LGS 200 Exam 3 Study Guide LGS 200 Test 3 Study Guide Chapter 9 Page 193 Contract a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty Requirements of a Valid Contract Agreement o Includes an offer and an acceptance Consideration o Any promises made by the parties to the contract must be supported by legally sufficient and bargained for consideration something of value received or promised like money to convince a person to make a deal Contractual Capacity o Possess characteristics that qualify each party as competent Legality o Accomplish some goal that is legal and not against public policy Contract Formation Bilateral a promise for a promise Unilateral a promise for an act Formal requires a special form for creation Informal requires no special form for creation Express formed by words oral written or combination of both Implied In Fact formed by the conduct of the parties Valid Contract a contract with the necessary elements agreement consideration legal capacity of the parties and legal purpose Enforceable Voidable one party has the option of avoiding or enforcing the contractual obligation Unenforceable a contract exists but it cannot be enforced because of legal defense Void Contract no contract exists or there is a contract without legal obligations Mutual Assent agreement to the same bargain Requirements of the Offer Offer a promise or commitment to do or refrain from doing some specified thing in the future Offeror must have a serious intention to become bound by the offer Terms of offer must be reasonably certain definite Offer must be communicated by offeror Intention page 199 Termination of the Offer page 206 207 Revocation the offeror s act of withdrawing revoking an offer Irrevocable Offers Rejection of the Offer by the Offeree Counteroffer by the Offeree counteroffer occurs when the offeree rejects the original offer and simultaneously makes a new offer Capacity page 215 Capacity the legal ability to enter into a contractual relationship Minors o Age of majority when a person is no longer a minor 18 years old o Emancipation occurs when a child s parent or guardian relinquishes the legal right to exercise control over the child Intoxication o Normal capacity to act think is inhibited by alcohol or some drug o A contract entered into by an intoxicated person can be either voidable or valid Mental Incompetence o Any contract made by mentally incompetent person is void no contract exists o Only the guardian can enter into binding legal obligations on the incompetent person s behalf Fraudulent Misrepresentation page 219 Generally fraudulent misrepresentation refers to misrepresentation that is consciously false and is intended to mislead another Example ticket selling but wrong advertisement of ticket seats Misrepresentation occurs act is of intent deceive innocent party must justifiably rely on the misrepresentation Non Fraudulent Misrepresentation Innocent he or she makes a statement that believes to be true but actually misrepresents material facts Negligent misrepresentation through carelessness Statutes of Frauds Statute stipulates what types of contracts must be in writing Statute of Frauds denies enforceability to certain contracts that do not comply with its requirements The following are said to fall under the Statute of Frauds and therefore require writing o Contracts involving interests in land o Contracts that cannot by their terms be performed within one year from the date of formation o Collateral or secondary contracts such as promises to answer for the debt or duty of another and promises by the administrator or executor of an estate to pay a debt of the estate personally that is out of his her own pocket o Promises made in consideration of marriage pre nup o Under the UCC contracts for the sale of goods priced at 500 or more 5 000 or more under the 2003 amendments to the UCC Assignments one party has the right to require the other to perform some task and the other has a duty to perform it The transfer of contractual rights to a third party is known as an assignment Assignor party making the assignment o When rights are assigned unconditionally rights of assignor are extinguished Assignee third party one receiving the assignment o Has right to demand performance from the other original party to the contract o The assignee takes only those rights that the assignor originally had As a general rule all rights can be assigned Example leases land lords Delegations Example contractors The transfer of contractual duties to a third party is known as a delegation Delegator party making the delegation A delegation of duties does not relieve the party making the delegation delegator of the obligation to perform in the event that the part of the duty has be delegated delagatee fails to perform As long as the delegator expresses an intention to make the delegation it is effective Third Party Beneficiaries Third Party Beneficiary Intended Beneficiary Incidental Beneficiary Chapter 10 page 228 Condition a possible future event the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract Discharge by Performance The contract comes to an end when both parties fulfill their respective duties by performing the act they have promised Complete Performance Substantial Performance Performance to the Satisfaction of One Party Performance to the Satisfaction of Third Party Material Breach of Contract o The nonperformance of a contractual duty o The breach is material when performance is not at least substantial o If there is a material breach then the non breaching party is excused from the performance of contractual duties and has a cause of action to sue for damages resulting from the breach Discharge by Agreement Discharge by Recession Discharge by Operations of Law Alteration of the Contract Statute of Limitations Bankruptcy Impossibility or Impracticality of Performance o After contract is made performance may become impossible in an objective sense and may result in a discharged contract o Objective when a person dies when subject matter is destroyed when change in law renders performance illegal o Commercial o Frustration Breach of Contract and Remedies page 236 A remedy is the relief provided for an innocent party when the other party has breached the contract o It is the means employed to