Chapter 7 – Introduction to ContractsContract can be defined as follows: A legally enforceable promise or set of promises.Four Requirements for a Valid ContractMutual Manifestation of AssentA. The outward expression of agreement by all parties to the terms of a contract.B. Offer: A specific offer requesting something in return in a contract setting.C. Acceptance: an expression of complete agreement to the offer.ConsiderationA. something of value given or detriment suffered in exchange for a promise.B. basically this means that a promise to make a gift is not enforceable. Quid pro quo – This for that.CapacityMinors, 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.LegalityLack 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).Noncompliance with formalitiesFormalities: 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 ContractsBilateralA promise in exchange for a promise, because the offer contemplates a promise as acceptance.Most written contracts are bilateral – each party is exchanging a written promise with each other, a two0sided or bilateral commitment.UnilateralA promise in exchange for a completed act because the offer clearly contemplates acceptance by performance.Return of the dog.Express and Implied ContractsExpressed 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.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 Enforceability1. 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.Example: Illegal Contracts3. Voidable Contract: a voidable contract may be avoided by one or more parties.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.Statue of FraudsExecutory and Executed ContractsExecuted: 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.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:Ordinary Words: Are given their dictionary definition.Legal Terms: are given their legal definition.Technical Terms: Will be given their technical meaning in the relevant trade or profession.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 termsTypewritten termsPre-printed termsChapter 8 – Offer and AcceptanceOffer: 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 offerOfferee: 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.AdvertisementsAuctions: Generally not offers, unless they are advertised as being “without reserve”.Requirements for a Valid OfferIntentionOfferor must have a serious and objective intention to be bound.DefinitenessThe offer must be definite enough so that if the offeree accepts, the court will be able to understand the terms of the contract.CommunicationThis requires communication by the offeror and receipt by the offeree.Termination of an OfferFirst, an offer may terminate if the offeror revokes it prior to acceptance.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.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.Death or incompetenceIntervening IllegalityDestruction of the subject of the ContractFifth an offer may be terminated