BUSFIN 3500 Chapters 13 18 33 35 38 42 43 Chapter 13 Contracts Contract promise that if breached can be legally enforced Covenant Not to Compete restrict who an employee can work for after his current employer Decide WHERE WHEN and WITH WHOM the employee can work Elements of a Contract Agreement o Made of Offer and Agreement Consideration Contractual Capacity what one party has to give up in exchange for the other s promise having the full ability mental physical etc to enter a contract Lack of Genuine Assent entering a contract unwillingly through things like fraud misrepresentation duress undue influence We base contract law on how a reasonable person would interpret contracts Sources of Contract Law Common Law and Uniform Commercial Code commercial laws that can be applicable in all states PROMISE PROMISE BILATERAL PROMISE REQUESTED ACTION UNILATERAL Express vs Implied Contracts Express clearly in written or spoken words Implied contextual conduct that forms an agreement between parties Quasi Contracts agreements that are implied to protect the parties Ex A guy sees a roof repair crew about to redo his roof Instead of telling them it s the wrong house he does nothing and lets them replace his roof He would be obligated to pay compensation Valid Contracts Unenforceable Contracts Void Contracts Voidable Contracts Unenforceable contracts can be valid Void contracts aren t contracts to begin with because they are either illegal or has some error Voidable if one or both parties can exit agreement o Both parties may be obligated to return any already received consideration Plain Meaning Rule contracts are judged just by what is stated between the four corners of the document Judges cannot interpret a contract based off inference Chapter 14 Agreement Agreement consisted of 1 Serious intent of the offeror 2 Reasonable terms to the agreement 3 Communication Intent based off what the parties outward manifestations are not the internal though process Definite and Certain Terms Material Terms include subject matter price quantity quality and parties Communication offeree must communicate that he or she accepts the agreement to the offeror What can automatically end an agreement Death of the offeror Destruction of Subject Matter Subject Matter becomes illegal Mirror Image Rule terms of acceptance must equal the terms of the offer Mailbox Rule an offer is accepted once the offeree places the acceptance in the mailbox Chapter 15 Consideration Consideration what one party will receive in return for fulfilling an obligation Promissory Estoppel occurs when three conditions are met 1 A promise is made and one party knows the other will reasonably rely on it 2 The other party reasonably relies on it 3 Enforcing the promise is the only way to avoid injustice Ex Someone received a job offer they quit their job sold everything they owned bought an apartment moved out of state only to find out the employer cancelled the job Courts cannot decide whether or not you made a good decision Illusory Promise not actually a promise Ex I ll come over later to see if I want to buy the TV Preexisting Duty Obeying the law is not consideration Performing an existing agreement is not good consideration Liquidated Debt finite amount of money vs Unliquidated Debt parties disagree on how much is owed Chapter 16 Capacity Legality Capacity mental ability to enter agreement and fully understand his or her rights and duties Types of Incapacity Infancy Insanity Intoxication Minors Minors can withdrawal from disaffirm mostly any agreement before they turn 18 Disaffirmance must occur before or a reasonable amount of time after they become an adult Ratification affirming the contract occurs when the minor reached the age of majority and they agree orally Express Ratification or in writing that they want to remain in the contract Implied Ratification stating it oral or in writing continuing an agreement after reaching the age of majority without Parents cannot be held liable for contracts their children enter unless they cosign the agreement Mentally Incapacitated Persons Only can void a contract if the mental incapacity of a party prevents them from fully understanding the contract Only a valid defense if the party can prove that the conditions existed at the time the agreement was made Intoxicated Persons Not usually accepted as a valid defense unless party was intoxicated against their will Contracts are not enforceable if they are not legal Usury when a party gives out a loan at above the legal interest rate Exception if the loan is small Sabbath Laws in some states it is illegal to enter into a contract on Sunday Covenants Not to Compete Agreement not to work in the same field for a set time and location Can be after you sell a business Can be after leaving employer Unconscionable Agreement agreement that is so unfair it is voided Procedural Unconscionability contract Substantive Unconscionability conditions that impede one party s understanding of the when an agreement is extremely unfair or imbalanced Exculpatory Clause releases one party from all liability regardless of fault In Pari Delicto both of the parties in the agreement are equally at fault for illegality of the agreement Severable Contracts contracts with multiple parts that can be carried out individually Chapter 17 Legal Assent Legal Assent Promise that the parties have to obey Are enforced by the courts Rescinded Contract if one party cancels a contract the two parties must return everything to each other Mistake of Fact false belief of facts about the contract when the contract is concluded Unilateral Mistake Mutual Mistake an error made by one party both parties make the error Misrepresentation when one party lies about material fact Innocent Misrepresentation when both parties truthfully believed in the false material fact Parties cannot sue for damages Negligent Misrepresentation innocent misrep Only if he or she could have used reasonable care to discover the truth Fraudulent Misrepresentation one party blatantly lies to the other Concealment consciously hiding the truth Nondisclosure failing to give necessary information about the contract Undue Influence when one party takes advantage of their position of power to persuade another s decisions Duress One party is wrongfully forced into the agreement by the other party Can be physical harm Threatening to file lawsuit Economic Duress Chapter 18 Contracts in Writing Statute of Frauds 3 main purposed 1