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Contracts

Definitions Assignment

1. Contract: A contract is an agreement between two or more parties which the law will
enforce. (Clancey’s Outlaw)

Example: When John signed the contract with the local Ford dealer to buy a new car, it
was an agreement between two parties: John and the dealer. The law will enforce the
agreement because it was mutually agreed to, and it is supported by consideration
through the exchange of the car for the price.

2. privity of contract: Privity of contract is the relationship that exists between the parties
to an agreement, allowing them to sue each other to enforce the agreement, but
preventing a third party from doing so. (Clancey’s Outlaw)

Example: John and the Ford dealer have signed contract to buy a new car. This allows
the two parties to sue each other for performance or other reasons. Parties that are not
part of the contract are unable to sue either of the contract participants for obligations
resulting from the contract.

3. Uniform Commercial Code: The Uniform Commercial Code (UCC) governs a variety of
commercial transactions. The UCC was intended to be adopted in some form by the
individual states, thereby creating a degree of similarity between different state laws
regarding commercial transactions. All states have adopted the UCC in some form.
(Clancey’s Outlaw)

Example: The UCC provides a framework to protect consumers who purchase tangible
items and to ensure the goods sold are actually the goods advertised by the reseller.
4. Goods: Goods are tangible chattels which are moveable and identifiable to the contract
at the time of formation. (Clancey’s Outlaw)

Example: The goods associated with the contract between John and the Ford dealer are
a car and any other items specified in the contract, such as special wheels.

5. Predominant Factor Test: An assessment of whether Article 2 of the UCC applies in an

exchange, conducted by considering whether the exchange’s chief aspect, viewed in
light of all the circumstances, is for the sale of goods. (Black’s Law Dictionary)

Example: If a sale between entities is mostly for goods it is probably a sale, vs if the sale
is primarily for services, it does not qualify as a sale of goods.

6. Merchant: Under the UCC, a merchant is one who deals regularly in the kind of goods
involved in the contract, or one who holds himself out as having special knowledge or
skill about the practices or goods involved in the contract. Merchants owe a duty to
observe reasonable commercial standards of fair dealing. (Clancey’s Outlaw)

Example: A merchant is an individual or legal entinty is in business to primarily sell

goods, not services. They typically have storefronts of some type where consumers can
evaluate the goods that are being offered for sale.

7. Offer: An offer is a manifestation of present contractual intent which includes certain

and definite terms; is communicated to the offeree; proposes a bargain in which the
offeror’s act, forbearance to act, or promise is exchanged for the offeree’s act,
forbearance to act, or return promise; and creates a power of acceptance in the offeree.
(Clancey’s Outlaw)

Example: Jill has listed her house for sale and John has decide he would like to purchase
the house. John presents Jill with an offer to buy the house, but the terms of the offer
are different from those that Jill has stated and Jill must now decide if this offer is good
and accept it, or that it is not good and declines to accept it.

8. termination of offer: Termination results from the end of an offer that had specified
time constraints or other clauses that allow for some other method to trigger the end of
the offer, such as a fee. (Black’s Law Dictionary)
 Example: Jill has listed her house for sale and John has made an offer to buy the house
but the offer expires in two hours. After that time the offer is terminated by the
included condition.

9. revocation of offer: Revocation results from the canceling, annulling, or otherwise

voiding of an offer. An offer may freely be revoked by the offeror unless 1) the offer was
for a unilateral contract and the offeree has already begun performance, 2) the offer
was a firm offer, in which case it terminates at the end of the time stated without the
need for further action by any party, or 3) the offeree detrimentally relied on the offer.
(Clancey’s Outlaw)

Example: Jill has not yet accepted John’s offer to buy the house, and John changes his
mind and rescinds the offer, thereby revoking the offer.

10. firm offer: Under the common law, a firm offer is an offer which is irrevocable because
an option has been paid for by one of the parties. Under the UCC, an option need not be
paid for if the firm offer was made by a merchant who signed it in writing giving
assurance that the offer will remain open for a certain or reasonable length of time not
to exceed three months. (Clancey’s Outlaw)

Example: A seller agrees to sell wheat to a baker with the offer to be open for three
months. The price of wholesale wheat increase twice in the next month but the seller
can not modify the terms of the contract due to the offer being a firm one with the
three month time limit.

