BUSINESS LAW FINAL EXAM (CONTRACTS)
QUESTIONS AND ANSWERS
Common Law - Correct Answers -sources of contract law except sales and leases
contract - Correct Answers -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 as a
duty.
promise - Correct Answers -A declaration by a person (the promisor) to do or not to do a
certain act.
objective theory of contracts - Correct Answers -a party's intention to enter into a legally
binding agreement, or contract, is judged by outward, objective facts. Facts interpreted
by a reasonable person.
objective facts include - Correct Answers -1. what the party said when entering into the
contract
2. how the party acted or appeared
3. the circumstances surrounding the transaction
agreement (11) - Correct Answers -requirement for a valid contract. Includes an offer
and an acceptance. One party must offer to enter into a legal agreement, and another
party must accept the terms of the offer.
Consideration (11) - Correct Answers -requirement for a valid contract. Any promises
made by the parties to the contract must be supported by legally sufficient and
bargained-for ____ (something of value received or promised, such as money, to
convince a person to make a deal). Does not have to be fair and is not limited to money
Specific Performance - Correct Answers -A legal action to compel a party to carry out
the terms of a contract.
Contractual Capacity (11) - Correct Answers -requirement for a valid contract. Both
parties entering into the contract must have the ______ to do so. The law must
recognize them as possessing characteristics that qualify them as competent parties.
Legality (11) - Correct Answers -requirement for a valid contract. The contract's purpose
must be to accomplish some goal that is legal and not against public policy.
Genuiness of Assent - Correct Answers -the requirement that a party's assent to a
contract be genuine. A defense to the enforceability of a contract.
,form - Correct Answers -the contract must be in whatever ____ the law requires. Often
referring to a document such as a deed for real estate. A defense to the enforceability of
a contract
Bilateral Contract - Correct Answers -A type of contract that arises when a promise is
given in exchange for a return promise. Only a promise to perform and most contracts
are this
Unilateral Contract - Correct Answers -A type of contract that results when an offer can
be accepted only by the offeree's performance. ( a promise for an act)
irrevocable - Correct Answers -offer cannot be revoked once performance has begun
Express Contract - Correct Answers -A contract in which the terms of the agreement are
fully and explicitly stated in words, oral or written.
Implied Contract - Correct Answers -Conduct creates and defines the terms of this type
of contract. Requirements:
◦PL furnished good or service
◦PL expected to be paid
◦DEF had chance to reject and did not.
Formal Contract - Correct Answers -A contract that by law requires a specific form, such
as being executed under seal, to be valid.
informal contract - Correct Answers -A contract that does not require a specified form or
formality in order to be valid.
Executed Contract - Correct Answers -A contract that has been completely performed
by both parties.
executory contract - Correct Answers -A contract that has not as yet been fully
performed on either side
Valid Contract - Correct Answers -A contract that has the necessary contractual
elements: agreement, consideration, legal capacity of the parties and the legal purpose.
Void Contract - Correct Answers -no contract exists, or there is a contract without legal
obligations
enforceable contract - Correct Answers -a valid contract that can be enforced because
there are no legal defenses against it
Voidable Contract - Correct Answers -a party has the option of avoiding or enforcing the
contractual obligation
,Unenforceable Contract - Correct Answers -a contract exists, but cannot be enforced
because of a legal defense
Quasi Contract - Correct Answers -contracts implied in law. Imposed to avoid the unjust
enrichment of one party at the expense of another. Generally cannot be used when
there is an actual contract that covers the matter in controversy
◦Fictional contracts created by courts.
◦Imposed on parties for the interest of fairness and justice.
◦Equitable remedies.
◦Quantum Meruit. (fair value. Amount that you merit)
Limitations on Recovery.
◦"FAIR VALUE"
Plain Meaning Rule - Correct Answers -if a court determines that the terms of the
contract are clear from the written document alone, the ______ will apply, and the
contract will be enforced according to what it clearly states
Objective Theory of Contract Interpretation. - Correct Answers -If a court finds that there
is a need to interpret the terms of the contract, the court will apply a number of well-
established rules of interpretation. For example, one rule of interpretation states that
specific wording will be given greater weight than general wording
Contra-Proferendum - Correct Answers -a doctrine of contractual interpretation
providing that, where a promise, agreement or term is ambiguous, the preferred
meaning should be the one that works against the interests of the party who provided
the wording
Ambiguous - Correct Answers -If terms are ______, court will attempt to interpret
______ contract terms in a reasonable, lawful, effective manner.
◦Contracts are interpreted as a whole.
◦Terms negotiated separately given greater weight.
◦Ordinary, common meaning given.
◦Specific wording given greater weight than general language.
◦Written or typewritten given greater weight than preprinted.
◦______ terms interpreted against the drafter.
