4/29/2021 The Legal Environment of Business - Ch.

9 Flashcards | Quizlet

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The Legal Environment of Business - Ch. 9 Study

The Legal Environment of Business - Ch. 9

Terms in this set (73)

A declaration by a person (the promisor) to do or not to

Promise
do a certain act.

- common law for services, real estate, employment, and

insurance
Sources of Contract Law
- Uniform Commercial Code (UCC) for the sale or leasing
of goods.

An agreement that can be enforced in court, formed by

Contract
two or more parties.

- intent is determined by outward, objective facts

The Objective Theory of Contracts
interpreted by a reasonable person.

1. Agreement - created by offer and acceptance

2. Consideration - legally sufficient and bargained for
Requirements of a Valid Contract 3. Contractual Capacity - both parties must be qualified as
competent by law
4. Legality - contract must be to accomplish a legal goal

1. Voluntary consent - cannot be the result of fraud, undue

Defenses to the Enforceability of a
influence, mistake, or duress
Contract
2. Form - must be in the form by which the law requires

1. Bilateral v. Unilateral
Types of Contracts - Contract
2. Formal v. Informal
Formation
3. Express v. Implied

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4/29/2021 The Legal Environment of Business - Ch. 9 Flashcards | Quizlet

The Legal Environment of Business--aCh. 9 for a promise"

"promise Study

- just a promise to perform, performance not required

Bilateral Contract
- exists the moment promises are exchanged

- a "promise for an act"

- offeree can accept only be performing completely
- i.e. contests, lotteries, and other competitions
Unilateral Contract
- revocable only if offeree has not substantially
undertaken the performance (does not need to be
completed)

- require a special form or method of creation

- negotiable instruments - checks, drafts, promissory
Formal Contracts notes, bills of exchange, and certificates of deposit
- letters of credit - agreements to pay contingent on the
purchaser's receipt of invoices and bills of lading

- all other contracts (except for contracts required to be in

Informal Contracts
writing)

- terms are fully and explicitly stated in words, oral, or

Express Contracts
written

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Implied Contracts -implied from the conduct of the parties

1. Plaintiff furnished some service or property

2. Plaintiff expected to be paid for that service or
Requirements for an Implied property, and the defendant knew or should have known
Contract that payment was expected.
3. The defendant had a chance to reject the services or
property and did not.

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4/29/2021 The Legal Environment of Business - Ch. 9 Flashcards | Quizlet

The Legal
Types Environment
of Contracts of Business1.-Executed
- Performance Ch. 9 v. executory Study

Executed Contract - fully performed by both sides

Executory Contract - has not been fully performed by the parties

1. Valid
2. Voidable
Types of Contracts - Enforceability
3. Unenforceable
4. Void

- meets 4 basic requirements (agreement, consideration,

Valid
capacity, legality)

- a valid contract, but one that can be avoided at the

option of one or both of the parties.
- the party with the option can elect to avoid any duty to
Voidable Contract perform or ratify the contract (make valid)
- contracts made by mentally incompetent persons,
intoxicated persons, made under duress, fraudulent
conditions, or undue influence

- valid contract that cannot be enforced because of

Unenforceable Contracts
certain legal defenses against it (statutes or laws)

- no contract at all
Void Contracts
- no one has any legal obligations

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4/29/2021 The Legal Environment of Business - Ch. 9 Flashcards | Quizlet

The Legal Environment of Business--parties

Ch. 9must agree on the terms of the contract and Study
manifest to each other their mutual assent to the same
Agreement bargain
- two events: offer and acceptance

- a promise or commitment to do or refrain from doing

some specified action in the future.
Offer - 3 elements for an effective offer: serious intention, terms
must be reasonably certain or definite, communicated to
the offer

- determined by what a reasonable person in the offeree's

position would conclude
- situations when intent is lacking: expressions of opinion,
Serious intent
statements of future intent, preliminary negotiations,
advertisements (invitations to negotiate), preliminary
agreements

Generally must include the following terms:

1. The identification of the parties
2. The identification of the object or subject matter of the
Definiteness of Terms
contract.
3. The consideration to be paid
4. The time of payment, delivery, or performance

Termination of the Offer - by action of the parties or by operation of law

Termination by Action of the Parties 3 Ways: by revocation, rejection, or by counteroffer

- offeror's act of withdrawing an offer

- accomplished by either...
Revocation 1. Express repudiation of the offer
2. Performance of acts that are inconsistent with the
existence of the offer and are made known to the offeree

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4/29/2021 The Legal Environment of Business - Ch. 9 Flashcards | Quizlet

The Legal Environment of Business--sometimes

Ch. 9 "firm offers" made by merchants Study

- option contracts - created when an offeror promises to

Irrevocable Offers hold an offer open for a specified period of time in return
for payment

- offeree rejects by words or conduct

Rejection - only effective when it is actually received by the offeror
or the offeror's agent

- the rejection of the original offer and simultaneous

making of a new offer
- mirror image rule: requires offeree's acceptance to
Counteroffer
match the offeror's offer exactly. Any change in, or
addition to, the terms automatically terminates that offer
and substitutes the counteroffer.

