Chapter 7 Nature and Classification of Contracts A Overview of Contract Law a Sources of Contract Law UCC or statutory law sale and lease of goods Common Law intangible goods services real estate Administrative Agency regulations b 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 relief c Definition of a Contract d Objective Theory of Contracts 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 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 contract o How party acted or appeared o Circumstances surrounding transaction e 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 themselves B Elements of A Contract a Requirements of a Valid Contract must be met for valid contract to exist 1 Agreement offer and acceptance 2 Consideration 3 Contractual Capacity 4 Legality b 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 enforceable 2 Form Form law requires some must be in writing C Types of Contracts Categorized by formation performance and enforceability a Contract Formation 1 Bilateral vs Unilateral Bilateral Contract Promise for a Promise o Offeree can accept by promising to perform o No performance necessary for contract to be formed contract is formed when promises are exchanged o Ex Buy someone s car for certain price Unilateral Contract Promise for an Act o Offeree can accept by completing contract performance o Contract formed when contract is performed not when promises are exchanged o Revocation offers normally revocable until accepted But once substantially undertaken offeror cannot revoke offer Unilateral Promise for a Promise Offeree can accept by promising to perform Contract formed when promises are exchanged Ex Buy someone s car for certain price Bilateral Promise for an Act Offeree can accept by completing contract performance Contract formed when contract performed Ex Get 1000 upon completion of driving car to LA 2 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 contract o Requirements 1 Plantiff furnished some service or property 2 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 office b Contract Performance executed vs executory Executed Fully performed on both sides Executory Has not been fully performed on both sides c Contract Enforceability 1 Valid Contract 1 Agreement offer and acceptance 2 Supported by legally sufficient consideration 3 For a legal purpose 4 Made by parties who have the legal capacity to enter into a contract 2 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 fraud 3 Unenforceable Contracts 4 Void Contracts Can t be enforced because against some statue or law wrong form No contract at all no legal obligations Maybe lack legal capacity or purpose of contract is illegal D Quasi Contracts a Contracts implied in law different that actual contracts Intro 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 another o Doctor s services b Limitations A party who has conferred a benefit on someone else unnecessarily or because of misconduct or negligence can t invoke Extra wax at car wash haven t been unjustly enriched c 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 justice E Interpretation of Contracts a Plain Language Laws b Plain Meaning Rule terms clear from the written document alone plain meaning rule will apply and Personal family or household purposes 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 contract 1 Reasonable lawful effective meaning given to contract 2 Contract interpreted as a whole 3 Terms that were negotiated separately will be given greater consideration than standardized 4 Words given commonly accepted meanings 5 Specific wording given more consideration than general language 6 Written or type written terms prevail over preprinted terms 7 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 terms ambiguity Chapter 8 Agreement and Consideration A Agreement 1 Requirements of the Offer 1 Intention Serious objective intention by offeror i ii iii iv v vi i Determined by reasonable person would conclude offeror s words and actions meant Saying you will sell car for 500 dollars when angry Expressions of Opinion is not an offer doesn t demonstrate intention Statements of Future Intent not an offer 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 binding Advertisements Catalogues and Circulars are treated as invitations to negotiate not offers Ads on craigslist may get many for asking price Price lists only an invitation not an offer Some ads contain definite terms that invited acceptance lost dog Auctions not an offer to form a contract just an invitation to ask to