CONTRACT VS. PROMISE Promise: A person’s declaration that something will or willnot happen in the future. Promisor: The person making the promise. Promisee: The person to whom the promisor made thepromise. Contract: An agreement between two or more competentparties, for valuable consideration, to perform or to refrainfrom performing some act now or in the future. Offeror: The person proposing an agreement. Offeree: The person to whom the offeror proposes theagreement.Ch. 7: Contracts: Nature, Classification, Agreement, and Consideration - No. 1Business Law Today: The Essentials (7th ed.)CONTRACT FORMATION Agreement: The offeror must offer to enter into anagreement, and the offeree must accept the terms of theofferor’s offer. Consideration: Something of value given or promised toconvince a party to agree to the deal. Contractual Capacity: Both parties must be legallycompetent to enter into the agreement. Legality: The contract’s purpose must be to accomplishsome goal that is legal and not against public policy. Genuineness of Assent: The apparent consent of bothparties must be genuine. Objective Theory of Contract: The parties’ assent isjudged not by the subjective intent of each party, butby the objective intent that a similarly situatedreasonable person would understand the parties tohave. Form: The agreement must be in whatever form (e.g.,written, under seal) the law requires.Ch. 7: Contracts: Nature, Classification, Agreement, and Consideration - No. 2Business Law Today: The Essentials (7th ed.)BILATERAL AND UNILATERAL CONTRACTS Bilateral Contract: A bilateral contract arises when theofferor gives her promise in exchange for the offeree’sreturn promise (e.g., X promises to deliver a car to Y, and Ypromises to pay X an agreed price). Unilateral Contract: A unilateral contract arises when theofferee can only accept the offer by performance (e.g., Xoffers Y $25 to mow X’s yard). Once the offeree of a unilateral contract begins toperform, the offeror loses the ability to revoke heroffer (e.g., if X offered Y $25 to mow X’s yard, on Yhad substantially begun to perform, X could notrevoke her offer to pay Y for mowing her yard).Ch. 7: Contracts: Nature, Classification, Agreement, and Consideration - No. 3Business Law Today: The Essentials (7th ed.)FORMAL AND INFORMAL CONTRACTS Formal Contract: A contract that requires a special formor method of formation (creation) in order to beenforceable. For example: Contract Under Seal: A formalized writing with aspecial seal attached. Recognizance: A promise, made in open court, toperform a specific task or pay a specified sum. Negotiable Instrument: A check, note, draft, orcertificate of deposit – each of which requires certainformalities. Letter of Credit: An agreement to pay that iscontingent upon the receipt of documents (e.g.,invoices and bills of lading) evidencing receipt of andtitle to goods shipped. Informal Contract: A contract that does not require aspecified form or method of formation in order to be valid. The vast majority of contracts are informal.Ch. 7: Contracts: Nature, Classification, Agreement, and Consideration - No. 4Business Law Today: The Essentials (7th ed.)EXPRESS AND IMPLIED CONTRACTS Express Contract: A contract in which the terms of theagreement are explicitly stated orally or in writing. Implied-in-Fact Contract: A contract formed in whole orin part by the conduct (as opposed to the words) of theparties. In order to establish an implied-in-fact contract,(1) the plaintiff must have furnished some service orproperty to the defendant,(2) the plaintiff reasonably expected to be paid and thedefendant knew or should have known that areasonable person in the plaintiff’s position wouldhave expected to be paid for the service or propertyrendered, and(3) the defendant must have had the opportunity toreject the service or property and failed to do so.Ch. 7: Contracts: Nature, Classification, Agreement, and Consideration - No. 5Business Law Today: The Essentials (7th ed.)EXECUTION AND VALIDITY OF CONTRACTS Executed Contract: A contract that has been completelyperformed by both (or all) parties. By contrast, An executory contract is a contract that has not yetbeen fully performed by one or more parties. Valid Contract: A contract satisfying all of the requisitesdiscussed earlier – agreement, consideration, capacity, legalpurpose, assent, and form. By contrast, a void contract is a contract having no legal force orbinding effect (e.g., a contract entered into for anillegal purpose); a voidable contract is an otherwise valid contract thatone of the parties may legally avoid, cancel, or annul(e.g., a contract entered into under duress or underfalse pretenses); and, an unenforceable contract is an otherwise validcontract rendered unenforceable by some statute orlaw (e.g., an oral contract that, due to the passage oftime, must be evidenced by a writing to beenforceable).Ch. 7: Contracts: Nature, Classification, Agreement, and Consideration - No. 6Business Law Today: The Essentials (7th ed.)QUASI CONTRACTS Quasi Contract: A fictional contract imposed on parties bya court in the interests of fairness and justice, typically to(1) prevent the unjust enrichment of one party at theexpense of the other, and(2) allow the party whose actions would otherwiseunjustly enrich the other party to recover in quantummeruit. Courts typically will not allow a party who has conferred abenefit on another to recover in quasi contract if the partyconferring the benefit did so officiously (e.g., if a cardealership applies, without your asking or agreeing to haveit do so, an expensive finish to your car after you agree tobuy the car but before you take delivery, you should nothave to pay for the unsought benefit) or as a result ofmisconduct (e.g., a distant cousin’s murderer cannot sueyou to recover a portion of what the cousin left you in herwill) or negligence (e.g., a driver who falls asleep at thewheel and loses control of