1 Contract K A promise or set of promises under which the law recognizes a duty to perform and for which CONTRACTS if breached the law gives the aggrieved party a remedy i Agreement between 2 legal entities ii Private law area 2 Formation a Expressed Oral or Written arise from interactions in which parties actually discuss the promised b Saying you agree verbally negotiated purchase of land for construction of a plant terms of their agreement i ii Signing an agreement Implied arise from the conduct of parties rather than from words an accountant asks for professional advice implies a promise to pay the going rate for this advice even though you do not man an express promise to pay for it i ii By law Quasi contract a court created contract By parties conduct 1 Are a judicial remedy to prevent one party form receiving unjust enrichment When one party is justly enriched at the expense of another the law may imply a duty on the first party to pay the second even though there is no contract between the two parties 3 Sources of Contract Law a Common Law comes from judges decisions Courts have developed principles controlling contract information performance breach and remedies in courtless cases This judge made law affects many types of contracts including real property service employment and general business contracts Governs all other contracts besides goods Article 2 UCC b Article Two of the Uniform Commercial Code U C C Contracts for the Sale of Goods Legislation Law that applies to individuals and firms GOODS are tangible moveable items of personal property Relates to contracts involving goods 4 Classification of Contracts a Valid all of the 5 Elements are present enforceable i Void unenforceable appears to be agreement but lacks essential reqs for validity enforceability ii Voidable enforceable until a party with the right to do so elects to void the agreement 1 Offer 2 3 4 5 Acceptance Legal Subject matter Legal capacity of contract parties Consideration b Formation c Performance i Unilateral agreement w only one promise only one party is committed to perform 1 promise Exist when a promise is made to motivate action ii Bilateral agreement containing a promise for a promise 2 promises Executed contract has been performed party has performed their promises i ii Executory when the parties have not yet performed their agreement CONTRACTS 5 Elements of a Valid Contract a Offer contains a specific promise and a specific demand Offeror needs to have serious intent makes and offer to the offeree Need to know all the details very specific All material goods have to be in an offer Same quantity must be in the offer and acceptance Mirror Image Rule b Acceptance Any reasonable way of accepting an offer Unilateral are accepted by performing a requested act not by making a promise Bilateral contract is accepted by the offeree s making the required promise The language of the offer determines whether acceptance should be a promise resulting in a bilateral contract or an act resulting in a unilateral contract c Capacity of Contracting Parties Refers to a person s ability to be bound by a contract Minors infants intoxicated perosns mentally incompetent persons lack capacity to be bound by contractual promises d Legal Subject Matter A valid contract must have legality of purpose Contracts that require commission of a crime or violate accepted standards of behavior are void e Consideration TO be valid a contract must involve the exchange of consideration between the parties There must be some incentive or inducement for a person s promise or it is not binding 6 Analysis of Potential Contract Settings Is there a Valid Contract i Are all 5 elements for a valid contract present a 1 Offer a Does an Offer exist b Ways an offer can legally cease to exist Acceptance by offeree Rejection by offeree Counteroffer accept but change some terms or make a new offer Lapse of specified time reasonable amount of time Revoking by offeror Option contracts are revocable Subject matter is destroyed Subject matter is illegal Insanity of offeror or offeree Bankruptcy Death of offeror or offeree of offeror or offeree CONTRACTS 2 Acceptance a Manner of Acceptance b Silence as Acceptance Silence alone is not acceptance An action such as using an internet search engine after having the opportunity to review contractual terms of use may constitute acceptance c Mirror Image Rule d Timing Rules Standard contract law requires that the acceptance must mirror the offer 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 A rejection is legally effective when received by the offeree A counteroffer acts a rejection of the original offer and the issuance of a new offer Hence the first and third timing rules apply to counteroffers Example 1 2 Offeror A mails offer to offeree B 1 3 Offeror A telephones revocation to offeree B 1 4 Offeree B receives offer in the mail 1 5 Offeree B mails acceptance 1 6 Offeree B telephones rejection 1 7 Offeror A receives acceptance in the mail On January 8th is there a contract Yes 3 Capacity of Contracting Parties 4 Legal Subject Matter State licensing laws Usury laws and maximum legal rate of interest Contracts in restraint of trade Illegal Contracts that keep you from livelihood Anti Competition clause Non to compete Glue that keeps contracts together and binding a Bargained for Exchange i Legal Benefit and Legal Detriment A k B A s legal detriment becomes B s legal benefit B s legal detriment becomes A s legal benefit b Illusory Promise Contingency Ill buy your car for 10k if I like it 5 Consideration some incentive or inducement for a person s promise CONTRACTS i Output or Requirements Contracts Car dealership agrees to buy all tires from Firestone for next 12 months c Pre existing Duty Rule take up new duty A party to an agreement does not give consideration by promising to do something that he she is already obligated to do When a party demands more to complete job but they cant d Substitutes for Consideration thereby creating quasi contracts i Moral Obligation Theory ii Doctrine of Promissory Estoppel 1 Elements Promise from the promisor to the promisee Promisee relies on the promise from the promisor Forseeable to promisor that promise will rely Promisee acts But for his
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