Mr. Valanzano
Business Law
 Contract – _____________________________________
 Requirements for a transaction to be recognized as a
contract:
 1) _________________________________
 2) ________________________________
 3) _____________________
 4) ____________________
 5) ________________________
 6) _______________________
 Some contracts are required to be in writing.
 Offer – a proposal by an ___________ to do something,
provided the _____________ does something in return
 Offeror – ________________________________________
________________________________________________
 Offeree – ________________________________________
 To create a valid offer:
 The offeror must appear ___________________________
___________________________________
 The terms must be ________________________________
 The offer must be _________________________________
 The law will only recognize that an offer exists when the
offeror ____________________________________________.
 If a reasonable person would ________________________as
indicating you intend to contract, _____________________.
 If a reasonable person would interpret your conduct as not
serious or as a joke, ___________________________.
 This gives jurors and judges an _______________ test rather
than a subjective test based on what you say you were
thinking.
 All offers must identify the __________, ____________, and
________________, either directly or indirectly.
 The amount of information which is essential depends
upon the complexity of the transaction.
 Example: real estate sale
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Identity of the specific lot
Price
Full terms for payment
Date for delivery of possession
Date for delivery of the deed
If any of the above terms were missing, there would not be a
valid offer
 In some contracts, a term might not be implied by law or
common practice.
 Example: In a sale of good between merchants, when price is
not specified, current market price is the basis for the
contract.
 Advertisements in newspapers, magazines, on radio or TV,
or in the mail are generally not offers. Courts treat them as
_______________ to customers to make offers.
 Ads become offers when they are worded in ways that
________________________________________________ or
if it asks the offeree to _______________________________.
 Revocation by the Offeror – __________________________
________________________________
 An offer can be terminated if the offeror has a ___________
___________ the offer must be accepted by.
 If there is nothing in the offer about a length of time to
accept, a reasonable amount of time is determined
depending on the type of offer.
 The offeree _________________________.
 The offeree can ___________________________.
 Death or insanity of either the offeror or offeree
 Acceptance – ____________________________________
________________________________________
 If an offer is made to only one person, only that person
can accept the offer. If an offer is made to a group of
people, anyone in that group that knows of the offer can
accept it.
 To create an enforceable contract, the acceptance must:
 _________________________________________________
 __________________________________
 __________________________________
 Mirror Image Rule – ____________________________
_____________________________; if it varies any term,
it is a ____________________
 The mirror image rule applies to contracts for services
such as tax preparation and realty.
 By statute (___________), the mirror image rule has
been changed for the sale of goods
 An _______________ contract is a contract that may be
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oral or written.
When a contract is formed through the actions of the
parties, this is called a _______________ contract.
A ______________ contract contains two promises.
A ______________ contract contains a promise by only
one person to do something, if and when the other
party performs an act.
All contracts may be _________ or ____________.
 _____________________: a law stating certain contracts must
be in writing to be enforceable
 Genuine Agreement – ___________________________
______________________________________
 The absence of genuine agreement will make what
appears to be a contract voidable (the injured party
can rescind).
 Rescission – ____________________________________
________________________________________
 Ratification – __________________________________
____________________________________
 Duress – _______________________________________
_________________________________________
 A contract resulting from duress is voidable.
 Types of threats used to force agreements resulting in
duress:
 __________________________
 __________________________
 _________________________
 _________________________
 Undue Influence – ______________________________
_______________________________________________
_________________________
 The two key elements of undue influence are the
_________________ and the ______________________.
 Unfair terms within a contract is usually a strong sign
of unfair persuasion.
 _______________________ – when one party holds an
incorrect belief about the facts related to a contract
(usually will not affect validity of a contract)
 ___________________________ – both parties have an
incorrect belief about an important fact (recognized or
induced)
 Material Facts – ________________________________
______________________________________________
(subject matter or law)
 Misrepresentation – ______________________________
__________________________
 ________________ – the offeror using details they thought
were true but are actually not
 __________________ – the offeror knowingly using untrue
statements
 Statements are considered misrepresentation if:
 The statement is one of fact or there is active concealment
(substitute for false statement of fact)
 The statement is material to the transaction or fraudulent
 The victim reasonably relied on the statement
 All elements of misrepresentation must be proven in order
for fraud to be present.