11. acceptance: An acceptance is an unequivocal assent to the terms of an offer. (Clancey’s

Outlaw)

Example: Jill accepts Johns offer to buy the house as presented to her because it has
met of the terms she required.

12. Mirror Image Rule: Under the common law Mirror Image Rule, an acceptance must
match the terms of the offer. If the acceptance contains additional or different terms, it
is a counter offer rather than an acceptance. However, modernly the UCC modifies this
rule to allow an acceptance to differ from the offer as to minor terms. (Clancey’s
Outlaw)

Example: John has presented and offer to buy Jills house that meets all of her terms but
includes some additional minor conditions such as vacuuming the carpets and mopping
the floors before acceptance.
13. mutual assent: : Mutual assent relates to the requirement that the parties agree to
enter into a contractual relationship, including terms and conditions. It is usually proved
by showing that one party made a valid offer and the other party made a valid
acceptance. (Clancey’s Outlaw0

Example: Mutual assent is an agreement to terms by two or more parties and includes
some evidence of agreement like signatures and initials on specific points in a printed
contract.

14. meeting of the minds: The historic rule holds that mutual assent exists if there was a
“meeting of the minds” between the parties, meaning that the parties subjectively
intended to enter into a legally binding contract and agreed to the terms and conditions
of the contract. (Clancey’s Outlaw)

Example: John had a table at a public street fair with items for sale. Jill made several
offers for one and then multiple items and the two of them discussed the prices, and
then agreed to a price that was different than the listed price for the package of items.

15. Objective Theory of Contracts: The modern rule holds that mutual assent exists if a
reasonable person would objectively have understood the outward actions and
statements of the other party to indicate an intent to enter into a legally binding
contract and agreement to terms and conditions of the contract. (Clancey’s Outlaw)

Example: Two people negotiate different terms to purchase goods than those terms
that are publicly advertised. They verbally state to each other the agreement on the
contract and intention to complete their agreed terms.

16. Consideration: Consideration is that which is bargained for and given in exchange for a
promise. It may be an act, a forbearance to act, or a return promise on the part of the
promisee, but it must include a legal detriment to both parties in order to be valid.
(Clancey’s Outlaw)

Example: John agrees with Jill to mow her lawn and maintain her yard, keepin it free
from debris and garbage. Jill will pay John an agreed fee as consideration upon
completion of the work.

17. legal detriment: A legal detriment is a promise to do something that one is not legally
obligated to do, or to refrain from doing something that one is legally privileged to do.
(Clancey’s Outlaw)
 Example: It is when one party, the offeror, makes a promise to give consideration to
another party, the offeree, for performing or promising to perform an act.

18. sufficiency of consideration: Generally, courts do not require that the consideration
benefit the promisee, nor that it be of any substantial value, as long as there is some
legal detriment to the promisor so that the consideration serves as an inducement for
the return promise of the promisee. (Clancey’s Outlaw)

Example: Someone can make a promise to make a change of lifestyle in exchange for
money. This is something that is not of value to the one making the offer but is still
sufficient for the deal.

19. Preexisting Duty Rule: The rule that if a party does or promise to do what the party is
already legally obligated to do, or promise to refrain from that legal duty, the party has
not incurred legal detriment. (Black’s Law Dictionary)

Example: A cab driver agrees to drive a group of people to a destination for a fee and
when they arrive at the destination, the cab driver refuses to allow the group to get the
luggage from the trunk unless an additional fee is paid.

20. promissory estoppel: The principle that a promise made without consideration may
nonetheless be enforced to prevent injustice if the promisor should have reasonably
expected the promisee to rely on the promise and if the promisee did actually rely on
the promise to their detriment. (Black’s Law dictionary)

Example: An example of promissory estoppel where a manager in a company makes a

erbal promise to an employee to pay the employee a specific monthly amount of money
from the day of that employee’s retirement until their death.

