LGST 1102 Law of Contracts Midterm 1 Study Guide Chapter 10 14 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 b 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 Chapter 11 Sections 1 2 ONLY 1 Requirements of an Offer a 3 Elements of an Offer 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 a Expression of opinion b Statements of future intent c Preliminary negotiations d Advertisements Not Offers Invitations to Negotiate i 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 new offer acceptance 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 i A major exception to this rule is the option contract where an offeree pays money to someone to keep an offer open 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 8 Mailbox Rule 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 b This general rule applies because an offeree should not be obligated to act affirmatively to reject an offer when no consideration has passed to the offeree to impose such a duty a Majority of the courts follow b Under this rule if the authorized mode of communication is the mail then an acceptance becomes valid when it is dispatched not when it is received by the offeror However if the offer stipulates when acceptance will be effective then the offer will not be effective until the time specified c Chapter 12 OMIT Promissory Estoppel page 250 and Requirement Output contracts 1 Focus on what sufficiency is and bargained for exchange a Legal sufficiency of consideration involves the requirement that consideration be something of legally sufficient value in the eyes of the law i Under most circumstances a promise to do what one already has a legal duty to do does not constitute legally sufficient consideration b Bargained for Exchange The second element of consideration is that it must provide the basis for the bargain struck between the contracting parties c This element of Bargained for exchange distinguishes contracts from gifts i Something of legal value promise act or forbearance must be exchanged between the parties ii The promise must be either 1 Legally detrimental to the promisee 2 Legally beneficial to the promisor 2 The difference between sufficiency and adequacy a Legal sufficiency of consideration involves the requirement that consideration be something of legally sufficient value in the eyes of the law b Adequacy of consideration involves how much considerations is given Essentially adequacy of consideration concerns the fairness of the bargain 3 Failure of Consideration Past consideration pre existing duty and illusory promises a Past Consideration i Actions or events that have already taken place do not constitute legally sufficient consideration ii Promises made in return for actions or events that have already taken place