L201: Contracts BUSL 201 Indiana University-Bloomington | UPDATED Questions with 100% Verified Answers

L201: Contracts BUSL 201 Indiana University-Bloomington | UPDATED
Questions with 100% Verified Answers

Question:
Contracts (definition)

Answer:
def: a LEGALLY ENFORCEABLE promise or set of promises


Question:
Contracts (functions)

Answer:
CONTRACTING LETS US CREATE A TYPE OF PRIVATE LAW that governs our relationships
with others
CONTRACTS FACILITATE THE PLANNING that is necessary in a modern industrialized
society


Question:
Freedom of Contract

Answer:
the central principle of contract law that emerged from the 19th century (Industrial
Revolution)
def: the idea that contracts should be enforced because they are the products of the free
wills of their creators, who should, within broad limits, be free to determine the extent of
their obligations


Question:
Standardized Form Contracts

Answer:
def: contracts that are preprinted by one party and presented to the other party for
signing
most situations: the party who drafts and presents the standardized contract is the party
who has the most bargaining power and/or sophistication in the transaction
frequently: standardized contracts are nonnegotiable

,(present dangers that the party signing the contract will not know what he is agreeing to
and may be taken advantage of by the party who drafted the contract)


Question:
Basic Elements of a Contract

Answer:
(requirements that a set of promises must meet before they are treated as a contract)
(1) the set of promises must be based on a voluntary agreement, which is made up of an
OFFER and an ACCEPTANCE of that offer
(2) there usually must be CONSIDERATION to support each party's promise
(3) the contract must be between parties who have CAPACITY to contract
(4) the objective and performance of the contract must be LEGAL
(Negotiation -> Agreement? (offer & acceptance) -> Voluntary? -> Consideration? ->
Capacity? -> Legality? -> CONTRACT!)


Question:
Basic Contract Concepts and Types

Answer:
(1) Bilateral and Unilateral Contracts
(2) Valid, Unenforceable, Voidable, and Void Contracts
(3) Express and Implied Contracts
(4) Executed and Executory Contracts


Question:
Bilateral and Unilateral Contracts

Answer:
Unilateral Contracts: only one party makes a promise (ex: perks cafe promises a free
coffee after having frequent buyer card stamped 10 times)
Bilateral Contracts: BOTH parties exchange promises and the contract is formed as soon
as the promises are exchanged (ex: perks cafe promises to pay willowtown mall $1,000 a
month if willowtown mall promises to lease a kiosk in the mall to perks for the holiday
season)

,Question:
Valid, Unenforceable, Voidable, and Void Contracts

Answer:
Valid Contract: one that meets all of the legal requirements for a binding contract
(enforceable in court)
Unenforceable Contract: one that meets the basic legal requirements for a contract but
may not be enforceable because of some other legal rule [ex: (1) one of those for which
the statute of frauds requires writing but no writing is made; (2) an otherwise valid
contract whose enforcement is barred by the applicable contract statute of limitations]
Voidable Contracts: one or more of the parties have the legal right to cancel their
obligations under the contract (ex: a contract that is induced by fraud or duress is
voidable at the election of the injured party)
*important feature: the injured party has the RIGHT to cancel the contract IF HE
CHOOSES
Void Contracts: agreements that create no legal obligations and for which no remedy will
be given (ex: contracts to commit crimes, such as "hit" contracts)


Question:
Express and Implied Contracts

Answer:
Express Contracts: the parties have directly stated the terms of their contract orally or in
writing at the time the contract was formed
Implied Contracts: when the surrounding facts and circumstances indicate that an
agreement has in fact been reached (ex: a court would infer a promise by your doctor to
use reasonable care and skill in treating you and a return promise on your part to pay a
reasonable fee for her services)


Question:
Executed and Executory Contracts

Answer:
Executed Contracts: when all of the parties have fully performed their contractual duties
Executory Contracts: what a contract is until such duties have been fully performed


Question:

, Sources of Law Governing Contracts

Answer:
(1) Article 2 of the Uniform Commercial Code
(2) Common Law of Contracts


Question:
Common Law of Contracts

Answer:
def: court-made law that, like all court-made law, is in a constant state of evolution
determining what body of law applies to a contract problem is a very important first step
in analyzing that problem


Question:
The Uniform Commercial Code: Origin and Purposes

Answer:
created by the American Law Institute and the National Conference of Commissioners on
Uniform State Laws (adopted by all states except Louisiana, which has only adopted part
of the code)
contains 9 articles, *most important is article 2: deals with the sales of goods
purposes:
(1) to establish a uniform set of rules to govern commercial transactions, which are often
conducted across state lines
(2) to create a body of rules that would realistically and fairly solve the common
problems occurring in everyday commercial transactions
(3) tried to formulate rules that would promote fair dealing and higher standards in the
marketplace


Question:
Application of Article 2

Answer:
applies to contracts for the sales of goods
does NOT apply to SERVICE contracts (contracts for the sale of real estate, services, and
intangibles are governed by the common law of contracts)