21. Moral Obligation Rule: Under the Moral Obligation Rule, consideration may be found if
the promisor has received something of value from the promisee under such
circumstances as to create a moral obligation for the promisor to pay for what he or she
has received, and if the promisor has later promised to pay. The rule most often applies
in situations involving promises to pay for previously provided gratuitous services,
promises to pay debts barred by the statute of limitations, or promises to pay debts
discharged in bankruptcy. The promise to pay can be implied by a mere
acknowledgment of a debt or by part payment of the debt. (Clancey’s Outlaw)

Example: A friend is invited to help another friend to pack and move furniture with no
mention of consideration. After working very hard for many hours, the friend who has
received the help says to the other friend that they should pay them for their effort.
22. illusory promise: An illusory promise is an expression , resembles promissory terms, but
in actuality imposes no obligation upon the party making it so that the element of legal
detriment is lacking. (Clancey’s Outlaw)

Example: An agreement between a buyer and seller where the seller says “I agree to sell
all of the bottled water I feel like selling” to the buyer.

23. Merit Music v. Sonneborn: If a contracting party fills in the blank spaces of a contract
with the very material provisions covering the duration of the contract and the
minimum guarantees, after he has obtained the other party's signatures, then the
contract is null and void because there is no concursus ad idem concerning essential
provisions of the contract. Conversely, if the material provisions have been inserted in
the blank spaces prior to the execution of the contract, it is a valid contract because the
law presumes that a person knows the contents of a document that he executes and
understands at least the literal meaning of its terms. (LexisNexis)

Example: A person signs an unfilled contract template for a variety of purchasing

responsibilities. The provider of the items fills in the blanks with whatever terms they
want and expect the contract to be fulfilled. The person does not have to fulfill the
contract because the terms were not known at the time of signing.

24. Mailbox Rule: Under the Mailbox Rule, established in the case of Adams v. Lindsell, an
acceptance of an offer for a bilateral contract, dispatched by an authorized mode of
communication, is effective when mailed. (Clancey’s Outlaw)

Example: A person signs an employment contract, places it in an envelope with stamps

and then puts it in a curbside mailbox. The contract is then valid from that date.

25. Caldwell v. Cline: Where a person uses the post to make an offer, the offer is not made
when it is posted but when it is received.

Example: An offer to sell a house at a certain price is sent to Jan in the mail. The offer
says the offer is good for 2 days from the mailing of the leter. The letter takes 3 days to
arrive and Jan responds the same day. The contract is valid because the timer starts
when Jan receives the offer, not when it was posted.

26. unilateral contract: A contract in which only one party makes a promise or undertakes a
performance.

Example: An offer is made to do something, such as climb a tree for fifty dollars. Only
one party has made a commitment and the second party can only collect by doing the
act, there are no terms for the offeror.
27. revocation of offer rule: An offer is only available for a certain period of time. An offer
may also be revoked before an acceptance if it is conditional or not irrevocable.

Example: An offer is posted that a car is for sale for $500 and the offer expires in 3 days.

28. rejection: A rejection is a manifestation by the offeree that he or she does not intend to
accept the offer nor to give it further consideration. (Clancey’s Outlaw)

Example: Bob offers to sell his house to Bill for $100. Bill tells Bob that he is not
interested in the offer and will not pursue it.

29. counteroffer: A counteroffer is an offer by the original offeree regarding the same
transaction but containing terms that differ from those proposed in the original offer
made by the offeror. (Clancey’s Outlaw)

Example: Bill offers to sell his house to Bob for $100. Bob tells Bill “No”, but adds that he
will buy the house for $75.

30. counteroffer as an implied rejection: A counteroffer is an implied rejection of the

original offer. It is, in effect, a new offer available for acceptance. (Clancey’s Outlaw)

Example: Bill offers to sell his house to Bob for $100. Bob tells Bill that he will buy the
house for $75.

31. battle of the forms: The conflict between the terms of standard forms exchanged
between a buyer and a seller during contract negotiations. (Black’s Law Dictionary)

Example: Bob uses a standard form from Microsoft with conditions set and Bill uses a
standard form from Google. The terms in the two contracts are not identical and thus
there may be issues that arise due to those differences.

32. bilateral contract: : A bilateral contract results from an offered promise that is accepted
by the giving of a return promise. (Clancey’s Outlaw)

Example: Bob agrees to buy $100 in nails from Bill and Bill agrees to deliver the nails to
Bob at a specified address.

33. unilateral contract: A unilateral contract results from an offered promise that must be
accepted by giving the performance specified. A mere promise to perform does not
constitute acceptance in such a case. (Clancey’s Outlaw)

Example: Bob says to Bill, “If you walk across this tightrope I will pay you $100”.
34. executed contract: An executed contract is a contract that has been fully performed by
all parties to the contract. (Clancey’s Outlaw)

Example: Bill and Bob sign the contract for delivery of nails for $100.

