1. CHAPTER 9
Test review

2. PARTS OF A CONTRACT
Offer and Acceptance: Complete terms accepted Genuine Assent: “Not” being forced or misled into contract Consideration: Both sides gain something “Fair” not necessarily equal Capacity: Understanding a contract and your actions Legality: Terms must be legal Written: “Some” contracts must be written to be considered valid

3. CONSIDERATION Makes serious transactions valid
Fair transactions for both sides
“Both” sides must gain something from the contract
Creates actual contractual agreements, rather than promises or gifts

4. 3 elements of consideration
Give: What each party promises to do
Trade: Proof the promise was actually traded
Legal Value: Worth something in the eyes of the law (Party got what they expected to get)

5. Gifts Transfer of ownership without getting anything back
Does NOT contain consideration
Donor- person who gives the gift
Donee- person who receives the gift

6. Forbearance A promise NOT to do something you have a right to do
Asking a bank to not make you pay a loan back while you are out of work (Even though you can)

7. Legal Value
Defined as a change in the legal position of the parties as a result of the contract (Property Rights)
Example: You go into a store and buy a bag of grapes. You get the grapes (Ownership rights) and the store gets your money (Ownership rights)

8. Adequacy of consideration
Court do NOT look at if the considerations value was equal, only if it was fair
Value is based on what the 2 parties negotiate
Courts look at if the parties got what they expected

9. Nominal Consideration
A token or small amount of consideration give
Example: Give someone a $1 for a $1000 car
Allows a contract to be created

10. Illusory Promise
An “Open Ended” promise, which means either party can back out at any time
Example: “If I get a chance to help you fix your car, I’ll be there”

11. Termination Clause
A Illusory promise where only “1” side has a right to back out
ONE side can back out for any reason and at any time
It is an Implied Duty, that both sides will be fair to the other

12. DIFFERENCE BETWEEN Output contract
Requirements Contract
When a buyer agrees to purchase everything a company produces
Example: McDonalds buying the rights to the only potato that is used for their French fries
When a seller agrees to sell only to certain types of companies
Example: Microsoft sells its operating system to only PC based computer manufacturers, like IMB or Dell

13. DIFFERENCE BETWEEN
Existing Public Duty
Existing Private Duty
Agreeing to something you are already obligated to do by law
Saying “I won’t speed again if you don’t give me this ticket”
No consideration for party since you are already supposed to do this
Agreeing to something that you are already obligated to do within the agreement
Example: If you already get an extended warranty with a purchase, the store cannot ask you to pay for it

14. Settlement of a debt
Unliquidated Debt: Parties do NOT agree to a debt and its amount
Liquidated Debt: Parties agree that a debt exists and to its amount, therefore it must be paid

15. PAYING LESS THAN FULL AMOUNT OWED
Accord and Satisfaction: Paying less than the full amount due in exchange for an agreement NOT to sue
Ex) Paying $600 on a $1000 debt in exchange for an agreement that you will not be sued (Released)
Release: When your obligation to another party ends or you are “Let out” of your contract early

16. Past performance
You cannot bargain using something that has already occurred in a past contract as part of a current contract
Example: If you deliver Pepsi to a local grocery store and give the store a 10% discount, you cannot bargain with the store using this past offer as the basis for why they should pay you more in the future to make up for that discount. It’s a completed agreement.

17. Promissory Estoppel
An exception to where mutual consideration is needed to make a contract valid
One party may intend a gift or an open ended promise, but sometimes the promise may be enforceable
Used to stop people from being taken advantage of

18. ELEMENTS Rely on the promise made
Acted in reliance of the promise made
Suffered a “Substantial” economic loss
Ask for the courts help

19. Promises to charities Usually an open ended gift or a pledge
“ONLY” way a pledge can be honored is if the charity tells the donor what the donation will be used for
Pledge is enforced if a legal detriment is taken on

20. Statute of limitations
Time limit for filing a lawsuit against another person
States usually give most people 3 years to file
Purpose is because evidence may get lost over time

21. DIFFERENCE Giving collateral to leave an offer open Common Law based
Option Contract
Firm Offer
Giving collateral to leave an offer open
Common Law based
Non-Retail
A written agreement
Good for 3 months
UCC law based
Retail

22. Modification To change a contract
If you want to modify (Or change), additional consideration must be given to be allowed to make this change
Example: If a car dealer wants to sell you an extended warranty “After” you agree to a car price, you will pay extra to get the contract modified

23. Questions?