CONTRACTS Legal Environment of Business Chapter Two I II Definition A promise or set of promises under which the law recognizes a duty to perform and for which if breached the law gives the aggrieved party a remedy Formation 243 545 Conflict of Laws none with procedural laws but substantive law gets at the guts of the controversy A Express Oral or Written B Implied 1 By Parties Conduct i e when you eat an apple at the grocery store it is assumed that you are going to pay for it 2 By Law Quasi Contracts courts create the contract III Sources of Contract Law 239 241 A Common Law B Article Two of the Uniform Commercial Code U C C Contracts for the Sale of Goods Does not have to follow the Mirror Image Rule the only things that Law governing contract for the sale of good have to match are the quantities III Classification of Contracts 245 246 A Valid all 5 elements of the contract are met 1 Offer 2 Acceptable 3 Legal Subject Matter 4 Legal Capacity to Contract parties 5 Consideration bargain for what you give up and I get Void any of the elements missing Voidable able to become void at the option of one of the contracting parties Disaffirm or Avoid the Contract minors can get out of the contract Reasonable Time after minor becomes a major he has a specific time window to still disaffirm the contract Necessaries food shelter clothing etc minor cannot get out of a K that involves necessaries B Unilateral 242 243 an agreement with only one promise the maker of such a promise seeks an action rather than a promise in return Bilateral 242 243 an agreement containing mutual promises C Executed 246 the parties have performed their promises completed can be partial Executory when the parties have not yet performed their agreement IV Elements of a Valid Contract 247 256 A Offer contains a specific promise and a specific demand Offeror person making the offer must intend to make the offer by making a commitment to the offeree the person to whom the offer is made Is there a valid offer there has to be serious intent to make an offer by the offeror Are all material terms present Or too vauge Ways an offer can cease to exist 1 Acceptance by offeree offer merges into a K 2 Rejection of an offer by offeree 3 Lapse of time specified time or reasonable amount of time 4 Counter Offer 5 Revocation by offeror before accepted 6 Illegal Subject Matter 7 Destruction of Subject Matter 8 Death of offeror or offeree If K is made the K is still in affect if death happens estate will have to cover it and it is still enforced as long as it is not unique personal services 9 Bankruptcy of offeror or offeree 10 Insanity of offeror or offeree Mirror Image Rule every term in K must mirror everything offered in the offer UCC Article 2 quantity is the only thing that must be the same B Acceptance it is necessary to create a valid enforceable K Offeree is the only one with the power to accept Mirror Image Rule Silence is not deemed as acceptance 249 Timing Rules Dispatched Rule communication medium offeree can change mind C Capacity of Contacting Parties refers to a person s ability to be bound by a contract Minors Intoxicated and Mentally Incompetent Persons D Legal Subject Matter must be legal public policy licensed professional Anti Competition Clauses or Non Compete Clause 256 important to protecting employers from having employees they train leave them and compete against them also protect the buyer of a business from having the seller set up a competing business Must be reasonable in time duration and geographical location E Consideration courts look to see if they have suffered a legal detriment and received a legal benefit Person A and B both must receive a legal benefit and suffer a legal detriment Detriment give up a right or take up a duty A promise to make gifts is not legally enforceable Pre Existing Duty to have consideration for a K you must take on a new right or new duty In a Bilateral K the promises themselves are consideration Illusory Promise not consideration illusion all within the promising party s control conditions that are outside the promising parties control is OK V Analysis of Potential Contract Settings A Is there a Valid Contract i Are all five elements for a valid contract present 1 Offer 247 248 a Does an Offer Exist b Ways an Offer Can Legally Cease to Exist ii Acceptance 1 Manner of Acceptance 2 Silence As Acceptance 3 Mirror Image Rule 4 Time Rules 250 a The offeror is the master of the offer due to the mirror image rule Accordingly these timing rules are designed by the Courts to protect the offeree i An offer is legally effective when received by the offeree ii An acceptance is legally effective when dispatched by the offeree iii A rejection is legally effective when received by iv A revocation is legally effective when received the offeror by the offeree v A counteroffer acts a rejection of the original offer and the issuance of a new offer Hence the first and third timing rules above apply to counter offers iii Capacity of Contracting Parties 253 255 iv Legal Subject Matter 255 256 sidebar 8 8 v Consideration 229 1 Bargained for Exchange a Legal Benefit and Legal Detriment 2 Illusory Promise a Output or Requirements Contracts 3 Pre existing Duty Rule 252 4 Substitutes for Consideration thereby creating quasi contracts 253 a Moral Obligation Theory i e pledge to charitable organization If you pledge money it is your moral obligation to pay that pledge b Doctrine of Promissory Estoppel i Elements 250 253 1 Promise by Promisor party who makes a Promisee receives promise 2 Reasonably Relies on Promise promise Promisee a I counted on that promise 3 Foreseeable to the Promisor at the time of promising that the promise will rely 4 Promisee Acts 5 Injury Detriment or Damage B Is the Contract Enforceable i Are there any defects in its formation or defense to its enforcement 1 Statue of Frauds 439 A valid contracts but for us as a court to enforce it it must be in writing No verbal contracts Contracts that are used with the Statue of Frauds a Contracts for the Sale of Real Property b Contracts the performance of which requires a year c Contracts for the sale of goods greater than or equal or more to complete to 500 d Contracts where the agreement is to be liable for the debts of another e Writing must be signed by the party to be charged party who contract must be enforced against basically get everyone s signature 2 Parole Evidence Rule 451 if you try to present any verbal testimony that
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