◦Trade usage, prior dealing, course of performance to allowed to clarify.
agreement (12) - Correct Answers -= offer and acceptance. The parties must agree on
the terms of the contract and manifest to each other their mutual assent to the same
bargain
offer - Correct Answers -A promise or commitment to perform or refrain from performing
some specified act in the future. Requirements under common law include
-Serious intention.
-Definiteness of terms.
, -Communication to Offeree
Offer-Serious Intention - Correct Answers --Contract is judged by what a reasonable
person in the Offeree's position would conclude about the offer.
◦Lucy v. Zehmer (1954). Page 232.
-Offers made in anger, jest, or undue excitement are usually not offers.
-Expressions of opinion are not offers.
-Statements of intention, preliminary negotiations, and agreements to agree, are not
offers.
-Advertisements, catalogues, price lists, and circulars are treated as invitations to
negotiate, and not as offers.
-Auctions.
Offer-Definiteness of Terms - Correct Answers -Terms (Expressed or Implied).
Emphasis on intent rather than form. Generally, must include these terms:
◦Identification of the parties.
◦Object or subject matter of the contract.
◦Consideration to be paid.
◦Time of payment, Delivery, or Performance.
Offer-Communication - Correct Answers -Offeree's knowledge of the offer:
◦Directly by the Offeror, or
◦Use of Agents.
Revocation - Correct Answers -Termination by action of the parties.
◦Offer can be withdrawn anytime before Offeree accepts the offer.
◦Effective when the Offeree or Offeree's agent receive it.
◦Exceptions: Irrevocable Offers.
-Option Contract: Promise to hold an offer open for a specified period of time in return of
consideration.
-Detrimental Reliance or Promissory Estoppel where Offeree relies on offer to his or her
detriment, thus Offeror is barred from _____ the offer.
-Detrimental Reliance and Partial Performance where offeree partially performs in
response to an offer to form a unilateral contract.
rejection - Correct Answers -Termination by action of the parties.
◦_______ by the Offeree (expressed or implied) terminates the offer.
◦Effective only when it is received by the Offeror or Offeror's agent.
Counteroffer - Correct Answers -Termination by action of the parties. a rejection of the
original offer and making of a new offer ("mirror image" rule).
Termination by Operation of Law - Correct Answers -1. Lapse of Time.
◦Offer terminates by law when the period of time specified in the offer has passed.
◦If no time period for acceptance is specified, the offer terminates at the end of a
reasonable period of time.
QUESTIONS AND ANSWERS
Common Law - Correct Answers -sources of contract law except sales and leases
contract - Correct Answers -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 as a
duty.
promise - Correct Answers -A declaration by a person (the promisor) to do or not to do a
certain act.
objective theory of contracts - Correct Answers -a party's intention to enter into a legally
binding agreement, or contract, is judged by outward, objective facts. Facts interpreted
by a reasonable person.
objective facts include - Correct Answers -1. what the party said when entering into the
contract
2. how the party acted or appeared
3. the circumstances surrounding the transaction
agreement (11) - Correct Answers -requirement for a valid contract. Includes an offer
and an acceptance. One party must offer to enter into a legal agreement, and another
party must accept the terms of the offer.
Consideration (11) - Correct Answers -requirement for a valid contract. Any promises
made by the parties to the contract must be supported by legally sufficient and
bargained-for ____ (something of value received or promised, such as money, to
convince a person to make a deal). Does not have to be fair and is not limited to money
Specific Performance - Correct Answers -A legal action to compel a party to carry out
the terms of a contract.
Contractual Capacity (11) - Correct Answers -requirement for a valid contract. Both
parties entering into the contract must have the ______ to do so. The law must
recognize them as possessing characteristics that qualify them as competent parties.
Legality (11) - Correct Answers -requirement for a valid contract. The contract's purpose
must be to accomplish some goal that is legal and not against public policy.
Genuiness of Assent - Correct Answers -the requirement that a party's assent to a
contract be genuine. A defense to the enforceability of a contract.
,form - Correct Answers -the contract must be in whatever ____ the law requires. Often
referring to a document such as a deed for real estate. A defense to the enforceability of
a contract
Bilateral Contract - Correct Answers -A type of contract that arises when a promise is
given in exchange for a return promise. Only a promise to perform and most contracts
are this
Unilateral Contract - Correct Answers -A type of contract that results when an offer can
be accepted only by the offeree's performance. ( a promise for an act)
irrevocable - Correct Answers -offer cannot be revoked once performance has begun
Express Contract - Correct Answers -A contract in which the terms of the agreement are
fully and explicitly stated in words, oral or written.
Implied Contract - Correct Answers -Conduct creates and defines the terms of this type
of contract. Requirements:
◦PL furnished good or service
◦PL expected to be paid
◦DEF had chance to reject and did not.
