TodayUpper Division B-Law CoursesThe ScenarioRevocation and AcceptanceThe LawOption ContractsOption Contract – ExampleOption Contracts in BusinessEquitable Remedies – ReviewAnother Equitable RemedyPromissory EstoppelPromissory Estoppel – Example 1Harvey v. Dow AnalysisPromissory Estoppel – Example 2Common LawFour Elements of a ContractCapacityThe RisksCapacity – ExampleScheduleToday•Upper division business law courses•Finish discussing four parts of a contract•Agreement•Consideration•Capacity•LegalityUpper Division B-Law Courses•Commercial Law•Employment Law•International Business Law•Law and Entrepreneurship•LSB 4403 (T/TH, 3:30 – 4:45)•Law and innovation/creativity•Starting and operating your own business•IP, stock (venture capital, crowdfunding), real estate…The Scenario•Larry offers to sell car for $10,000•Sally pays $150 for mechanic’s inspection•Larry decides to sell to JimRevocation and Acceptance•Valid sale to Jim?•Valid acceptance by Sally?•Mailbox rule?The Law•Revocation: valid when received by offeree•Acceptance: valid when sent by offeree•Can be risky for both parties. Solution?Option Contracts•What if Larry promises not to revoke?•Not enforceable because no consideration (unenforceable gift)•Add consideration to create enforceable option contractOption Contract – Example•Sally pays Larry $200 to hold offer open•How much money?•How long to hold the offer open?•Must be bargained-for exchange, without fraud or coercionOption Contracts in Business•Mergers & Acquisitions (M&A)•Facebook considering buying Snapchat•Real estate (earnest money)•Option contract: buy a due diligence periodEquitable Remedies – Review•Review: unjust enrichment when no contract•Recall Bob and Jane yard work example•Three elements:•Benefit received•Opportunity to reject benefit•Detriment suffered (expectation of payment)Another Equitable Remedy•“Promissory estoppel” when no consideration and thus no contract•Court “stops” you from reneging on promisePromissory Estoppel•Three elements•Should promisor reasonably expect reliance?•Did promisee reasonably rely?•Enforcing promise is only way to avoid injusticePromissory Estoppel – Example 1•Harvey v. Dow: build house on family land•Can daughter obtain ownership?•Court: yes—three elements of promissory estoppel are met.Harvey v. Dow Analysis•Three elements of promissory estoppel•Parents should have expected reliance•Daughter did rely on the promise ($200,000)•Contract claims fail, so no other way to avoid injusticePromissory Estoppel – Example 2•Church: elderly couple promises funds•Enforceable promise?•Court: no contract claim (unenforceable gift). But promissory estoppel can provide justice.Common Law•Equitable remedies show flexibility of courts•Contract claims are more reliable•Equity for “sophisticated” businesses vs. “disadvantaged” partiesFour Elements of a Contract•Agreement•Consideration•Capacity•LegalityCapacity•Three areas•Contracts with minors•Contracts with mentally disabled (elderly)•Contracts with intoxicated peopleThe Risks•Know when to ask questions•Void contracts: automatically unenforceable•Voidable contracts: one party may choose not to be bound by the contractCapacity – Example•A 17-year old buys an expensive car•May “disaffirm” the contract•Before turning 18?•After turning 18?•Can’t disaffirm for “necessaries”•Can’t disaffirm after minor “ratifies” the contract•If disaffirmed, court may apply “rescission”Schedule•No class on Thursday 10/8 (Fall Break)•Next Tuesday (10/13)•Finish illegality (chapter 14)•Discuss chapter 15 (mistakes, fraud,