35. executory contract: An executory contract is a contract that remains to be completed in

the future by at least one of the contracting parties. (Clancey’s Outlaw)

Example: Bob and Bill have agreed to pay for and deliver nails to a specific location in 3
months.

36. express contract: An express contract is one which is manifested by words either written
or oral. (Clancey’s Outlaw)

Example: Bob and Bill have agreed to a contract that states specifically that Bob will pay
$100 at the rate of $1 per nail and that each nail must be green in color and also 4
penny in size and that Bill will deliver each individual nail to the 2nd floor of the building
at 300 State St. and place each nail on the top of the fireplace mantle in room #27.

37. implied in fact contract: An implied-in-fact contract is one that is inferred by the law
because the acts or conduct of the parties and the surrounding circumstances make it
reasonable to assume that a contract exists between them even though the contract
was never manifested by words. (Clancey’s Outlaw)

Example: Bob goes to the doctor for an appointment with an ailment. The doctor comes
in to see Bob and gives him a check-up and prescribe some medication. No actions were
agreed to by either party but they acted as if there were obligations.

38. implied in law contract (quasi contract): An implied-in-law contract is a remedy that is
imposed by operation of law to do justice even though it is clear that no promise was
ever manifested by words or ever intended. The creation of an implied-in-law contract
will be recognized when one party accepts or retains benefits that have been conferred
upon him by another party who expected to be paid and who was not a volunteer.
(Clancey’s Outlaw)

Example: A court decides that the actions between two parties are a contract because
one party has asked for something the other party finds unacceptable and then the
issue is taken to court and decided on.
39. quantum meruit: : Quantum Meruit refers to the reasonable value deserved for one's
labor, and is awarded in a quasi-contract claim. (Clancey’s Outlaw)

Example: Bob has cleaned Bills yard and Bill pays Bob $1. Bob tells Bill this is unfair and
demands $5. Bill declines and Bob then takes Bill to court and the court may then rule
that Bob’s labor value is $5 and award that amount to him, payable by Bill.

40. quantum valebant: Quantum Valebant refers to reasonable value that is deserved as
payment for goods, and is awarded in a quasi-contract claim. (Clancey’s Outlaw)

Example: Bob has sold Bill yarn and Bill pays Bob $1. Bob tells Bill this is unfair and
demands $5. Bill declines and Bob then takes Bill to court and the court may then rule
that Bob’s yarn value is $5 and award that amount to him, payable by Bill.

41. requirements contract: A requirements contract is a contract in which the seller agrees
to supply all of the goods or services that the buyer needs over a specified period of
time. As consideration for the seller’s promise, the buyer agrees to obtain these goods
or services exclusively from the seller. (Clancey’s Outlaw)

Example: Ford agrees to buy all of the tires for the cars they manufacture from Bill.

42. output contract: : An output contract is a contract in which the buyer agrees to buy all
of the goods or services that the seller can produce over a specified period of time.
(Clancey’s Outlaw)

Example: Bob agrees to buy all the eggs Bill’s chickens lay for $1 per egg until this day
next year.

43. option contract: An offer that is included in a formal or informal contract with an
obligation to keep the offer open for a specified period of time and that it can not be
revoked during that period, and the offer is usually supported with consideration.
(Black’s Law Dictionary)

Example: Bob is offered to buy Bill’s house for $100, but he only has 3 days to decide
and must pay $5 for the option.
44. void contract: A void contract is a contract which cannot be enforced by either of the
parties. (Clancey’s Outlaw)

Example: Bob agrees to a contract that will pay him $100 to kill Bill.

45. voidable contract: A voidable contract is a contract that can be disaffirmed by one or
more of the parties for reasons related to legal immaturity or mental incapacity.
(Clancy’s Outlaw)

Example: Bob agrees to buy Bill’s house for $100 but Bob is only 5 years old.

46. power of disaffirmance: A declaration that a voidable contract is void. (Black’s Law
Dictionary)

Example: Bob agrees to buy Bill’s house for $100 but Bob is only 5 years old and Bill
realizes Bob is a minor and ends the contract.