 The misrepresentation must be ____________________ or
__________________________.
 The misrepresentation or concealment ________________
_________________________________.
 Remedies for fraud:
 ______________________
 ______________________
 ______________________ (money awarded in order to punish
the fraudulent party)
 Consideration – ________________________________
_______________________________________________
 To be consideration, a promise must _______________
_________________________________.
 The 3 Requirements of Consideration:
 Each party must give an act or promise to the other party
 Each party must trade what they contribute to the
transaction for the other party’s contribution
 What each party trades must have legal value (be worth
something in the eyes of the law)
 Output Contract - _________________________________________
_____________________________________________________________
 ____________________________ - when a seller agrees to supply all of the
needs for a particular buyer
 Liquidated Debt – _______________________________________________
_______________________________________
 ______________________________ – an agreement where both sides agree
to compromise on the terms of a contract
 Release – _______________________________________________________
 _________________________________ – when someone in debt pays their
combined creditors less than the total of what is owed to all of them in
exchange for agreeing not to file for bankruptcy
 Capacity – _____________________________________
_______________________________________________
__________________________________________________
 Minors, mentally handicapped, and the intoxicated lack
contractual capacity.
 Minors gain contractual capacity by being emancipated,
getting married, moving out, joining the armed forces,
giving birth, and/or getting employed full time
 __________________________ – when people who work for
an organization have the power to bind the organization to
a contract
 Disaffirmance – ____________________________________
_______________________________
 Types of contracts that can be disaffirmed by those who
lack capacity:
 Contracts for non-necessities
 Contracts to pay fair price for necessities
 Types of contracts that can NOT be disaffirmed:
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Court-approved contracts
Major commitments (enlist in army; student loan)
Banking Contracts
Insurance Contracts
Work-related contracts
Sale of realty
Apartment rental
 Agreements can be void and unenforceable if they involve
contracting for an illegal act.
 Types of contracts that are voidable if illegal acts are
involved:
 Contracts made illegal by specific statute - Illegal gambling,
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Charging more than maximum interest rate (usury),
Discrimination
Agreements that obstruct legal procedure – bribing jurors,
paying for false testimony, refraining from informing on an
alleged crime
Agreements made without a required license – agreements with
doctors, lawyers, brokers, contractors, etc.
Agreements that affect marriage negatively – an illegal
immigrant paying someone to marry them so they can gain
citizenship
Agreements that restrain trade unreasonably – price fixing, bid
rigging, resale price maintenance, allocation of markets,
covenants not to compete
 Courts will not enforce the agreement.
 Courts will leave the parties where they are.
 Restitution – ____________________________________
 Under common law, restitution will not be paid in most
instances.
 Exceptions:
 If the law that was violated was designed to protect an
injured party
 The victim is excusably ignorant (victim does not know
contract is illegal, other party does, minor illegality)
 A party rescinds before the illegal act occurs
 Only legal parts of the contract will be enforced (divisible
contract)
 Under the UCC governing the sale of goods, it makes
agreements or contract clauses that are unconscionable
unenforceable.
 Unconscionability – ______________________________
____________________________________________________
____________________
 Procedural – shown by _______________________________
 Substantive – established by ___________________________
 Most courts require both types on unconscionability to be
present to determine a contract illegal.