Formal Contract - Correct Answers -A contract that by law requires a specific form, such
as being executed under seal, to be valid.
informal contract - Correct Answers -A contract that does not require a specified form or
formality in order to be valid.
Executed Contract - Correct Answers -A contract that has been completely performed
by both parties.
executory contract - Correct Answers -A contract that has not as yet been fully
performed on either side
Valid Contract - Correct Answers -A contract that has the necessary contractual
elements: agreement, consideration, legal capacity of the parties and the legal purpose.
Void Contract - Correct Answers -no contract exists, or there is a contract without legal
obligations
enforceable contract - Correct Answers -a valid contract that can be enforced because
there are no legal defenses against it
Voidable Contract - Correct Answers -a party has the option of avoiding or enforcing the
contractual obligation
,Unenforceable Contract - Correct Answers -a contract exists, but cannot be enforced
because of a legal defense
Quasi Contract - Correct Answers -contracts implied in law. Imposed to avoid the unjust
enrichment of one party at the expense of another. Generally cannot be used when
there is an actual contract that covers the matter in controversy
◦Fictional contracts created by courts.
◦Imposed on parties for the interest of fairness and justice.
◦Equitable remedies.
◦Quantum Meruit. (fair value. Amount that you merit)
Limitations on Recovery.
◦"FAIR VALUE"
Plain Meaning Rule - Correct Answers -if a court determines that the terms of the
contract are clear from the written document alone, the ______ will apply, and the
contract will be enforced according to what it clearly states
Objective Theory of Contract Interpretation. - Correct Answers -If a court finds that there
is a need to interpret the terms of the contract, the court will apply a number of well-
established rules of interpretation. For example, one rule of interpretation states that
specific wording will be given greater weight than general wording
Contra-Proferendum - Correct Answers -a doctrine of contractual interpretation
providing that, where a promise, agreement or term is ambiguous, the preferred
meaning should be the one that works against the interests of the party who provided
the wording
Ambiguous - Correct Answers -If terms are ______, court will attempt to interpret
______ contract terms in a reasonable, lawful, effective manner.
◦Contracts are interpreted as a whole.
◦Terms negotiated separately given greater weight.
◦Ordinary, common meaning given.
◦Specific wording given greater weight than general language.
◦Written or typewritten given greater weight than preprinted.
◦______ terms interpreted against the drafter.
◦Trade usage, prior dealing, course of performance to allowed to clarify.
agreement (12) - Correct Answers -= offer and acceptance. The parties must agree on
the terms of the contract and manifest to each other their mutual assent to the same
bargain
offer - Correct Answers -A promise or commitment to perform or refrain from performing
some specified act in the future. Requirements under common law include
-Serious intention.
-Definiteness of terms.
, -Communication to Offeree
Offer-Serious Intention - Correct Answers --Contract is judged by what a reasonable
person in the Offeree's position would conclude about the offer.
◦Lucy v. Zehmer (1954). Page 232.
-Offers made in anger, jest, or undue excitement are usually not offers.
-Expressions of opinion are not offers.
-Statements of intention, preliminary negotiations, and agreements to agree, are not
offers.
-Advertisements, catalogues, price lists, and circulars are treated as invitations to
negotiate, and not as offers.
-Auctions.
Offer-Definiteness of Terms - Correct Answers -Terms (Expressed or Implied).
Emphasis on intent rather than form. Generally, must include these terms:
◦Identification of the parties.
◦Object or subject matter of the contract.
◦Consideration to be paid.
◦Time of payment, Delivery, or Performance.
Offer-Communication - Correct Answers -Offeree's knowledge of the offer:
◦Directly by the Offeror, or
◦Use of Agents.
Revocation - Correct Answers -Termination by action of the parties.
◦Offer can be withdrawn anytime before Offeree accepts the offer.
◦Effective when the Offeree or Offeree's agent receive it.
◦Exceptions: Irrevocable Offers.
-Option Contract: Promise to hold an offer open for a specified period of time in return of
consideration.
-Detrimental Reliance or Promissory Estoppel where Offeree relies on offer to his or her
detriment, thus Offeror is barred from _____ the offer.
-Detrimental Reliance and Partial Performance where offeree partially performs in
response to an offer to form a unilateral contract.
rejection - Correct Answers -Termination by action of the parties.
◦_______ by the Offeree (expressed or implied) terminates the offer.
◦Effective only when it is received by the Offeror or Offeror's agent.
Counteroffer - Correct Answers -Termination by action of the parties. a rejection of the
original offer and making of a new offer ("mirror image" rule).
Termination by Operation of Law - Correct Answers -1. Lapse of Time.
◦Offer terminates by law when the period of time specified in the offer has passed.
◦If no time period for acceptance is specified, the offer terminates at the end of a
reasonable period of time.
