LSB 3213 1st Edition Exam 2 Study Guide Chapters 11 17 CHAPTER 11 Promisor Offeror Person party in the contract that is offering a service good Promisee Offeree Person party in the contract who is receiving the service good Contract Definition A promise carrying an enforceable legal duty with an enforceable legal remedy for breach Objective Theory of Contracts The intent to form a contract will be judged by outward objective facts what the party said when entering into the contract how the party acted or appeared and the circumstances surrounding the transaction as interpreted by a reasonable person rather than by the party s own secret subjective intentions Outward objective intent is primary Internal subjective thoughts not relevant Draft your escape clause into the contract Four Requirements of a valid contract Agreement meeting of the minds reasonable person standard Would a reasonable person think there was an agreement a meeting of the minds Would two reasonable people reading the contract be in agreement of what the contract means an offer by one party to form a contract and an acceptance of the offer by the person to whom the offer is made o Jack and Jill Jack says he will pay 200 for the football tickets and will bring Jill the money for the tickets tomorrow Jill does not say yes or no AGREEMENT from Jack but not from Jill Consideration skin in the game both parties have to exchange something money for object in the contract must be something of legally sufficient value and bargained for o Jack and Jill Jill says have the tickets I m going to the beach anyways Jack says great takes the deal and doesn t pay for anything This would be considered a gift and gifts are not considered a contract If Jill had instead said if you buy my 2 coffee I will give you the tickets that are worth 100 Because Jill put a value on it the exchange is not considered a gift Capacity both parties have the physical and mental capacity ability to make decisions o Jack and Jill Jack and Jill meet at a restaurant to discuss the deal over dinner After a long dinner with lots of wine Jack pays 1 000 for the tickets and Jill writes the deal on a napkin and both of them sign it Jack was incapacitated and Jill KNEW that he was incapacitated meaning that the contract was not valid Legality the contract cannot involve legal activity o Jack and Jill Jack pays agrees to pay 100 for the tickets Jill then says that she is having car problems and needs to get her car fixed She tells Jack that she has an insurance policy that means that if someone just randomly came and destroyed her car they would pay to replace it So Jack goes to Jill s house and destroys her car and brings 100 to Jill the next day for the tickets but she decides to not take the deal Jack sues Jill and wins because the contract involved illegal activity Defenses to formation of a valid contract Lack of voluntary consent o Fraud Misrepresentation intentionally misrepresented what was being offered Jack and Jill Jack agrees to pay 200 for tickets that Jill claims are on the fifty yard line but Jill knows that they are actually on the back row o Mistake either party in the contract made a mistake mutual and unilateral Jack and Jill Jack and Jill make a written contract to buy tickets for 200 00 but forgot the decimal and wrote 20000 Jill sues Jack for 20 000 Jack is not liable because Jill knew it was a mistake Jack and Jill again Jack offers to pay 2 000 for the tickets thinking that the tickets are close to the field This was a unilateral error that happened without Jill s knowledge o Undue Influence Duress unlawful pressure brought to bear on a person causing the person to perform an act that he or she would not otherwise perform When one party uses undue influence fraud or duress to induce another party to enter into an illegal bargain the second party will be allowed to recover for the performance of it value Lack of correct form o These contracts must be in written form Land and lease of at least one year Cannot possibly be performed in one year Marriage prenuptial agreements Guarantor contracts UCC contracts 2 Example merchant sale of goods over 500 Bilateral contract Most common promise given in exchange for return promise Example If you drive my car from New York to California I will pay you 1 000 Unilateral contract One party makes an offer that can only be accepted by the offeree s performance Example If you paint my house while I am out of town I will pay you 5 000 when I get back Express Contracts Contract in which the terms of the agreement are fully and explicitly stated in wordsoral or written Words of the contract Implied Contracts Contract formed in whole or in part from the conduct of the parties conduct not words o Example someone mows your lawn every Saturday for years and you pay them 15 each time o This is implied as the conduct is repeated and so that makes a contract Enforceable Contracts valid contract Unenforceable voidable and void contracts Unenforceable contract exists but valid defense stops judge from enforcing contract Voidable a party can get out if it wants one or both parties has the option to get out of it Void no contract lacks one of four elements Plain meaning rule for contract interpretation The words and their plain ordinary meaning determine the intent of the parties at the time that they entered into the contract A court is bound to give effect to the contract according to the intent Extrinsic Evidence Evidence outside the contract itself like conversations or testimony that are generally not allowed except for 3 reasons 3 o Ambiguity terms of contract are unclear confusing etc can be taken to court and use outside evidence o Mistake Fix mistake in court with extrinsic evidence o Fraud misrepresentation Prove this with outside evidence CHAPTER 12 Three requirements of an offer Intention There is a serious intent to make the offer or contract Definiteness How concrete specific is the agreement o Example of contract that is not definite I ll buy your house for a fair price You ve got a deal o Key items to look for Subject matter Quantity Price Timing Communication The agreement has to be communicated to the other person in writing orally etc Three ways for an offer to be terminated by the parties Revocation o Express revocation Simply say that the offer is off of the table o Expiration date The maker of the contract can set an explicit expiration date or the law can give interpret a reasonable