47. installment contract: a contract requiring or authorizing the delivery of goods in

separate lots or payments in separate increments to be separately accepted.

Example: Bob goes to Kohl’s and puts a shirt on law away, where he will pay $1 as he
can until he pays completely for the shirt.

48. exculpatory clause: A contractual provision relieving a party from liability resulting from
a negligent or wrongful act. (Black’s Law Dictionary)

Example: A coat check ticket has the clause “not responsible for lost or stolen items”.

49. Guaranty: A promise to answer for the payment of some debt, or the performance of
some duty, in case of the failure of another who is liable in the first instance. (Black’s
Law Dictionary)

Example: Bob has agreed to help Bill make any payment or portion of payment that Bill
misses for his new car loan.

50. Statute of Frauds: A 1677 statute that declared certain contracts judicially
unenforceable if they were not committed to writing and signed by the party to be
charged. (Black’s Law Dictionary)

Example: Bob agrees to buy Bill’s house for $100, and the contract must be written and
signed by all parties.
51. Parol Evidence Rule: The common-law principle that a writing intended by the parties to
be a final embodiment of their agreement cannot be modified by evidence of earlier or
contemporaneous agreements that might add to, vary, or contradict the writing.

Example: A written contract can not be changed after it is signed by all parties with
something that was being negotiated but not added to the final contract. It is an
assumption that the signed contract was the best, final agreement.

52. integrated contract: One or more writings constituting a final expression of one or more
terms of an agreement. (Black’s Law Dictionary)

Example: The contract Bill Bob agree to has all of the agreed terms included from both
sides and is complete and valid.

53. course of performance: A sequence of previous performance by either party after an

agreement has been entered into, when a contract involves repeated occasions for
performance and both parties know the nature of the performance and have an
opportunity to object to it.

Example: Bill and Bob have a contract of which Bill will buy 100 birdhouses from Bob. It
takes Bob one week to complete one birdhouse. Bill can see the performance of the
build quality and has ample opportunity to raise concerns if he ahs any.

54. course of dealing: An established pattern of conduct between parties in a series of

transactions. (Black’s Law Dictionary)

Example: Bill and Bob have a contract for the delivery of vegetables from Bill’s
warehouse to Bob’s store. They have had this yearly contract for several years previous
and have clear expectations about the performance of the contract.

55. usage of trade: A practice or method of dealing having such regular observance in a
region, vocation or trade that it justifies an expectation it will be observed in a given
transaction. (Balcks Law Dictionary)

Example: Bob has seen many different plumbers work on his sink and each tie the
hourly rate is the same across companies. He has the expectation of this same rate
when calling a new plumber to come and repair his sink.

56. contract of adhesion: A standard form contract prepared by one party, to be signed by
another party in a weaker position, usually a consumer, who adheres to the contract
with little choice about the terms.

Example: Bob joins the Army and has no choice in the terms of the contract.
57. unconscionable contract: An agreement that no promisor with any sense, and not under
delusion, would make.

Example: Bob agrees with Bill to cut of his arms and legs for $50 each.

58. third party beneficiary contract: A contract that directly benefits a third party and that
gives the third party a right to sue any of the contracting parties for breach.

Example: Bob and Bill agree to allow Nancy to oversee the completion of the contract
for delivery of birdhouses built by Bob to Bill. Bob fails to deliver and Bill is ok with that
but Nancy will sue Bob for missing the delivery of the birdhouses despite Bill being
willing to wait patiently.

59. Lawrence v. Fox: Where one person makes a promise to another for the benefit of a
third person, that third person may maintain an action upon it. (LexisNexis)

Example: Bob owes $100 to Bill and can not pay it. Bob gets a loan from Bonnie to repay
the debt and still does not pay it to Bill. Bonnie can sue Bob for the unpaid debt to Bill.

60. intended beneficiary: A third party beneficiary who is intended to benefit from a
contract and thus acquires the rights under the contract as well as the ability to enforce
the contract once those rights have vested.

Example: Bill has a life insurance policy that benefits Bonnie. Bonnie can sue the
Insurance company or Bill for performance on the contract.

61. creditor beneficiary: A third party beneficiary of a contract who is owed a debt that is to
be satisfied by another party’s performance under the contract. (Black’s Law Dictionary)

Example: Bob owes $100 to Bill and can not pay it. Bob gets a loan from Bonnie to
repay the debt and still does not pay it to Bill. Bonnie can sue Bob for the unpaid debt to
Bill.