 When a court finds a contract illegal for unconscionability it
can:
 Refuse to enforce the contract
 Enforce only the legal parts of the contract
 Modify the terms of an agreement to make it fair
 Requires certain contracts to be _______________ and
_____________ in order to be enforceable in court.
 When a contract has been fully performed it is
considered ______________. If there are still parts to
be done by either or both parties it is considered
_________________.
 Contracts that must be in writing:
Purchase or sale of goods valued at $500 or more
Buying and selling of real estate
Contracts that will take more than 1 year to complete
Promises to pay the debt or answer for a legal obligation
of another person
 Promises to give something of value in return for a
promise of marriage
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 Essential terms required to create a valid offer and
acceptance:
 Names of the parties
 Description of the subject matter
 Price
 Quantity
 Other essential terms (method of delivery, terms of
payment, method of financing, date of transfer, etc.)
 Signature
 Evidence of a contract (the writing indicates the existence
of a contract)
 Under the UCC, the writing must indicate only:
 The quantity of goods
 A contract has been created between the parties
 Signature
 A writing signed and sent by 1 party is treated as the writing
of the other party if not objected to within 10 days of
receiving
 The signature may be written, stamped, engraved, or printed
 A signature may be any mark that is intended as a signature
or authentication of the writing
 The purpose us to prevent frauds by requiring proof on the
contract’s existence that is hard to fake
 Exceptions with contracts to pay a debt or answer for the
legal obligation of someone else:
 when there is a primary promise
 when the executor of a deceased person’s estate agrees to pay
the unpaid debts personally instead of using the deceased’s
assets
 when a 3rd party promises to pay another’s debt (main purpose
rule)
 Under the UCC, a writing and signature is not required for
sale of goods of $500 or more when goods:
 are ordered to be specially manufactured
 have been ordered, paid for, and payment was accepted
 have been received and accepted by the buyer
 Exceptions with contracts to buy or sell real estate:
 when the seller delivers the deed
 if the buyer made partial or full payment, has occupied the
land, and made substantial improvements to the land
 Integration Clause – _____________________________________
_______________________________________________________
 Parol Evidence Rule – keeps out ___________________________,
_____________________, ______________, and other discussions
that are not __________________________________
 Parol evidence or statements are usually not admissible in court
except:
To clarify unclear terms in the writing
If the written contract was not intended to be a complete agreement
If a condition necessary to the contract never occurred
If fraud, forgery, illegality, mistake, or misrepresentation occurred
To show the parties reached an another agreement or terminated
the contract
 To show the contract is voidable because one party lacked capacity
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 When a contract refers to an amount of money in both words
and numbers, the words will be relied on if they do not match.
 __________________________ – when courts interpret contracts,
they look at the main objectives to see which clauses should
prevail over others
 The plain and normal meaning of ordinary words will be used to
determine the meaning of a contract.
 ______________________ – contracts written by a stronger party
(_________) with the help of lawyers who favor the interests of
their clients; the weaker party (_______) must “take it or leave it”
and the terms of the contract are non-negotitable
 Examples: purchasing something on credit, life insurance
 Contractual Rights – ____________________________
_______________________________
 Contractual rights can be transferred to others. The
transfer of contractual rights is called an
________________.
 The party who transfers the contractual right is the
______________ and the party who receives it is called
the __________________.
 A party may assign contractual rights as long as performance will not
be materially changed.
 Performance – ________________________________________________
 State statutes require that certain assignments be in writing, but no
consideration is necessary to make a valid assignment.
 Contractual rights may not be assigned if performance would be
materially changed or if performance would become substantially more
difficult.
 Rights that may not be transferred include:
 A right created under a contract that prohibits the transfer of
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contractual rights
Claims for damages for personal injuries
Claims against the United States
Rights to personal services, especially those of a skilled nature, or when
personal trust and confidence are involved
Assignments of future wages, as limited by state statutes
 Contractual Duties – __________________________________
 The transfer of duties is know as _______________________.
 Obligor – ___________________________________________
 “__________________________________________________.”
– this means that the assignee receives exactly the same
contractual rights and duties as the assignor had.
 If the obligor breaches, the assignee, not the assignor, must
sue for the breach.
