BUSINESS LAW TEST QUESTIONS AND ANSWERS A+ GRADED
Elements of Contract
1. Offer
2. Acceptance
3. Consideration
4. Contractual Capacity
5. Legality
Offer
must be a definite, clearly stated offer to do something. For example: A quotation by
sub-contractor to the main contractor and an offer to lease.
An offer does not include ball park estimates, requests for proposals, expressions of
interest, or letters of intent.
Sources of Contract Law
Common law governs all contracts except when it has been modified or replaced by
statutory law such as the UCC (Uniform Commercial code), or by administrative agency
regulations
Contract Areas governed by common law
services, real estate, employment, and insurance
Contracts governed by UCC
sale and lease of goods
Promisor
the person making the promise
Promisee
the person to whom the promise is made
Purpose of Contracts
in business: to avoid potential disputes
many times, bc of moral obligation
Contract
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
simply: it is a legally binding agreement between two or more parties who agree to
perform or to refraim from performing some act now or in the future
Reasons for contract disputes
usually when there is a promise of future performance and it is not fulfilled
Objective Theory of Contracts
the element of intent is of prime importance. Intent to form a contract must be
determined objectively and not by the personal or subjective intent, or belief, of a party.
A party's intention to enter into a legally binding agreement, or contract, is judged by
outward, objective facts as interpreted by a reasonable person
Objective facts include: 1) what the party said when entering into the contract
2)how the party acted or appeared (intent may be manifested by conduct as well as by
, oral and written words
3) the circumstances surrounding the transaction
Objective Facts to tell if there was intent for contract
1) what the party said when entering into the contract
2)how the party acted or appeared (intent may be manifested by conduct as well as by
oral and written words
3) the circumstances surrounding the transaction
Linear Tech Corp v Micrel, Inc 2001
LTC makes and sells circuites for use in cell phones and computers.
LTC sued Micrel for patent infringement.
Micrel said LTC didn't have a valid patent because offered to sell the chip commercially
before it could be legally sold.
ISSUE: had LTC entered a sales contract when asking for input on pricing and accepted
distributors' purchase orders using a 'will advise' procedure before the critical date?
Rule: using objective theory of intent--reasonable person wouldn't say asking for info on
potential orders is intent of a contract.
LTC did NOT violate the ban on sales. could continue lawsuit against Micrel
Consideration
any promises made by the parties to the contract must be supported by legally sufficient
and bargained for consideration--something ofvalue received or promised, such as
money, to convince a person to make a deal)
Contractual Capacity
Both parties entering into the contract must have the capacity to do so--the law must
recognize them as possessing characteristics that qualify them as competent parties
Legality
the contract's purpose must be to accomplish some goal that is legal and not against
public policy
Defenses for Enforceability of Contracts
sometimes, even with all the elements, a contract can be unenforceable. These are
defenses for enforceability
1. Voluntary Consent
2. Form--the contract is in whatever form the law requires
Types of Contracts
1. Bilateral and Unilateral Contracts
2. Formal and Informal contracts
3. Express and Implied Contracts
Offeror
the party making the offer
Offeree
the party to whom the offer is made
Bilateral Contracts
the offeree can accept simply by promising to perform. It is a "promise for a peromise."
No performance, such as payment of funds or delivery of goods, need take place. Exists
the moment promises are exchanged.
eg. A wants to buy B's camcorder. A will pay B next week when he gets paid. B will give
the camcorder when A pays him. The promise is a bilateral contract.
Elements of Contract
1. Offer
2. Acceptance
3. Consideration
4. Contractual Capacity
5. Legality
Offer
must be a definite, clearly stated offer to do something. For example: A quotation by
sub-contractor to the main contractor and an offer to lease.
An offer does not include ball park estimates, requests for proposals, expressions of
interest, or letters of intent.
Sources of Contract Law
Common law governs all contracts except when it has been modified or replaced by
statutory law such as the UCC (Uniform Commercial code), or by administrative agency
regulations
Contract Areas governed by common law
services, real estate, employment, and insurance
Contracts governed by UCC
sale and lease of goods
Promisor
the person making the promise
Promisee
the person to whom the promise is made
Purpose of Contracts
in business: to avoid potential disputes
many times, bc of moral obligation
Contract
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
simply: it is a legally binding agreement between two or more parties who agree to
perform or to refraim from performing some act now or in the future
Reasons for contract disputes
usually when there is a promise of future performance and it is not fulfilled
Objective Theory of Contracts
the element of intent is of prime importance. Intent to form a contract must be
determined objectively and not by the personal or subjective intent, or belief, of a party.
A party's intention to enter into a legally binding agreement, or contract, is judged by
outward, objective facts as interpreted by a reasonable person
Objective facts include: 1) what the party said when entering into the contract
2)how the party acted or appeared (intent may be manifested by conduct as well as by
, oral and written words
3) the circumstances surrounding the transaction
Objective Facts to tell if there was intent for contract
1) what the party said when entering into the contract
2)how the party acted or appeared (intent may be manifested by conduct as well as by
oral and written words
3) the circumstances surrounding the transaction
Linear Tech Corp v Micrel, Inc 2001
LTC makes and sells circuites for use in cell phones and computers.
LTC sued Micrel for patent infringement.
Micrel said LTC didn't have a valid patent because offered to sell the chip commercially
before it could be legally sold.
ISSUE: had LTC entered a sales contract when asking for input on pricing and accepted
distributors' purchase orders using a 'will advise' procedure before the critical date?
Rule: using objective theory of intent--reasonable person wouldn't say asking for info on
potential orders is intent of a contract.
LTC did NOT violate the ban on sales. could continue lawsuit against Micrel
Consideration
any promises made by the parties to the contract must be supported by legally sufficient
and bargained for consideration--something ofvalue received or promised, such as
money, to convince a person to make a deal)
Contractual Capacity
Both parties entering into the contract must have the capacity to do so--the law must
recognize them as possessing characteristics that qualify them as competent parties
Legality
the contract's purpose must be to accomplish some goal that is legal and not against
public policy
Defenses for Enforceability of Contracts
sometimes, even with all the elements, a contract can be unenforceable. These are
defenses for enforceability
1. Voluntary Consent
2. Form--the contract is in whatever form the law requires
Types of Contracts
1. Bilateral and Unilateral Contracts
2. Formal and Informal contracts
3. Express and Implied Contracts
Offeror
the party making the offer
Offeree
the party to whom the offer is made
Bilateral Contracts
the offeree can accept simply by promising to perform. It is a "promise for a peromise."
No performance, such as payment of funds or delivery of goods, need take place. Exists
the moment promises are exchanged.
eg. A wants to buy B's camcorder. A will pay B next week when he gets paid. B will give
the camcorder when A pays him. The promise is a bilateral contract.