62. donee beneficiary: A third party beneficiary who is intended to receive the benefit of
the contract’s performance as a gift from the promise.

Example: Bill has a life insurance policy that benefits Bonnie. Bonnie is the donee
beneficiary.

63. incidental beneficiary: A third party beneficiary who, through benefiting indirectly, is not
intended to benefit from a contract and thus does not acquire rights under the contract.

Example: Bill has a life insurance policy that benefits Bonnie. Bonnie is the beneficiary.
Bonnie’s daughter is an incidental beneficiary.
64. rights against the promisee: The rights a promisor has in defense of an unfulfilled
contract due to breach or non-performance. (cms-lawnow.com)

Example: Bill has a contract with Bob and Bob does not perform the contract. Bill can
sue Bob and Bob must pay damages but the damages can only be the total, even if a
third party has also sued because they are a beneficiary.

65. assignment: The transfer of rights or property. (Black’s Law Dictionary)

Example: Bill has a contract to collect $1 from Bob and Bill chooses to give that right to
Bonnie so that she can now collect the $1 from Bob.

66. delegation and assumption of duties: A transaction by which a party to a contract

arranges to have a third party perform the party’s contractual duties. (Black’s Law
Dictionary)

Example: Bill has a contract to clean Bob’s yard. Bill pays Bonnies $1 to clean Bob’s yard.

67. Condition: A future and uncertain event on which the existence or extent of an
obligation or liability depends. (Black’s Law Dictionary)

Example: Bob agrees to pay Bill $1 to repair his car. Payment is conditional on the
successful repair of the car.

68. condition precedent: An act or event, other than a lapse of time, that must exist or
occur before a duty to perform something promised arises. (Black’s Law Dictionary)

Example: Bob agrees to be the executor of Bill’s will after Bill dies.

69. condition concurrent: A condition that must occur or be performed at the same time as
another condition, the performance by each party separately operating as a condition
precedent. (Black’s Law Dictionary)

Example: Bob agrees to clean Bill’s yard every week as long as Bill cleans Bob’s yard
every week.

70. condition subsequent: A condition that, if it occurs, will bring something else to an end.
(Black’s Law Dictionary)

Example: Bob grants his house to Bill as long as Bill stays married to Bonnie. If Bill
divorces Bonnie then the house should go to Tony.

71. express conditions: A condition that is the manifested intention of the parties. (Black’s
Law Dictionary)
 Example: Bob and Bill agree that Bob can buy Bill’s house, but only after Bob has
cleaned Bill’s yard every week for 37 weeks.

72. implied in fact conditions: A contractual fact that the parties have implicityly agreed to
by their conduct or by the nature of the transaction. (Black’s Law Dictionary)

Example: Bob enters a restaurant, is seated and places an order for a meal.

73. doctrine of constructive conditions: A condition contained in an essential contractual

term that, though omitted by the parties from their agreement, a court has supplied as
being reasonable in the circumstances. (Black’s Law Dictionary)

Example: Bob agrees to pay Bill $1 to clean his yard. Bill cleans the yard and tries to pay
Bill in $1 Canadian. A court will rule that Bob must pay in US dollars.

74. substantial performance: Performance of the primary, necessary terms of an

agreement. (Black’s Law Dictionary)

Example: Bob and Bill agree that Bob will clean Bill’s yard for $1. Bob cleans the yard.

75. implied condition of cooperation: The assumption that certain conditions of the contract
exist and that both parties understand these conditions before signing the contract and
agree to them. (LexisNexis)

Example: Bob and Bill agree that Bob will clean Bill’s backyard for $5. Implied in the
contract is that Bill will allow Bob access to his backyard, which is protected by a locked
gate and fence.

76. waiver of condition: Occurs when parties to a contract agree to waive certain
conditions within the subject contract. The party benefiting can waive the condition
thus freeing the other party from performance.

Example: Bob has a contract with Bill that has a requirement for a two week notice for
Bob to gain access to Bill’s yard. Bob has an opportunity to give Bill a tractor but must
have immediate access to Bill’s yard. Bill can waive the two week notice because he will
benefit from the deal.

