LGST 1102 Law of Contracts Midterm 1 Study Guide Chapters 10 14 Table of Contents Page 2 o Objective Theory of Contracts o Unilateral Contracts o Bilateral Contract o Executed o Executory o Valid o Void o Voidable o Unenforceable o Quasi Contract Page 3 o Plain Meaning Rule o Requirements of an Offer o Non Offer situations o How Contracts are terminated Page 4 o Option Contracts o Unequivocal Acceptance Mirror Image Rule o Silence as Acceptance o Mailbox Rule o Sufficiency and Bargained for Exchange o Sufficiency VS Adequacy Page 5 Page 6 o Failure of Consideration o Past Consideration o Preexisting Duty o Illusory Promises o Releases o Accord Satisfaction o Charitable Subscriptions o Capacity o Contractual Capacity Page 7 o Ability of Minors to Disaffirm voidable Page 8 o Exceptions to Disaffirmance o Misrepresentation of Age o Contracts for Necessaries o Ratification o Intoxication o Incapacity Adjudication of incapacity Page 9 o No Adjudication of Capacity when Capacity is lacking o Contracts for Necessaries payable under Quasi Contract o Legality o Licensing Statues o Covenants Not to Compete o Exculpatory Clauses Page 10 o Unconscionability o Effect of Illegality Justifiable Ignorance Exceptions o Mistakes of Facts o Mistakes of Value Page 11 o Puffery o Fraud o Fraudulent Misrepresentation o Misrepresentation By Conduct o Misrepresentation By Law o Misrepresentation By Silence o Innocent Misrepresentation Page 12 o Negligent Misrepresentation o Undue Influence o Duress 3 Chapter 10 1 Objective Theory of Contracts a In contract law intent is determined by the Objective Theory of Contracts not by the personal or subjective intent or belief of a party i The theory is that a party s intention to enter into a legally binding agreement or contract is judged by outward objective facts as interpreted by a reasonable person rather than by the party s own secret subjective intentions 2 Unilateral Contract a A promise for an act b Offer is phrased so that the offeree can accept the offer only by completing the contract performance 3 Bilateral Contract a A promise for a promise b Offeree can accept simply by promising to perform 4 Executed 5 Executory 6 Valid a A fully performed contract b Completely performed by both parties a A contract is not fully performed b Something yet to be done by either or both parties a Contract has the necessary contractual elements i Agreement offer and acceptance ii Consideration iii Legal Capacity of the parties iv Legal Purpose 7 Void 8 Voidable 9 Unenforceable 10 Quasi Contract a No contract at all b A void contract produces no legal obligations on any of the parties a One party has the option of avoiding or enforcing the contractual obligation a A contract exists but it cant be enforced because of a legal defense a Or Implied in law are not actual contracts b Quasi is Latin for as if c Quasi contracts are not true contracts because they do not arise from any agreement expressed or implied between the parties themselves 11 Plain Meaning Rule a If a court determines that the terms of the contract are clear from the written document alone the plain meaning rule will apply and the contract will be enforced according to what it clearly states 4 Chapter 11 Sections 1 2 ONLY 1 Requirements of an Offer a 3 Elements of an Offer a Expression of opinion b Statements of future intent not promising c Preliminary negotiations contract d Advertisements i i Intent Objective Standard Offeror must have a serious intention to become bound by the offer ii Reasonably Definite Terms The Terms of the Offer must be reasonably certain or definite as to price payment type and quantity of goods and delivery terms so that the parties and the court can ascertain the terms of the contract iii Communication The offer must be communicated to the offeree 2 Non Offer Situations focus on advertisement negotiations and inquiries i Doesn t indicate an intention to enter a binding agreement i Future intent could conclude party was only thinking about agreement i Only expresses willingness to discuss possibility of entering into a Not Offers Invitations to Negotiate In general advertisements including representations made in mail order catalogues price lists and circulars are treated not as offers to contract but as invitations to negotiate ii Advertisement Exception 1 Offer to do an act that one is not required to do Offeree performs the act 3 OMIT AUCTIONS 4 How contracts are terminated a Counteroffer Essentially the bargaining process This is both a rejection and a b Rejection Once an offer is rejected by the person to who it is directed c Revocation The person making an offer may withdraw the offer anytime before new offer acceptance i A major exception to this rule is the option contract where an offeree pays money to someone to keep an offer open 5 1 Example A lease with an option to purchase d Death or Incompetence of the Offeror or Offeree i An offeree s power of acceptance is terminated when the offeror or offeree dies or is deprived of legal capacity to enter into the proposed contract unless the offer is irrevocable e Destruction of Subject Matter i An offer is automatically terminated if the specific subject matter of the offer is destroyed before the offer is accepted f Supervening Illegality of the Proposed Contract i When A statute or court decision that makes an offer illegal automatically terminates the offer 5 Option Contracts a Another form of irrevocable offer b Created when an offeror promises to hold an offer open fort a specified period of time in return for payment consideration given by the offeree c An option contract takes away the offeror s power to revoke the offer for the period of time specified in the option 6 Unequivocal Acceptance and the Mirror Image Rule a To exercise the power of acceptance effectively the offeree must accept unequivocally b The Mirror Image Rule i If the acceptance is subject to new conditions or the terms of the acceptance change the original offer the acceptance may be deemed a counter offer that implicitly rejects the original offer c The crucial element of an acceptance for non UCC contracts is it must be unequivocal 7 Silence as acceptance a Ordinarily silence cannot constitute acceptance even if the offeror states By your silence and inaction you will be deemed to have accepted this offer i This general rule applies because an offeree should not be obligated to act affirmatively to reject an offer when no consideration has