 Discharge – _________________________________________
____________________________
 Breach of Contract – __________________________________
_______________________
 When one party commits a major breach, the other party can
consider their obligation discharged. When this happens in a sales
contract under the UCC, it is called ________________.
 ___________________________ – when most duties are performed,
but only a minor duty remains (contract not discharged)
 Defaults – _____________________________
 When a party notifies the other party that they will default before
the time of performance, this is called an _____________________.
 By ______________________:
On a specified date of termination
Upon the occurrence or failure of a specified event to happen
At the free will of either party upon giving ample notice
If both parties agree to rescission, they will attempt to be put
back into the position they were in prior to contracting.
 Substitution – replacing an existing contract with a new one
 An agreement to change the obligations of the original
contract is called accord and the performance of the new
obligation is called satisfaction.
 Novation – a party releasing the other from their duty and
accepting a substitute party
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 By _______________________________:
 Destruction of the subject matter
 Performance declared illegal
 Death or disability
 A contract can be discharged by operation of law in the
following ways:
 Promisor’s debts are ______________________________
 Time for performance elapsed due to ________________
___________________
 __________________ – a material change in the terms of
a written contract without consent of the other party
(must be material, intentional, made by a party or
authorized agent of a party to the contract, and without
consent of the other party)
 Tender – ___________________________________________
 If the duty requires the doing of an act, a tender made in
good faith but is rejected will discharge the obligation of
the one offering to perform.
 If the obligation requires the payment of money, rejection
of an offer to pay the money does not discharge the debt or
prevent the creditor from collecting.
 Legal Tender – ____________________
 The law divides breaches of contract into 2 categories:
________________________ and ________________.
 Remedy – __________________________________________
______________________________________________
 The significance of the breach in relation to the entire
contract will determine if the breach is major or minor.
 Basic remedies for a major breach:
 _____________________________
 _____________________________
 _____________________________
 How does a minor breach affect the victim’s duties?
 The party injured by a minor breach usually must continue to perform
their contractual duties.
 Most likely, the victim will receive money damages to recover the cost
of completing their duty.
 Recovering damages to recover lost costs is called recovering through
offset.
 How does a major breach affect the victim’s duties?
 The injured party does not need to continue performing their
contractual duties.
 The victim can also choose a remedy such as: restitution, money
damages, and specific performance.
 What are rescission and restitution?
 Rescission – _________________________________________________
 Restitution – ___________________________________________
___________________________________________________________
 _____________________ – seeks to place the injured party in the
same financial position they would have been in if there had
been no breach
 Consequential – ____________________________________
__________________________________________________
 __________________ – used when the parties agree that a certain
amount of money will be paid if a certain breach occurs
 Punitive – ______________________________________________
_________________ (used in cases of fraud and intentional torts)
 _______________ – a small damage awarded to punish the failure
to perform a contractual duty even when there is not actual
injury
 When money damages are not an adequate remedy for
breach of contract a court may issue a _____________
______________________.
 Under this decree, the court orders the breaching party to
__________________________________________________.
 Specific performance is an ___________________________.
 “___________________” – the injured party that is seeking
damages is blameless for the breach and acted reasonably
throughout the transaction
 An injured party must elect a remedy when suing.
Specific performance and damages can’t be recovered
for the same breach.
 Specific performance is not available when damages
are an adequate remedy.
 Combining rescission and restitution and damages can
only happen under a contract for the sale of goods
governed by the UCC.
 If the injured party does not act to minimize their injuries
or ___________________________.
 By intentionally and explicitly giving up a contractual right
by using a ________________.
 If a lawsuit to recover damages is not in place within the
time stated by a state’s ______________________________.
 If the debtor’s assets are cleared through _______________.
This is where the debts are evenly shared by each creditor
they are owed to.
Rescission &
Restitution
Compensatory
• Injunction
Damages
Consequential
Specific
Performance
Liquidated
Waiver
Injunction
Nominal
Punitive
- ___________________________________________
______________________________________________________