77. divisible (or severable) contracts: A contract with two or more agreements that are
distinct enough to where the unenforceability or breach of one does not nullify the
enforceability of the other. (Legal Information Institute)

Example: Bob and Bill have an agreement in which Bob will clean Bill’s yard each week
for $5 and that Bill will clean Bob’s yard for $5 each week. If Bob and Bill decide to stop
 having Bob clean Bill’s yard, they can also agree for the second portion of the agreement
can remain in place.

78. modification: A change to something, an alteration or an amendment. (Black’s Law

Dictionary)

Example: Bob and Bill have an agreement in which Bob will clean Bill’s yard each week
for $5 and that Bill will clean Bob’s yard for $5 each week. Bob and Bill agree to modify
the contract to change the frequency of cleaning to every two weeks.

79. Collateral Agreement Doctrine: The principle that in a dispute concerning a written
contract, proof of a second agreement will not be excluded under the parol-evidence
rule if the oral agreement is independent of and not inconsistent with the written
contract, and if the information in the oral agreement would not ordinarily be expected
to be included in the written contract. (Black’s Law Dictionary)

Example: Bob and Bill have an agreement in which Bob will clean Bill’s yard each week
for $5 and that Bill will clean Bob’s yard for $5 each week. Bob and Bill verbally agree to
modify the contract to change the frequency of cleaning to every two weeks.

80. accord and satisfaction: An agreement (accord) between two contracting parties to
accept alternate performance to discharge a pre-existing duty between them and the
subsequent performance (satisfaction) of that agreement. The new performance is
called the accord. The excusal of the initial performance obligation is called the
satisfaction. (Legal Information Institute)

Example: Bob and Bill have an agreement to have Bill clean Bob’s yard every week for
$5. Bill has other obligations come up and Bob agrees that Bill’s payment of $50 is good
enough for the completion of the contract instead of Bill’s cleaning.

81. novation: The act of substitution for an old obligation with a new one that either
replaces an existing obligation with a new obligation or replaces an original party with a
new party. (Black’s Law Dictionary)

Example: Bob and Bill have an agreement to have Bill clean Bob’s yard every week for
$5. Bonnie buys Bob’s house and yard and is substituted into the agreement with Bill.

82. release: Liberation from an obligation, duty or demand, the act of giving up a right or
claim to the person against whom it could have been enforced. (Black’s Law Dictionary)

Example: Bob and Bill have an agreement to have Bill clean Bob’s yard every week for
$5. Bill has other obligations come up and Bob agrees to allow Bill out of the contract.
83. mutual rescission: An agreement between whereby two parties that previously entered
into a contract with each other agree to rescind, or cancel, the contract. (LexisNexis)

Example: Bob and Bill have an agreement to have Bill clean Bob’s yard every week for
$5. Bob and Bill later both agree to end the contract before the full term has completed.

84. impossibility of performance: The principle that a party may be released from a contract
on the ground that uncontrollable circumstances have rendered performance
impossible. (Black’s Law Dictionary)

Example: Bob agrees to paint Bill’s hose for $5. A tornado blows Bill’s house away and
Bob can not paint the house.

85. economic or commercial impracticability: When the performance of a contract by a

party has become unfeasibly difficult or costly to perform. (LexisNexis)

Example: Bob agree’s to buy oil from Bill for $5 a barrel. There is a war in the middle
east and the price of oil rises to $50 a barrel, the contract becomes impracticable.

86. prospective failure of condition: Prospective failure of condition occurs when a party has
reasonable grounds to believe that the other party will be unable or unwilling to perform
when performance is due. (LexisNexis)

Example: Bob agrees to sell his house to Bill for $5 on Dec. 1. Bob is arrested for tax fraud
on Nov. 1 and his assets are frozen.

87. frustration of purpose: An unforeseen event undermines a party's principal purpose for
entering into a contract such that the performance of the contract is radically different
from performance of the contract that was originally contemplated by both parties, and
both parties knew of the principal purpose at the time the contract was made.
(Wikipedia)

Example: Bob and Bill have a contract for Bob to clean Bill’s yard every week. An
evacuation due to a fire that lasts for there weeks prevents Bob from fulfilling the
contract.

