Cedarville University Business Law
Exam 2
Occurs when the parties intend to form a valid bargain, but a court declares that some
rule of law prevents enforcing it - ANSWER-Unenforceable agreement
Occurs when the law permits one party to terminate the agreement - ANSWER-
Voidable contract
One that neither party can enforce, usually because the purpose of the deal is illegal or
because one of the parties had no legal authority to make a contract - ANSWER-Void
agreement
Agreements with all important terms explicitly stated - ANSWER-Express contracts
The words and conduct of the parties indicate that they intended an agreement -
ANSWER-Implied contract
One party makes a promise - ANSWER-Unilateral contract
Two parties make a promise - ANSWER-Bilateral contract
Contract has been made, but one or more parties have not fulfilled their obligations -
ANSWER-Executory contract
Occurs when all parties have fulfilled their obligations - ANSWER-Executed contract
All conditions fulfill the law's requirements - ANSWER-Valid contract
The defendant made a promise that the plaintiff relied on - ANSWER-Promissory
estoppel
The defendant received a benefit from the plaintiff, and the plaintiff reasonably expected
to be paid for the benefit and the defendant knew this - ANSWER-Quasi-contract
A letter that summarizes the negotiating process. A letter might help distinguish a
serious party from one with casual interest, summarize the progress made, and assist
the parties in securing necessary financing - ANSWER-Letter of intent
Occurs when the offeror "takes it back" before the offeree accepts - ANSWER-
Termination by revocation
, If an offeree clearly indicates he does not want to take the offer, then he has rejected it
and it can never be accepted - ANSWER-Termination by rejection
Counteroffer occurs when it responds to an offer with a new and different proposal;
previous offer is terminated with counteroffer - ANSWER-Counteroffer
If offeror sets time limit for offer and you respond after the time period has expired, offer
is no longer valid. With no time limit, offeree has reasonable time to decide. - ANSWER-
Termination by expiration
If an offeror dies or becomes mentally incapacitated, the offer terminates automatically
and immediately - ANSWER-Termination by operation of law
- Doesn't have to say "I accept" or even use words
- If no words are spoken or actions are done to indicate acceptance, the deal is not
accepted - ANSWER-Acceptance requirements
Requires that acceptance be on precisely the same terms as the offer - ANSWER-
Mirror Image Rule
- Sometimes called a covenant not to compete - An employee promises not to work for
a competitor for some time after leaving his company - ANSWER-Noncompete
agreement
Enforceable if reasonable in time, activity, and territory - ANSWER-Noncompete
agreement terms for business sale
These are contracts that attempt to release businesses from liability in the event of
injury to another party - ANSWER-Exculpatory clauses
Is one that a court refuses to enforce because of fundamental unfairness - ANSWER-
Unconscionable contracts
Concerns the legal ability of a party to enter a contract in the first place - ANSWER-
Capacity
Refers to whether a contracting party truly understood what she was getting into and
whether the agreement was made voluntarily - ANSWER-Consent
To give notice of refusal to be bound by an agreement - ANSWER-Disaffirm
Both parties mutually agree to terminate a contract - ANSWER-Rescind
- A minor who disaffirms a contract must return the consideration he has received, to
the extent he is able
Exam 2
Occurs when the parties intend to form a valid bargain, but a court declares that some
rule of law prevents enforcing it - ANSWER-Unenforceable agreement
Occurs when the law permits one party to terminate the agreement - ANSWER-
Voidable contract
One that neither party can enforce, usually because the purpose of the deal is illegal or
because one of the parties had no legal authority to make a contract - ANSWER-Void
agreement
Agreements with all important terms explicitly stated - ANSWER-Express contracts
The words and conduct of the parties indicate that they intended an agreement -
ANSWER-Implied contract
One party makes a promise - ANSWER-Unilateral contract
Two parties make a promise - ANSWER-Bilateral contract
Contract has been made, but one or more parties have not fulfilled their obligations -
ANSWER-Executory contract
Occurs when all parties have fulfilled their obligations - ANSWER-Executed contract
All conditions fulfill the law's requirements - ANSWER-Valid contract
The defendant made a promise that the plaintiff relied on - ANSWER-Promissory
estoppel
The defendant received a benefit from the plaintiff, and the plaintiff reasonably expected
to be paid for the benefit and the defendant knew this - ANSWER-Quasi-contract
A letter that summarizes the negotiating process. A letter might help distinguish a
serious party from one with casual interest, summarize the progress made, and assist
the parties in securing necessary financing - ANSWER-Letter of intent
Occurs when the offeror "takes it back" before the offeree accepts - ANSWER-
Termination by revocation
, If an offeree clearly indicates he does not want to take the offer, then he has rejected it
and it can never be accepted - ANSWER-Termination by rejection
Counteroffer occurs when it responds to an offer with a new and different proposal;
previous offer is terminated with counteroffer - ANSWER-Counteroffer
If offeror sets time limit for offer and you respond after the time period has expired, offer
is no longer valid. With no time limit, offeree has reasonable time to decide. - ANSWER-
Termination by expiration
If an offeror dies or becomes mentally incapacitated, the offer terminates automatically
and immediately - ANSWER-Termination by operation of law
- Doesn't have to say "I accept" or even use words
- If no words are spoken or actions are done to indicate acceptance, the deal is not
accepted - ANSWER-Acceptance requirements
Requires that acceptance be on precisely the same terms as the offer - ANSWER-
Mirror Image Rule
- Sometimes called a covenant not to compete - An employee promises not to work for
a competitor for some time after leaving his company - ANSWER-Noncompete
agreement
Enforceable if reasonable in time, activity, and territory - ANSWER-Noncompete
agreement terms for business sale
These are contracts that attempt to release businesses from liability in the event of
injury to another party - ANSWER-Exculpatory clauses
Is one that a court refuses to enforce because of fundamental unfairness - ANSWER-
Unconscionable contracts
Concerns the legal ability of a party to enter a contract in the first place - ANSWER-
Capacity
Refers to whether a contracting party truly understood what she was getting into and
whether the agreement was made voluntarily - ANSWER-Consent
To give notice of refusal to be bound by an agreement - ANSWER-Disaffirm
Both parties mutually agree to terminate a contract - ANSWER-Rescind
- A minor who disaffirms a contract must return the consideration he has received, to
the extent he is able
