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BUSFIN 3500 Final Exam Review: Chapters 7-12, 23-25I. Chapter 7: Nature and Classification A. Sources of Contract Law1. Common law governs all contracts except when it has been modified or replaced by statuesB. The Function of Contracts1. Provide stability and predictability for buyers and sellers in the marketplace2. Assures both parties that the promises they make will be enforceable, or if not, entitles the innocent party to some form of reliefa. Promise- an assertion that something either will or will not happen in the futureb. Promisor- the person making the promisec. Promise- the person to whom the promise is madeC. Definition of a Contract1. An agreement that is formed by two or more parties and can be enforced in courtD. The Objective Theory of Contracts1. Determines intent, theory is that a party’s intention to enter into a contract is judged by outward objective facts as interpreted by a reasonable person rather than by the party’s ownsecret subjective intentions2. Objective facts:a. What the party said when entering into the contractb. How the party acted or appearedc. The circumstances surrounding the transactionE. Freedom of Contract and Freedom from Contract1. Freedom of Contract- The law recognizes everyone’s ability to enter freely into contractual arrangements2. Freedom from Contract- certain contracts and clauses may not be enforceable if they are contrary to public policy, fairness, and justice. These exceptions are for people who may have been pressured into making contracts unfavorable to themselvesF. Requirements of a Valid Contract1. Agreement- includes an offer and an acceptance (mutual consent)2. Consideration- something of value received or promised to convince a person to make a deal3. Contractual Capacity- both parties are recognized by law as competent parties 4. Legality- the purpose of the contract must be to accomplish a legal goal and not be against public policyG. Defenses to the Enforceability of a Contract1. Genuineness of assent, or voluntary consent- the consent of both parties must be genuine2. Form- the contract must be in the correct form required by law (ex: writing)H. Contract Formation1. Bilateral versus Unilateral Contracts:a. Offeror- party making the offer (always makes a promise, so also promisor)b. Offeree- party to whom the offer is madei. Bilateral Contracts- “promise for a promise”, comes into existence at the moment the promises are exchangedii. Unilateral Contracts- “promise for an act”, formed when contract is preformeda. For contests, lotteries, and other competitions offering prizes: formed if the person complies with the rules of the contest (meets requirements)b. Ardito v. City of Providence1. Can a school’s or employer’s letter of tentative acceptance to a prospective student, or possible employee, qualify as a unilateral contract?a. Yes. If the letter extends a conditional offer and the prospective student/employee meets the requirementsiii. Revocation (cancelation) of offers for Unilateral Contracts a. Offers are normally revocable until accepted, however, once performance has been substantially undertaken, the offeror cannot revoke the offer2. Formal versus Informal Contracts:a. Formal Contracts- contracts that require a special form or method of creation (formation) to be enforceable (contracts under seal)b. Informal Contracts- (simple contracts) include all other contracts3. Express versus Implied Contracts:a. Express Contracts- the terms of the agreement are fully and explicitly stated in words, oral or writtenb. Implied Contracts- (implied-in-fact contracts) implied from the conduct of the parties which creates and defines at least some of the terms of the contracti. A contract can be a mixture of an express contact and an implied contractc. Requirements for an Implied-in-Fact Contracti. The plaintiff furnished some service or propertyii. The plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected (objective theory of contracts)iii. The defendant had a chance to reject the services or property and did notiv. Uhrhahn Construction & Design, Inc. v. Hopkinsa. During the construction of a home, the homeowner often requests that the builder make changes to the original specifications. When do these changes formpart of an implied contract that makes the homeowner liable to the builder for any extra expenses?1. If all elements of a contract are present, then it creates an implied contracta. Agreement, legal purpose, competent parties, considerationI. Contract Performance1. Executed contract- a contract that has been fully performed on both sides (completed)2. Executory contract- a contract that has not been fully performed on either side (in progress)3. If one party has fully performed on one side but the other side has not, the contract is said tobe executed on one side and executory on the other (still classified as executory) J. Contract Enforceability1. Valid Contract- has the four elements necessary for contract formationa. Agreement (offer and acceptance), supported by legally sufficient consideration, for a legal purpose, made by parties who have the legal capacity to enter into the contractb. May be enforceable, voidable, or unenforceablei. Enforceable contract- a valid contract that can be enforced because there are no legal defenses against itii. Voidable contracts- a valid contract but one that can be avoided at the option of one or both of the parties. The party with the option can either avoid any duty to perform or ratify (make valid, enforce) the contractual obligationa. If avoided, both parties are released from it. If ratified, both parties must fully perform their respective legal obligationsiii. Unenforceable contracts- one that cannot be enforced because of certain legal defenses against it. A valid contract rendered unenforceable by some law or statue2. Void contract- no contract exists, or there is a contract without legal obligationsK. Quasi Contracts (“as if”)1. Implied in law contracts- not true contracts because they do not arise from any agreement, rather, they are fictional contracts that courts can impose on the parties “as if” the parties had entered into an actual contracta. Imposed to avoid the unjust enrichment of one party at the expense of another (theory of individuals not being able to profit or be enriched unfairly at the expense of others)L. Limitations on Quasi-Contractual

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OSU BUSFIN 3500 - Final Exam Review

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