88. merger: The act of or an instance of combining or uniting. (Black’s Law Dictionary)

Example: Bob and Bill have agreed that Bob will clean Bill’s yard every week for $5. They
then both agree to change the frequency of the cleanings to bi-weekly.

89. breach: Violation of a contractual obligation by failing to perform one’s own promise, by
repudiating it, or by interfering with another party’s performance. (Black’s Law
Dictionary)
 Example: A car is delivered to a purchaser but did not include the features specified in
the purchase contract.

90. anticipatory breach: A breach of contract caused by a party’s anticipatory repudiation.

(Black’s Law dictionary)

Example: Bob tells Bill that he will not pay him for cleaning his yard even though they
have agreed to the terms of a contract.

91. minor breach: A breach of contract that is less significant than a material breach and
that gives the aggrieved party a right to damages but does not excuse that party from
performance.

Example: Bill contracted with Bob to paint his house orange and white. Bob painted the
house orange and light pink. Bill can seek some damages for the wrong color but must
still pay for the performance of painting the house.

92. material breach: A breach of contract that s significant enough to permit the aggrieved
party to elect to treat the breach as total, rather than partial, thus excusing that party
from further performance and affording it the right to sue for damages. (Black’s Law
Dictionary)

Example: A city contracts with a building contractor to build a bridge using bolts that are
rated a certain minimum strength. After the bridge is completed, test results for the
bolts are released that show the bolts used in construction do not meet the rated
minimum strength. The city can then sue the contractor for damages, performance, etc.

93. privity of contract: The relationship between the parties to a contract which allows
them to sue each other but prevents a third party from doing so. (USLegal.com)

Example: Bill agrees with Bob to give Bonnie a car. Bill does not give Bonnie the car
and Bonnie can not sue Bill.

94. liquidated damages: An amount contractually stipulated as a reasonable estimation of

actual damages to be recovered by one party if the other party breaches. (Black’s Law
Dictionary)

Example: Bob and Bill agree to clean the other’s yard for $5 each week. They also agree
that if one of them fails to do the work they must pay $3 to the other party.

95. compensatory damages: Damages sufficient in amount to indemnify the injured person
for the loss suffered. (Blacks’ Law Dictionary)
 Example: Bob damages Bill’s garage door. Bill sues Bill for the cost to repair the garage
door.

96. consequential damages: Losses that do not flow directly and immediately from an
injurious act but that result indirectly from the act. (Black’s Law Dictionary)

Example: Bob damages Bill’s storefront and facilities. Bill sues for the cost of repairs and
also for the lost revenue due to the store having been closed for those repairs.

97. expectation damages: Compensation awarded for the loss of what a person reasonably
anticipated from a transaction that was not completed. (Black’s Law Dictionary)

Example: Bob agrees to pay Bill $5 to clean Bob’s yard. Bill does not do the work and
Bob hires Bonnie to do the job for $10. Bob sues Bill for $5 that he had to pay Bonnie
above what he would have paid Bill.

98. reliance damages: Damages awarded for the losses incurred by the plaintiff in reliance
on the contract. (Black’s Law Dictionary)

Example: Bob and Bill agree to have Bill clean Bob’s yard for $5. Bill buys a shovel for $5
to clean the yard with and Bob cancels the deal. Bill can sue Bob for the $5 for the
shovel.

99. nominal damages: A trifling sum awarded when a legal injury is suffered but there is no
substantial loss or injury to be compensated. (Black’s Law Dictionary)

Example: Bob and Bill agree to have Bill clean Bob’s yard for $5. Bill cancels the deal and
Bob sues for damages and is awarded a nominal sum of $1 as Bob cannot identify any
loss due to the cancellation

100. mitigation of damages: The principle inducing a plaintiff, after injury or breach of
contract, to make reasonable efforts to alleviate the effects of the injury or breach.
(Black’s Law Dictionary)

Example: Bob agrees to buy one pie a week for one year from Bill. Bob cancels the
contract after one week. Bill must try to find another customer for the pies, he cannot
just sit around for a year and sue Bob for the full amount of the losses.

101. punitive or exemplary damages: Damages awarded in addition to actual damage

when the defendant acted with recklessness, malice, or deceit. (Black’s Law Dictionary)

Example: Bob damages Bill’s storefront and facilities. Bill sues for the cost of repairs and
also for additional amounts due to the stress he suffered due to the store having been
closed for those repairs.