppressive or manifestly unfair as to be unjust
genuineness of assent
the requi, The consent of the parties to create a contract must be genuine. If the consent is obtained by duress, undue influence, or fraud, there is no real consent.
rescission
an action to undo a contract
mutual mistake of fact
A mistake made by both parties concerning a material fact that is important to the subject matter of the contract.
mutual mistake of value
A mistake that occurs if both parties know the object of the contract, but are mistaken as to its value.
unilateral mistake
When only one party is mistaken about a material fact regarding the subject matter of the contract.
duress
a situation that occurs when one party threatens to do a wrongful act unless the other party enters into a contract
undue influence
an action or series of overly persuasive actions that make inappropriate use of one person's position of power over another person to create an agreement that is very favorable to the person with all the power
fraudelent misrepresentation
a situation in which one person consciously and knowingly induces another person to rely and act on a misrepresentation. Also called fraud.
statute of fraud
a state statute that requires certain types of contracts to be in writing
real property
the land itself; as well as buildings, trees, soil, minerals, timber, plants, crops, fixtures, and other things permanently affixed to the land or buildings
part performance
An equitable doctrine that allows the court to order an oral contract for the sale of land or transfer of another interest in real property to be specifically performed if it has been partially performed and performance is necessary to avoid injustice.
equal dignity rule
a rule stating that express authority given to an agent must be in writing if the contract to be made on behalf of the principal is required to be in writing
one year rule
An executory contract that cannot be performed by its own terms within one year of its formation must be in writing.
guaranty contract
A promise made by one party to pay another person's debts, if that person fails to pay the debt, falls within the statute and must be in writing to be enforceable.
guarantor
a person who agrees to pay a debt if the primary debtor does not
UCC Statute of Frauds Section 2-201(1)
a section of the uniform commercial code which states that contracts for the sale of goods costing $500 or more must be in writing
UCC Statute of Frauds Section 2-202(2)
a section of the uniform commercial code which states that lease contracts involving payments of $1,000 or more must be in writing
parol evidence rule
When the parties of a contract have put their contract to writing, neither party can introduce evidence in court that an oral agreement, reached at the same time or before the contract was made, actually contained terms IN ADDITION TO OR IN CONFLICT WITH
merger clause
A clause in a contract that stipulates that it is a complete integration and the exclusive expression of the parties' agreement - Parol evidence may not be introduced to explain, alter, contradict, or add to the terms of the contract.
assignment
the transfer of contractual rights by an obligee to another party
assignor
an obligee who transfers a right
assignee
a party to whom a right is transferred
intended third party beneficiary
a third party who is not in privity of contract but who has rights under the contract and can enforce the contract against the obligor
covenant
an unconditional promise to perform
condition
a qualification of a promise that becomes a convenant if it is met
condition precedent
In contract law, an act or promise that must take place or be fulfilled before the other party is obligated to perform his or her part of the agreement.
condition subsequent
a condition that, if it occurs, automatically excuses the performance of an existing contractual duty to perform
novation agreement
an agreement that substitutes a new party for one of the original contracting parties and relieves the exiting party of liability on the contract.
accord and satisfaction
a means of settling a contract dispute
force majeure clause
a clause in a contract in which the parties specify certain events that will excuse nonperformance
impossibility of performance
may be allowed in case of death or illness that prevents the performance of a personal service contract; the destruction of the exact subject matter, or the means for performance; and illegality, or situations in which the performance of a contract become
complete performance
all terms have been carried out properly and completely
substantial performance
the nonbreaching party may recover damages caused by the breach
minor breach
A breach that occurs when a party renders substantial performance of his or her contractual duties.
major breach
a breach of the whole contract or of an essential term so that the purpose of the contract is defeated
inferior performance
perf, Occurs when a party fails to perform express or implied contractual obligations that impair or destroy the essence of the contract.
monetary damages
Dollar sums awarded for a breach of contract; "legal remedies
compensatory damages
(law) compensation for losses that can readily be proven to have occurred and for which the injured party has the right to be compensated
consequential damages
foreseeable damages that arise from circumstances outside a contract. In order to be liable for these damages, the breaching party must know or have reason to know that the breach will cause special damages to the other party
liquidated damages
damages that parties to a contract agree in advance should be paid if the contract is breached
mitigation of damages
the law places a duty on nonbreaching party to take reasonable efforts to avoid or reduce the resulting damages from a breach of contract. to mitigate a breach of an emplyement contract, the nonbreaching party must only accept "comparable" employment
equitable remedies
remedies fashioned by the courts to achieve fairness when legal remedies (money cannot compensate for his/her injury) are inadequate for that purpose
specific performance
equitable remedy in contract law requiring the breaching part to perform according to the specific terms of the contract
reformation
a court rewrites a contract to express the parties' true intentions. This remedy is usually used to correct clerical errors.
injunction
a court prohibits a party from doing a certain act. Injunctions are available in contract actions only in limited circumstances