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FSU HFT 3603 - Chapter 4 Book Notes

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Chapter 4 Book Notes:• Contract: an agreement between 2 or more parties that is enforceable in courto EX: a hotel agrees to buy new furniture for its lobby for a set price or a guest agrees to rent a room for a weekend and pay the quoted rate. In exchange, the hotel agrees to reserve the room for the guest and not rent it to anyone else. o Can be in writing and signed, or it can be oral. It can even be implied • Breach of contract: failure to perform the terms of a contract o Results in liabilityo EX: if a hotel contracted to purchase furniture but after it was delivered refused to pay. The furniture company can sue for breach of contract.• The Elements of a Contract:o These must exist for a contract to be valid (Enforceable in Court) o Contractual Capacity:  The ability both to understand the terms of the contract and to appreciate that failure to perform its terms can lead to legal liability, including a lawsuit. Groups of people lacking contractual capacity: (contracts of these are VOIDABLE)• Minors• The mentally incompetent • Intoxicated Voidable Contract: on that may be canceled at the option of one party • also called the right to avoid or disaffirm• it applies while the disability exists and for a reasonable time after it ends• exceptions: contracts for the purchases of necessitieso Mutuality: All parties to the contract are interested in its terms and intend to enter an agreement to which they will be legally bound Also called meeting of the minds Established by one party making an offer and the other party accepting that offer• Offer: a proposal to do or give something of value in exchange for something else• Offeror: the person who makes and offer• Offeree: the person to whom the offer is made The offer must be definite• If the terms are vague a contract may not result, b/c the lack of clarity may evidence a lack of commitment to enter a cantract or b/c the terms are too indefinite to obligate each party to do anything sufficiently specifico EX: “the rooms in this hotel range from $42-$95/night”• Invitations to Negotiate: now instead of offers, they become open discussions that may or may not lead to an offer. Response to an Offer:• Can either accept or deny• Acceptance: an expression of agreement by the offeree to the terms of the offer. IF the offeree accepts then mutuality is achieved. • Counteroffer: a response to an offer that modifies on or more of its provisions, it is not an acceptance (treated as a new offer)o now the original offeror has the option of acceptance, rejection, or another counteroffer. o Legality: Must have a legal objective, if the parties obligate themselves to do something illegal then the contract is VOID Void Contract: unenforceable in court• EX: it is illegal for competing hotels to agree to all charge the same amount for a room. (Price-fixing)• These violate Antitrust Laws (laws that restric limitations on competition. o Consideration: Something of value exchanged for something else of value EX: a guest in a hotel gives the innkeeper money and in exchange receives the right to use a room Can take 3 forms:• A tangible item of value or a promise to give such an item (such as food or money)• Performance or a promise to perform (such as cleaning a swimming pool, working as a front-des clerk, or waiting on tables)• Forbearance- agreeing to refrain from doing something you have a legal right to do- or promise to forbear. o EX: if you are injured while at a restaurant, you might promise not to sue the restaurant for your injuries if the owner agrees to pay you a satisfactory sum of money Illusory Contract: the terms of a contact do not contain a firm commitment. If the apparent commitment is so indefinite that the party ahs not in fact promised to do anything then it is illusory. o Proper form: (Written, Oral) Oral contracts are more difficult to prove Contracts that must be in WRITING: The Statute of Frauds• Statute of Frauds: the law that requires certain contracts to be in writingo “the statute to prevent frauds”• Contracts for the purchase and sale of real property (included land and buildings) o Only those for the sale and purchase of land, buildings, or easementso Easement: the right of one person to use another person’s land for some particular limited purposeo EX: a restaurant owner having an oral agreement with an adjacent landowner to use his property for additional property is not a enforceable contract. • Contacts that cannot be completed within 1 year from when they are made. o EX: a two-year employment contract for a restaurant manager• Contracts to pay another person’s debt if that person fails to pay. o EX: a hotel guest uses a small, out-of-town credit card company as means for payment of the room. The hotel, may require the guest to agree to pay the hotel bill if the company fails to do so. This commitment must be in writing to be enforceable. • Contracts for the sale of goods (moveable, tangible objects, not services) in excess of $500. o EX: a contract between a hotel and a computer store for the purchase of a $2300 computer for the front office. o 2 exceptions:  The seller has delivered the goods and the buyer has accepted them  The buyer paid for the goods and the seller accepted the payment  Each off theses circumstances each party has evidenced the existence of the contract by his or her actions.  The nature of the writing:• It does NOT need to be a formal contract• A note, letter, or memorandum is sufficient• Should specify the identities of the parties, the subject matter of the agreement, and its essential terms. It must be signed by both parties to be enforceable in court.  Part Performance Exception:• The party asserting the absence of a writing as a defense has partly performed the contract, the court may construe there from both the existence of the contract and its terms.  Parol Evidence Rule:• Prevents parties from modifying a written contract using evidence of oral agreements made prior to signing the writing. • EX: you are negotiating to purchase a motel. In the back of the property there is a shed, you ask the seller to remove it and she agrees. You prepare a written contract containing the terms of your purchase and it is signed by both of you. It doesn’t mention the removal of the shed, you want the shed removed and remind the seller of the agreement but she


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