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1. Lapse of time
2. Destruction of the specific subject matter of the offer.
Termination by operation of law
3. Death of incompetence of offeror or the offeree
4. Supervening illegality of the proposed contract

- terminates when period of time specified in the offer has

passed
Lapse of time
- if offer does not specify a time period, the offer
terminates at the end of a reasonable period of time

- voluntary act by offeree that shows assent to terms

Acceptance - may consist of words or conduct, must be unequivocal
and must be communicated to the offeror

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4/29/2021 The Legal Environment of Business - Ch. 9 Flashcards | Quizlet

The Legal Environment of Business--mirror

Ch. 9image rule Study
Unequivocal Acceptance
- cannot impose new conditions or change the terms

- doesn't ordinarily constitute and acceptance

- circumstances where it applies:
Silence as Acceptance 1. When offeree takes the benefit of offered service even
though he or she had an opportunity to reject them
2. When offeree has had prior dealings with the offeror.

- in bilateral contracts, communication of acceptance is

necessary
Communication of Acceptance
- in unilateral contracts, acceptance is usually evident with
performance of some act

- mailbox rule: if the authorized mode of communication is

Mode and Timeliness of the mail, then an acceptance becomes valid when it is
Acceptance dispatched, NOT when it is received by the offeror.
Doesn't apply in instantaneous forms of communication

- express authorization: exists when offeror specifies how

Authorized means of Acceptance acceptance should be made
- if not specified, can be made by any reasonable means

- Electronic contracts
e-contracts - must meet same basic requirements
- also includes licensing

Provisions of an Online Offers
Should include:
1. Acceptance of terms
2. Payment - how payment is to be made
3. Return Policy
4. Disclaimer - disclaimers of liability
5. Limitation on remedies - should be C.L.E.A.R
6. Privacy Policy - how seller should use the buyer's info
7. Dispute Resolution - provisions related to dispute
settlement (arbitration, forum-selectino clause, etc.)

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- Forum selection clause

Dispute-Settlement Provisions
- Choice-of-law clause

- indicates forum or location in which contract disputes

Forum Selection Clause
will be resolved.

- specifies that any contract dispute will be settled

Choice-of-law Clause according to the law of a particular jurisdiction (state or
country)

- Click-on Agreements
Online Acceptances - Shrink-wrap Agreements
- Browse-wrap Terms

- binding contract can be created by conduct (clicking an

"I accept" button or checkbox)
Click-on Agreement
- law generally does not require that the parties have read
all of the terms for it to be effective

- terms are expressed inside the box in which the goods

are packaged
Shrink-wrap Agreement -party who opens the box agrees to terms by keeping
whatever is in the box.
- usually between the manufacturer and buyer or user

- can occur in transactions conducted over the Internet.

- do not require internet users to assent to the terms
Browse-wrap Terms
before downloading or using certain software.
- usually unenforceable (lack of agreement)

- "an electronic sound, symbol, or process attached to or

e-signature logically associated with a record and executed or
adopted by a person with the intent to sign the record"

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4/29/2021 The Legal Environment of Business - Ch. 9 Flashcards | Quizlet

The Legal Environment of Business--passed

Ch. 9 in Congress (2000) to provide that no contract,
Study

record, or signature may be "denied legal effect" just

because it is electronic
- does not apply to all types of documents, some are
E-Sign Act
exempt
- refers explicitly to the EUTA and provides that if the state
has enacted the UETA without modification, state law
governs

- been adopted in part by 48 states

- remove barriers to e-commerce by giving the same
legal effect to electronic records and signatures as is
The Uniform Electronic
given to paper documents and signatures
Transactions Act (UETA)
- does not apply to all writings and signatures, must relate
to a transactions as long as each of the parties has
previously agreed to conduit transactions by e-means

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"information that is inscribed on a tangible medium or that

Record is stored in an electronic or other medium and is
retrievable in perceivable form"

- the value given in return for a promise or in return for a

performance.
- broken down into two parts:
Consideration
(1) something of legally sufficient value must be given in
exchange for the promise, and (2), there must be a
bargained-for exchange

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4/29/2021 The Legal Environment of Business - Ch. 9 Flashcards | Quizlet

The Legal Environment of Business--must

Ch.be
9 something of value in the eyes of the law Study

- may consist of:

1. A promise to do something that one has no prior legal
duty to do.
Legally Sufficient Value
2. The performance of an action that one is otherwise not
obligated to undertake.
3. The refraining from an action that one has a legal right
to undertake (forbearance).

