OSU BUSFIN 3500 - Chapter 7: Nature and Classification of Contracts

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Chapter 7: Nature and Classification of ContractsA. Overview of Contract Lawa. Sources of Contract Law- UCC or statutory law: sale and lease of goods- Common Law: intangible goods (services, real estate)- Administrative Agency regulationsb. Function of Contracts- Provide stability and predictability for promisors and promise- Make sure the promises parties make are enforceable- Contract law necessary to ensure compliance with a promise or entitle innocent party to reliefc. Definition of a Contract - Agreement that can be enforced in court between two or more parties who agree to preform or refraining some act now or in the future.d. Objective Theory of Contracts - Party’s intent to entered into contract is judged by outward, object facts interpreted by reasonable person- Objective Facts: o What was said entering into contracto How party acted or appearedo Circumstances surrounding transactione. Freedom of Contract and Freedom from Contract- Freedom of Contract- Article I, Section 10, right to enter into contractual agreement- Courts rarely interfere with contracts that have been voluntarily made unless they are illegal, restrain trade or are in some circumstances unfair (unequal bargaining power)- Freedom from Contract: certain contracts and clauses may not be enforceable, protect persons who may have been forced into contracts unfavorable to themselvesB. Elements of A Contracta. Requirements of a Valid Contract (must be met for valid contract to exist) 1. Agreement (offer and acceptance)2. Consideration3.Contractual Capacity 4. Legalityb. Defense to Enforceability of an otherwise Valid Contract (even if all requirements are met)1. Genuineness of assent, or voluntary consent- Consent of both parties must be genuine. - Contracts formed as a result of fraud, mistake or duress may not be enforceable2. Form- Form law requires, some must be in writingC. Types of Contracts (Categorized by formation, performance and enforceability)a. Contract Formation1. Bilateral vs. Unilateral- Bilateral Contract: “Promise for a Promise”o Offeree can accept by promising to performo No performance necessary for contract to be formed, contract is formed when promises are exchangedo Ex) Buy someone’s car for certain price- Unilateral Contract: “Promise for an Act” o Offeree can accept by completing contract performanceo Contract formed when contract is performed, not when promises are exchangedo Revocation: offers normally revocable until accepted. But once substantially undertaken, offeror cannot revoke offer.Unilateral BilateralPromise for a Promise Promise for an Act Offeree can accept by promising to perform Offeree can accept by completing contract performanceContract formed when promises are exchanged Contract formed when contract performedEx) Buy someone’s car for certain price Ex) Get $1000 upon completion of driving car to LA2. Expressed vs. Implied Contracts - Express Contract: terms fully stated in words, oral or written o Example: Acceptance of classmate to buy your books for $300- Implied Contract: conduct of the parties creates and defines part or all of contracto Requirements1. Plantiff furnished some service or property2. Plantiff expects to be paid and defendant should have known 3. Defendant had chance to reject services and did not- Example: Dropping off tax returns at accountants officeb. Contract Performance (executed vs. executory)- Executed: Fully performed on both sides- Executory: Has not been fully performed on both sides.c. Contract Enforceability1. Valid Contract1) Agreement (offer and acceptance)2) Supported by legally sufficient consideration3) For a legal purpose4) Made by parties who have the legal capacity to enter into a contract2. Voidable Contracts- Valid but can be avoided at option of the parties- Elect to avoid any duty to perform or ratify (make valid) the contract- Minors, insane persons, intoxicated persons, under duress, or under fraud3. Unenforceable Contracts- Can’t be enforced because against some statue or law, wrong form 4. Void Contracts- No contract at all, no legal obligations- Maybe lack legal capacity or purpose of contract is illegalD. Quasi Contracts a. Intro- Contracts implied in law, different that actual contracts - Not true contracts because don’t arise from any agreement b/w parties- Fictional contracts that can impose parties as if parties had entered into legal contracts- Avoid unjust enrichment of one party at expense of anothero Doctor’s servicesb. Limitations- A party who has conferred a benefit on someone else unnecessarily or because of misconduct ornegligence can’t invoke - Extra wax at car wash- haven’t been unjustly enrichedc. When an Actual Contract Exists- Can’t be used when actually contract exists, there is already a remedy b/c of breach of contract- Quasi then isn’t needed to achieve justiceE. Interpretation of Contractsa. Plain Language Laws- Personal, family or household purposesb. Plain Meaning Rule: terms clear from the written document alone, plain meaning rule will apply and facts will be determined only from written document alone (face of the instrument). c. Other Rules of Interpretation: need to determine party’s intentions from contract1.Reasonable, lawful, effective meaning given to contract2.Contract interpreted as a whole3.Terms that were negotiated separately will be given greater consideration than standardized terms 4.Words given commonly accepted meanings5.Specific wording given more consideration than general language6.Written or type written terms prevail over preprinted terms7.A party that uses ambiguous expressions held to be responsible 8.Evidence of prior dealing, course of performance, or usage of trade is admissible to clarify ambiguityChapter 8: Agreement and ConsiderationA. Agreement1. Requirements of the Offer: 1. Intention: Serious, objective intention by offeror Determined by reasonable person would conclude offeror’s words and actions meant Saying you will sell car for 500 dollars when angryi. Expressions of Opinion is not an offer & doesn’t demonstrate intentionii. Statements of Future Intent not an offeriii. Preliminary Negotiations: request is not an offer,only expresses willingness of possibility- Invitations to submit bids is not an offer, actual bids submitted are and then can be bindingiv. Advertisements, Catalogues and Circulars are treated as invitations to negotiate, not offers- Ads on craigslist, may get many for asking price- Price lists

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OSU BUSFIN 3500 - Chapter 7: Nature and Classification of Contracts

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