Exam 2 Chapter 7 11 10 08 2013 Chapter 7 Introduction to Contracts Contract can be defined as follows A legally enforceable promise or set of promises Four Requirements for a Valid Contract Mutual Manifestation of Assent o A The outward expression of agreement by all parties to the terms of a contract o B Offer A specific offer requesting something in return in a contract setting o C Acceptance an expression of complete agreement to the offer Consideration o A something of value given or detriment suffered in exchange for a promise o B basically this means that a promise to make a gift is not enforceable Quid pro quo This for that Capacity o Minors mentally incompetent persons and highly intoxicated persons may not enter a valid contract and typically have the option to enforce or avoid contracts they enter Legality o Lack of reality of consent assent Described Where assent to a contract is not real or voluntary the contract is voidable Examples include situations where agreement to a contract is obtained through fraudulent misrepresentation or duress force o Noncompliance with formalities Formalities While some oral agreements are enforceable some contracts must be formalized bya signed writing or a signed and witnessed writing to be enforceable Example a written agreement is typically required to enforce a contract for the sale of real estate or to enforce a contract for the sale of goods prices at 500 or more Types of Contracts Bilateral o A promise in exchange for a promise because the offer contemplates a promise as acceptance o Most written contracts are bilateral each party is exchanging a written promise with each other a two0sided or bilateral commitment Unilateral o A promise in exchange for a completed act because the offer clearly contemplates acceptance by performance o Return of the dog Express and Implied Contracts Expressed Contract is created by specific words of the parties I ll give you 400 for the motorcycle I accept Implied in fact Contract in contrast to an express contract an implied contract or implied in fact contract is created by the conduct of the parties rather than by specific language o Example Implied you pay your hair cutter after the job is completed Implied in Law Quasi Contract a quasi contract is created by a court when one party unjustly enriches another party Levels of Enforceability 1 Valid Contract a valid contract is enforceable by all parties 2 Void Contract a void contract is enforceable by none of the parties it is as if the contract had never been made o Example Illegal Contracts 3 Voidable Contract a voidable contract may be avoided by one or more parties o Example If the contract is procured through fraud 4 Unenforceable in an unenforceable contract the four requirements for a valid contract are met but the contract is not binding because of a statute o Statue of Frauds Executory and Executed Contracts Executed in an executed contract all the performance required under the contract is complete Executory part of the performance is lacking Rules of Construction Interpretation Plain Meaning Rule If the words of the contract are objectively clear in their meaning the courts will enforce the contract as written Extrinsic Evidence evidence outside the contract such as what the parties said before the contract and what the parties were thinking o Example I signed an employment contract not knowing that it contained a covenant not to complete with my employer a court could easily enforce the contract as written Entire Writing Rule The court will do its best to enforce the entire contract when there is a potential conflict of terms doing its best to make sure that none of the terms of the contract are made meaningless by its interpretation Rules on Meaning of Words o Ordinary Words Are given their dictionary definition o Legal Terms are given their legal definition o Technical Terms Will be given their technical meaning in the relevant trade or profession o Conflicts of terms Where there is a conflict between terms f the contract which cannot be avoided under the entire contract rule the court will review the entire contract rule the court will review the entire contract and apply the term it believes is most consistent Ambiguous terms in a contract are terms which are subject to more than one interpretation Primary rule as to ambiguous terms is that the court will interpret them against the drafting aprty Priorities of Terms Handwritten terms Typewritten terms Pre printed terms Chapter 8 Offer and Acceptance Offer is an expression of a willingness to do something in exchange for something else provided by another person Offeror is the person who makes the offer Offeree is the person to wom the offer is made Acceptance is a clear expression of assent in reply to an offer Counteroffer is a reply to an offer in which the offeree makes a new proposal as to the terms of the contract Five Non offers Expressions of opinion are non offers that can be described as statements of value general statements of quality or predictions Statements of intention are non offers which are statements of what one may do in the future Preliminary Negotiations are non offers which can be described as inquireies or general discussions of potential contract erms Advertisements Auctions Generally not offers unless they are advertised as being without reserve Requirements for a Valid Offer Intention o Offeror must have a serious and objective intention to be bound Definiteness o The offer must be definite enough so that if the offeree accepts the court will be able to understand the terms of the contract Communication o This requires communication by the offeror and receipt by the offeree Termination of an Offer First an offer may terminate if the offeror revokes it prior to acceptance o Option contract is an agreement where one party pays some type of consideration in exchange for the other s promise to hold an offer open Second way an offer may terminate is lapse of time If an offer states it wil be open for a certain period of time it is not longer valid after that time period lapses Third an offer may be terminated by rejection or counteroffer o Mirror image rule states that an acceptance which contains terms different that the offer is considered a rejection and counter offer Fourth an offer may be terminated by operation of law o Death or incompetence o Intervening Illegality o Destruction of the subject of the Contract Fifth an offer may be terminated by the