The Legal Environment of BusinessFINA 2244 Christina Sheppard Futrell, Esq.Chapter Ten:Contracts-I. Contract Law- A. Definition of a Contract- “an agreement, upon sufficient consideration, to do or not to do a particular thing.” A contract is the legal relationship that consist of the rights and duties of the parties as a result of the promises.1. Express Contract- Exist if there is a written or oral expression of intent by the parties to enter into a legally binding agreement.2. Implied Contract- Arises from the actions rather than the expressions between the parties. B. Elements of a Contract-1. Offer and Acceptance-a. Offer- An offer is a promise to do something or to refrain from doing some specific thing. For there to be an the following requirements must be met:i. Requirements of and Offer--- Manifestation of Intent- There must be a clear intent by the offeror to become contractually bound.-- Definite Terms and Conditions- The basic terms of the offer must be clear and certain. -- Communication of the Offer- The offer must be properly communicated. ii. Terminating an Offer--- By the Parties- The offeror can terminate his or her offer prior to acceptance by revocation provided that the revocation is communicated to the offeree before acceptance. -- By Operation of Law- This happens as the result ofan intervening illegality.The Legal Environment of BusinessFINA 2244 Christina Sheppard Futrell, Esq.b. Acceptance- Is the offeree’s expression of agreement to the terms of the offer. For an acceptance to be valid three criteria must be met:i. Unconditional- The offeree must accept an offer as presented by an offeror. ii. Unequivocal- Acceptance must be definite.iii. Properly Communicated- The acceptance must be properly communicated. Three factors to consider inacceptance are:-- The Method of Acceptance-- The Timeliness of Acceptance-- Performance as Acceptance2. Consideration- Refers to something of value that is bargainedfor in exchange for a promise, basically it refers to the concept of a bargained for exchange. Both parties get something and both parties give up something. a. Adequacy of Consideration- The must be a trade of mutualpromises and obligations.b. Enforceable Promises without Consideration- Promissory estoppel is based on the idea that a contract should be enforced in order to avoid an injustice due to the promisee’s reasonable reliance on the promisor’s promise.3. Capacity to Contract- Refers to a party’s ability to perform legally valid acts, acquire legal rights, and incur legal liabilities.a. Void and Voidable Contracts- i. Void Contract- Does not exist at law, meaning the subject matter of the contract is illegal. You cannot contract for the purchase of marijuana. ii. Voidable Contract- Is when one party has the right to avoid the legal obligations of a contract.b. Minors- Minors below 18 do not have capacity to contract.Any contract entered into with a minor is considered a voidable contract in that the minor may later be able to avoid his or her obligations under the contract. Contracts with minors may be ratified after they attain majority. 4. Legality- For a contract to be valid, the subject matter must be legal.The Legal Environment of BusinessFINA 2244 Christina Sheppard Futrell, Esq.a. Illegal Agreements- Promises that violate the law are illegal agreements. b. Unenforceable Contracts- Were changes in the law have made an otherwise valid contract unenforceable.c. Contracts Contrary to Public Policy- Contracts that are unenforceable because their subject matter is contrary to public policy. i. Exculpatory Agreements- Releases one party from the consequences brought about by wrongful acts ornegligence.ii. Unconscionable Contracts- Contracts that are so grossly unfair that the courts will refuse to enforce them.iii. Contracts in Restraint of Trade- Contracts that restrain trade such a covenants not to compete are considered contrary to public policy and are not enforceable if they unreasonably restrict trade.5. Consent- Both parties must know what they are contracting for. If one party is without important information about the subject of the contract there is no true consent. Impedimentsto consent include:a. Mistake- Where a party enters into a contract with false information through no one’s fault. b. Fraud, Misrepresentation, Duress, or Undue Influence- Occurs when one party is forced to enter into a contract or is tricked into a contract based on false information. c. Statutory Exceptions- Statutes that allow a party to avoid contractual obligations if they were pressured into agreement.6. Statute of Frauds- Requires that certain contracts be in writing so as to avoid parties claiming a contract existed when it in fact did not.a. Applies too:i. Real Property- Contracts for the sale of land.ii. One Year- Contracts that cannot be performed in one year.iii. Debts of another- Contracts to pay the debts of another.The Legal Environment of BusinessFINA 2244 Christina Sheppard Futrell, Esq.iv. Marriage- Contracts made in consideration of marriage.b. Sufficiency of the Writing- Contracts under the Statute of Frauds must set out the material terms of the contract andbe signed by at least the defendant.c. Parole Evidence Rule- Restricts the use of oral statements in a lawsuit when the oral statements are contrary to the written terms of the agreement. II. Performance, Discharge, and Breach of Contracts- A. Performance-1. Substantial Performance- Means the contract has basically been fulfilled and payments must be made. 2. Assignment and Delegation-a. Assignment- A transfer of contractual rights to a third party.b. Delegation- A transfer of contractual duties to a third party.c. Third Party Beneficiaries- Is a party who is not party of an original contract who acquires rights under the contract.3. Discharge by Breach- If one party prevents or hinders the other party to a contract from performing her duties, then a breach occurs. a. Material Breach- Is a substantial breach. If one’s performance is substantially below what was contracted the breach is material.b. Anticipatory Breach- Takes place before the performance of the contract. Happens when one party indicates their inability to or lack of willingness to perform. 4. Discharge by Agreement of the Parties- Parties may agree notto perform on the contract just as they agreed to contract. A discharge by agreement can occur by:a. Rescission- Occurs when both