- the item of value must be given or promised by the

promisor in return for the promisee's promise,
Bargained-for Exchange
performance, or promise of performance
- distinguished from gifts

Agreements that Lack 1. Pre-existing Duty

Consideration 2. Past Consideration

- exists when one already has a legal duty to do

something and therefore, cannot collect rewards for doing
so
Pre-existing Duty - OR if a party is already bound by a contract to a certain
duty
- Exceptions: Unforeseen Difficulties and Rescission and
New Contract

- if, during performance, extraordinary difficulties arise

Unforeseen Difficulties that were totally unforeseen at the time the contract was
formed, a court may allow an exception to the rule

- the unmaking of a contract so as to return the parties to

the positions they occupied before the contract was made
Rescission and New Contract
- sometimes parties will rescind a contract and make a
new contract at the same time.

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4/29/2021 The Legal Environment of Business - Ch. 9 Flashcards | Quizlet

The Legal Environment of Business--promises

Ch. 9 made in return for actions or events that have
Study

already taken place are unenforceable.

- no consideration
Past Consideration - employers often ask employees to sign a covenant to
compete; won't compete w/employer for a period of time
after relationship has ended

Contractual Capacity - the legal ability to enter into a contractual relationship

- general rule: a minor can enter into any contract that an

adult can, except contracts prohibited by law for minors
Capacity of Minors - contract is voidable
- for disaffirmance, a minor must express his or her intent
not to be bound to the contract

- the legal avoidance, or setting aside, of a contractual

Disaffirmance
obligation

- contract can be voidable or valid

- voidable if the person was sufficiently intoxicated to lack
Capacity of Intoxicated Individuals mental capacity
- courts look at the objective indications of the intoxicated
person's condition

- can be void, voidable, or valid

- void if person has been previously determined mentally
incompetent by the court
Capacity of the Mentally
- voidable if person was mentally incompetent at the time
Incompetent
the contract was formed (if person did not know
-valid if the person had capacityy at the time the contract
was formed (if they have lucid intervals)

- K must be formed for a legal purpose (not contradictory

Legality
to public policy, or federal or state statutory law)

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4/29/2021
The Legal Environment of Business1.-Ks
Ch. 9
to commit a crime
Contracts Contrary to Statute
Contracts Contrary to Public Policy
Exceptions to Restraint of Trade
Unconscionable contracts or
clauses
Exculpatory Clauses
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The Legal Environment of Business - Ch. 9 Flashcards | Quizlet
Study
2. Usury - interest rate above lawful maximum
3. Gambling
4. Licensing Statutes
1. Contracts in restrain of trade - anticompetitive
2. Unconscionable contracts or clauses
3. Exculpatory clauses
1. Covenants not to compete in the sale of an ongoing
business
2. Covenants not to compete in employment contracts
There are enforcement problems because laws vary
significantly state to state. Courts usually resort to
contract reformation only when necessary to prevent
undue burdens or hardships.
- deemed unconscionable when bargains are so
oppressive that the courts relieve innocent parties of part
or all of their duties.
- could be procedural or substantive
- procedural - inconspicuous print, unintelligible
language, etc.
- substantive - when contracts are oppressive or overly
harsh
- release a party from liability in the event of monetary or
physical injury no matter who is at fault
- courts disfavor
- when associated with rental agreements for commercial
property are commonly held to be contrary to public
policy
- enforceable if they are reasonable, do not violate public
policy, and do not protect parties from liability for
intentional misconduct.
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The Legal Environment of Business--stipulates

Ch. 9 what types of contracts must be in writingStudy
in
every state (doesn't apply to frauds)
Common contracts required in writing MOLD:
1. Interest in land

Statute of Frauds 2. Contracts that cannot by their terms be performed

within one year from the day after date of formation
3. Colateral (secondary) contracts
4. Promises made in consideration of marriage
5. Under UCC, contracts for sale of goods $500 +

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