BUL3330 LAW FOR ACCOUNTANCY EXAM 1 CHAPTERS 9 18 CONTRACTS Chapter 9 Introduction to Contracts I Common Law a Contracts are primarily governed by State common law i Orderly presentation of this law found in Restatements of the Law of Contracts regarded as a valuable authoritative reference work and extensively relied upon and quoted in judicial opinions II The Uniform Commercial Code UCC III Definition of a Contract a The sale of personal property forms a substantial portion of commercial activity b Article 2 of the UCC governs sales in all states except Louisiana c Sale consists of the passing of title to goods from a seller to a buyer for a price goods defined as movable personal property i Includes both a present sales of goods and a contract to sell goods in future d Personal Property any type of property other than an interest in real property land ex Tv set car textbook i All transactions governed by article 2 of UCC but where the Code has not specifically modified general contract law the common law of contracts applies 1 In other words when there is a sale of goods the general contract law will govern unless there is a specific provision under the UCC applicable a Contract a binding agreement that the courts will enforce i Specifically defined in the Restatement as a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty ii Promise a manifestation of the intention to act or refrain from acting in a specified way 1 Promises that meet all essential requirements of a binding contract are contractual and enforceable and if breached a legal remedy is usually available 2 Breach failure to perform properly a Remedies typically include compensatory damages equitable remedies reliance damages and restitution iii All contracts are promises but not all promises are contracts 2 Consideration 1 Mutual Assent each party to a contract must intentionally exchange a legal benefit the parties to a contract must manifest by words or conduct that they have agreed to enter into a contract typically by offer and acceptance or incur a legal detriments as an inducement to the other party to make a return exchange each party must have contractual capacity contract must be legal 3 Legality of Object 4 Capacity IV Requirements of a Contract a Those judicially declared incompetent have no legal capacity to contract b Minors incompetent person and intoxicated persons have limited capacity to V Classification of Contracts contract a Various classifications based on certain characteristics b Standard classifications not mutually exclusive i Express or implied contracts ii Unilateral or bilateral contracts iii Valid void voidable or unenforceable contracts iv Executed or executor contracts v Formal or informal contracts c Express and Implied Contracts i Assent expressed either by express language or by conduct that implies such willingness ii Contract may be entirely oral partly oral and partly written entirely written partly oral or written and partly implied from the conduct of the parties wholly implied from the conduct of the parties iii Entirely oral partly oral partly written entirely written are known as express contracts while the last two are implied contracts Both are genuine contracts and equally enforceable iv Express Contract one in which the parties have manifested their agreement by oral or written language or both v Implied Contract one that is inferred from the parties conduct not from spoken or written words d Unilateral and Bilateral Contracts i Typical contractual transaction each party makes at least one promise ii Bilateral Contract contract in which both parties exchange promises 1 Each party is both promisor and promise a Ex Obama promises to pay Romney 20 to mow the White House lawn Promises are exchanged Obama promises to pay while Romney bitterly promises to mow iii Unilateral Contract contract in which only one party makes a promise 1 Ex Obama says If you mow my lawn I will pay you 20 2 The contract is formed only when Romney finishes mowing the lawn 3 The offer was an exchange from Romney s act of mowing the lawn not and not before a promise to mow the lawn a Romney was never under the duty to mow the lawn since he e Valid Void Voidable and Unenforceable Contracts never made a promise one that meets all requirements of a binding contracts an i Valid Contract enforceable promise or agreement binding contracts ii Void Contract an agreement that does not meet all of the requirements of a a Thus not a contract at all and carries no legal value iii Voidable Contract not wholly lacking in legal effect because of the manner in which it was formed or a lack of capacity of a party to it law permits one or more of the parties to avoid the legal duties the contract creates a If the contract is avoided both parties are relieved of their legal duties under the agreement f Unenforceable Contract i One for the breach of which the law provides no remedy ii For example contract may be unenforceable because of a failure to satisfy the requirements of the Statute of Frauds which requires certain kinds of contracts to be evidenced by a writing to be enforceable g Executed and Executory Contracts a contract full performed by all of the parties a i Executed contract completed contract promises by any party to the contract are unperformed ii Executory unperformed applies to situations in which one or more a Or where the contract is wholly unperformed by one or more of the parties h Formal and Informal Contracts i Formal Contract depends on a particular form or mode of expression for its legal existence Informal Contract contracts which do not depend upon formality for their legal validity ii a Certain circumstances arise in which courts will enforce noncontractual promises under the doctrine of promissory estoppel b Noncontractual Promise is enforceable when made under circumstances that should lead the promisor reasonably to expect that the promise would induce the promise to take definite and substantial action or forbearance in reliance on the promise and the promise does take such action or forbearance i Ex Brady promises Flacco not to foreclose for a period of six months on a mortgage Brady owns on Flacco s land Flacco then expends 100 000 to construct a building on the land His promise not to foreclose is binding on Gordon under the doctrine of promissory estoppel a Quasi meaning as if or implied in law