STUDY GUIDE FOR BUL3310 Requirements for valid contract P 191 Agreement This includes an offer and an acceptance One party offers to enter a contract and the other party must accept the terms Consideration any promises made by the parties must be supported by legally sufficient and bargained for consideration something of value received or promised money Contractual capacity both parties must have the ability to do what is promised Legality the contracts purpose must be to accomplish a goal that is legal and not against public policy Contract Enforceability Voidable Unenforceable and void P 194 195 Voidable a valid contract that can be avoided at the option of one or both parties They can either avoid any duty or ratify make valid the contract If voided both parties are released if ratified both parties are obligated to preform E g Most contracts made by minors intoxicated people or mentally incompetent Unenforceable Cannot be enforced due to legal defenses A party failed to satisfy a legal requirement It is a valid contract but due to a statute or law it is unenforceable E g certain contracts must be in writing If it s not in writing then it is unenforceable Void this is no contract at all void and contract are contradictory none of the parties have legal obligations E g purpose of contract was illegal Mail Box Rule AKA The deposited acceptance rule P 202 Acceptance takes effect at the time the offeree sends or delivers the communication via the mode authorized by the offeror This rule states that if the form of communication is the mail then the acceptance becomes valid when it is placed in the control of the post service not when received Does not apply to immediate forms of communications such as Email Face to face Etc Consideration Legally Sufficient Value Legal Detriment P 207 Consideration is a value given in return for a promise or in return for a performance E g If Anita says to her neighbor when finished painting the garage I will pay you 800 The act of painting the garage is the consideration To be legally sufficient consideration must be something of value to the law A promise to do something not legally required Promising to Paint Garage Preform an action that one is not obligated to do Painting the Garage Refrain from an action that one has the legal right to do Known as forbearance Stop smoking in return for money A legal detriment is when a party takes on the task of doing something not required or a change in position because of a promise made Refer to the three bullet points above Contracts Mistake of material fact value or quality unilateral and bilateral P 219 Under certain circumstances contract law allows a contract to be avoided on the basis of mistake There are mistakes of value and mistakes of fact but only mistakes of fact can void a contract Also this mistake must involve material face a fact that a reasonable person would consider important Two forms of mistake of face Bilateral aka mutual mistake Is made by both parties Unilateral mistake made by only one party Unilateral mistake of fact generally doesn t give the mistaken party any right to relief from contract E g if you send an email offering your bike for 200 but accidentally wright 100 and the other person responds immediately before you could correct the error you are responsible to sell the bike for 100 because of your unilateral mistake Two general rule exceptions The other party to the contract knows or should have known that a mistake of fact was made The error was due to a substantial mathematical mistake in addition subtraction division or multiplication that was made inadvertently and without extreme or gross negligence Bilateral mutual mistake of fact mutual misunderstanding concerning a basic assumption on which the contract was made When both parties made a mistake about the same material fact either party can rescind the contract Another thing is that a word or term can have different interpretations and if each party attached different meanings then the courts may allow the contract to be rescinded Mistakes of value a mistake concerning the future market value or quality of an object Value is variable and when the parties form a contract they create a value both parties are responsible This type of mistake will not matter and the contract will still be binding and enforceable E g if you bought an old car for 500 and both you and the seller believed the car to be worthless you own it If 1 day after the sale someone says that the car is in fact worth thousands the seller has no right to void the contract because it is a matter of value not fact Discharge by Performance complete and substantial P 223 224 Complete performance When a party performs exactly as agreed and there is no question as to whether the contract has been preformed then the contract is complete Any variation from the contract and that would be considered a breach Substantial performance a party who in good faith performs substantially all of the terms of the contract Must meet 3 requirements to be substantial Party must have performed in good faith Intentional failure is a breach in contract The performance must not vary greatly from the performance promised A variance omission or defect in performance is considered minor if it can easily be remedied by compensation The performance must create substantially the same benefits as those promised in the contract Discharge of contract by agreement Mutual rescission P 227 228 Any contract can be discharged by agreement of the parties Agreement can be contained in original contract or a new contract with the express purpose of discharging the contract can be formed Mutual rescission parties must make another agreement that satisfies legal requirements for contract offer acceptance consideration legality Normally the consideration for this new contract rescission will be the promise not to preform the acts from the first contract This will set the parties back to their positions before the original contract was made Discharge by operation of law Impossibility or impracticability of performance frustration P 229 230 Impossibility of performance this is means to discharge a contract because of objective impossibility A fire happens and its simply impossible to do the job This needs to have been unforeseeable and cannot be subjectively impossible they cant make a payment because bank is closed wont work because they cant do it but others could Whereas a fire means nobody can
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