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 Between 2 private entities Negotiate at arm s length opposite directions Has to involve legal not illegal terms Formation Express oral or written o Oral is enforceable if it can be proven Implied o By parties conduct Gas promising to give money if you put gas into your car Doctor s office grocery store etc o By law quasi contracts Court created it is not created by parties Unjustly enriched at the detriment of the other Sources of contract law Common law o Series of cases with precedents o Contract law is based on common law Article two of the Uniform Commercial Code U C C contracts for the sale of goods o Backbone of business law o Only deals with personal property transactions o Mid 1970 s when everyone adopted it o Louisiana only state that hasn t adopted the new amendments Articles Governing Law Clause they decide which state s contract law applies they can pick any state Article II contracts for the sale of goods tangible personal property Arbitration Clause waiving right to litigate Liquidated Damage Clause tells how to calculate damages Classification of contracts Valid Best of all worlds 5 elements see other page Void Voidable Not valid at all Able to become void at the option of one of the contracting parties Example minors with car unless for necessaries food shelter clothing etc they can get money back and return the car Unilateral Created when one party makes a promise and the other party does something for it Example car wash for 10 the performance is washing the car acceptance They exchange promises promise for a promise Example agreeing to sell a house for 300 000 and buy a house for 300 000 Bilateral Executed Executory Performance has occurred Performance hasn t occurred yet Elements of a valid contract Offer Acceptance o Meeting of the Minds Neutral Ascent o Meeting of the Minds Neutral Ascent Capacity of contracting parties Legal subject matter Consideration o Must involve legal not illegal subject o The glue that holds it together o What you agree to give up and gain o What you negotiate for o The bargain for element Analysis of potential contract settings Is there a valid contract o Are all 5 elements for a valid contract present Offer Does an offer exist o Legally insane can t enter into a contract o Minors have capacity however contracts are voidable at the minor s option o It is personal between the parties o Offeror party that makes the offer o Offeree party the offer is made to o Must exhibit a serious intent to offer judged by outward conduct o All material terms of the offer must be present Ways an offer can legally cease to exist o Acceptance merged into contract o Rejection by offeree o Counteroffer by offeree o Lapse of time specified time reasonable time o Destruction of subject matter ex offer for a house then it burns down o Illegality of subject matter o Insanity of either party o Bankruptcy of either party o Death of either party o Revocation offeror taking offer back Option contract agreement to get the offer irrevocable for Acceptance Manner of acceptance a period of time o They must fax email or mail it etc Silence as acceptance o NOT ALLOWED o Example Failure to respond with ten days will Mirror image rule o To have a valid acceptance every term of the acceptance has to be identical to the offer o Only thing that has to be the same quantity will allow gap filling Article II sale of goods battle of the forms much more liberal than common law Timing rules designed to protect the offeree o 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 An offer is legally effective when received by the offeree An acceptance is legally effective when dispatched by the offeree deposited acceptance rule A rejection is legally effective when received by the offeror A revocation is legally effective when received by the offeree A counteroffer acts as a rejection of the original offer and the issuance of a new offer Hence the first and third timing rules above apply to counteroffers Example January 2nd Offeror mails offer to offeree January 3rd Offeror telephones revocation to offeree nothing to revoke since the offer wasn t received yet January 4th offeree receives offer in the mail January 5th offeree mails acceptance January 6th offeree telephones rejection January 7th offeror receives acceptance in the mail Assuming all of the other contract elements are present as of January 8 is there a contract Answer Yes According to the timing rules above the offer did not legally become effective until received by the offeree on January 4 Since no offer existed until January 4 it could not be accepted rejected nor revoked prior to that date Hence the offeror s attempt to revoke the offer on January 3 is ineffective since no offer legally existed until January 4 On January 4 the offer came into existence when received by the offeree When the offeree mailed his acceptance on January 5 he dispatched his acceptance and the contract came into existence at that moment even though the offeror did not receive it until January 7 The Dispatch Rule a k a The Deposited Acceptance Rule Once a contract exists the offer ceases since the offer merges into and becomes part of the contract Accordingly the offeree s attempt to reject the offer on January 6 is ineffective since no offer legally exists any longer Capacity of contracting parties o Insane can t contract o Minors voidable at the minor s option o Intoxicated people have to be passed out cold on the floor Legal subject matter o If you have access to trade secrets you can never reveal that information EVER example formula for Coca Cola o Anti competition Clause Means that you cannot do anything in the world that you did for one company Example after working at an engineering company you are not allowed to work at another doing the same thing Used to be in restraint of trade Non compete agreement Buying a diner you don t want them to go down the street and open a new diner o Illegal stuff Usury laws maximum rate of interest that can be charged Licensing requirements example a doctor In restraint of trade if you buy this item you have to buy this item too can deal with them and no one else Consideration glue that holds contracts together at arm s length come from opposite ends o
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