Donna M. Kesot, CPCU ©February 19, 2013

Contract Law & Applications

Essential Elements

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Estoppel

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Breach of Contract

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Contract Formation

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Review

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Category 1 questions follow

Quest

ion

Name 4 Essential Elements of a Contract

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Answ

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1. Agreement (an offer & acceptance)2. Capacity to contract3. Consideration4. Legal Purpose

Without ALL four, the contract is not legally enforceable

Quest

ion

3 Elements of an Offer

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Answ

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1. Intent to contract (conveyed with words of promise)

2. Definite Terms (parties, subject matter, price, time of performance)

3. Communication with other party (knowledge at completed performance)

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Quest

ion

5 Essential Elements of duration & termination

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Answ

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1. Lapse of time2. Operation of Law (e.g. the subject of the contract

becomes illegal after the offer, or is destroyed before acceptance)

3. Offeree’s Rejection4. Counteroffers5. Offeror’s Revocation (prior to acceptance)

Once a contract arises, death/insanity does not terminate it unless it’s a personal service of the deceased/insane)

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Quest

ion

6 Characteristics of Insurance Contracts

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1. Conditional (e.g. payment conditioned on a covered loss)

2. Fortuitous & involve unequal amounts3. Utmost good faith4. Adhesion5. Indemnity6. Nontransferable (without insurer’s

written concent

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Quest

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5 Essential Elents for an Insurance Contract

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Answ

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1. Type of Coverage2. Object/Premises to be Insured 3. Amount of Insurance4. The Insured’s Name (not the carrier)5. Duration of Coverage

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Category 2 questions follow

Quest

ion

What is the doctrine of Estoppel?

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Category 2

Answ

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Estoppel is a legal principle that prohibits a party from asserting a claim or right that is inconsistent with that party’s past statement or conduct on which another party has detrimentally relied.

Led down the garden path either before or after the written contract

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Category 2

Quest

ion

What 3 things trigger estoppel in Insurance Law?

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Answ

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1. False representation of a material fact2. Reasonable reliance on the

representation3. Resulting in injury or detriment to the

insured

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Category 2

Quest

ion

How does waiver, estoppel, & election prevent the insurer from reviving a defense forfeited earlier?

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Category 2

Answ

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1. Waiver is intentional relinquishment of a known right in an existing contract

2. Estoppel is a legal principle that prohibits a party from asserting a claim or right that is inconsistent with hat party’s past statement or conduct on which another party has detrimentally relied.

3. Election is a voluntary act of choosing between two alternative rights

Give Examples 30

Category 2

Quest

ion

What is the Parol Evidence Rule?

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Category 2

Answ

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1. Parol evidence rule: In order to waive a right the contract must be in force

2. Prohibits oral evidence from being introduced into evidence

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Category 2

Quest

ion

Describe 3 ways estoppel differs from waiver.

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Category 2

Answ

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1. Waiver is contractual in nature and rests upon agreement between parties. Estoppel is equitable in nature and arises from false misrepresentation

2. Waiver gives effect to the waiving party’s intention. Estoppel defeats the inequitable intent of the estopped party

3. The parol evidence rule applies to waiver but not to estoppel.

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Category 2

Category 3 questions follow

Quest

ion

Repudiation v Anticipatory Breach

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Category 3

Answ

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Repudiation: A party’s refusal to meet obligations under a contract at time of performance

Anticipatory Beach: A party’s unequivocal indication before performance is due that she will not perform when performance is due

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Category 3

Quest

ion

Material v Minor Breach

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Category 3

Answ

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Material Breach: Violation of the agreement that would justify an owner’s termination of the contract

Material v Minor Breach is a matter of degree• Extent of breaching party’s performance• Willfulness of the breach• Extent to which the non-breaching part

obtained benefits and can receive compensation

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Category 3

Quest

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Name two equitable remedies

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Category 3

Answ

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1. Specific Performance2. Injunction

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Category 3

Quest

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Bad Faith

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Category 3

Answ

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Intentional or reckless act, extreme or outrageous in nature causing severe emotional distress, that results in physical injury

Extracontractual Damages can be awarded for this breach

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Category 3

Quest

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Explain each of the 5 types of damages awarded for breach of contract

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Category 3

Answ

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1. Compensatory Damages (indemnify for actual harm)

2. Consequential Damages (indemnify for indirect loss, foreseeable)

3. Punitive or Exemplary Damages (to punish recklessness, maliciousness, deceitfulness, to make an example)

4. Extracontractual Damages --breach of insurer’s duty of good faith --Intentional infiction of emotional distress or extreme & outrageous conduct5. Liquidated Damages (reasonable estimate of damages, in

contract) 50

Category 3

Category 4 questions follow

Quest

ion

3 elements that make an offer valid

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Category 4

Answ

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A valid offer requires:1. Intent to contract2. Definite terms3. Communication to offeree

Acceptance requires a valid offer & valid acceptance 10

Category 4

Quest

ion

Novation

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Category 4

Answ

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The substitution of a 3rd party for one of the original parties to a contract, releasing the original party from rights and obligations under the contract

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Category 4

Quest

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A valid acceptance requires 3 things

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Category 4

Answ

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1. It must be made by the offeree2. It must be unconditional and

unequivocal3. The offeree must communicate the

acceptance to the offeror by appropriate word or act

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Category 4

Quest

ion

Executory v Implied v Express Contracts

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Category 4

Answ

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Executory –not completely performed by one or both parties

Express—terms and intentions are explicitly stated

Implied—terms and intentions are indicated by the actions of the parties to the contract and the surrounding circumstances.

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Category 4

Quest

ion

Void v Voidable Contracts

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Category 4

Answ

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Void – an agreement that never reaches contract status, based on an unenforceable agreement (i.e. illegal) , Not legally enforceable.

Voidable – one party can reject (avoid) based on some circumstance surrounding the contract execution.

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Category 4

Category 5 questions follow

Quest

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Allegation

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Category 5

Answ

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A claim made in a complaint by a plainiff specifting what the plaintiff expects to prove to obtain a judgment against the defendant

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Category 5

Quest

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Answer

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Category 5

Answ

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A document filed in court by a defendant responding to a plaintiff’s complaint and explaining why the plaintiff should not win the case.

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Category 5

Quest

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Interrogatories

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Category 5

Answ

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Specific written questions or requests raised by one party to a lawsuit that the opposing party must answer in writing

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Category 5

Quest

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Hearsay Rule

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Category 5

Answ

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The rule of evidence that prevents the admission of out of court statements not made under oath by a person who is unavailable to testify.

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Category 5

Quest

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Civil Law v Common Law

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Category 5

Answ

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Civil Law has a foundation of law in Europe, Latin America, Scotland, Louisiana based on the French Code of Napoleon. The system relies on scholarly interpretation of their codes and constitutions, not court decision

Common Law is based on English law and ‘precedent.’ Law developed from court cases.

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Category 5