Chapter 9 Contract is a legally binding agreement between two or more parties who agree to perform or to refrain from performing some act now or in the future In determining whether a contract has been formed the element of intent is of prime importance In contract law intent is determined by what is called the objective theory of contracts Requirements for a valid contract o 1 Agreement An agreement to form a contract includes an offer and an acceptance One party must offer to enter into a legal agreement and another party must accept the terms of the offer o 2 Consideration Any promises made by the parties to the contract must be supported by legally suf cient and bargained for consideration something of value received or promised such as money to convince a person to make a deal o 3 Contractual capacity Both parties entering into the contract must have the contractual capacity to do so The law must recognize them as possessing characteristics that qualify them as competent parties o 4 Legality The contract s purpose must be to accomplish some goal that is legal and not against public policy Whether the contract is classi ed as bilateral or unilateral depends on what the offeree must do to accept the offer and bind the offeror to a contract o If the offeree can accept simply by promising to perform the contract is a bilateral contract Promise for a promise The contract comes into existence at the moment the promises are made o If the offer is phrased so that the offeree can accept the offer only by completing the contract performance the contract is a unilateral contract A promise for an act In other words the time of contract formation in a unilateral contract is not the moment when promises are exchanged but the moment when the contract is performed Another classi cation system divides contracts into formal contracts and informal contracts o Formal contracts are contracts that require a special form or method of creation formation to be enforceable o Informal contracts also called simple contracts include all other contracts No special form is required except for certain types of contracts that must be in writing The contracts are usually based on their substance rather than their form EXPRESS VERSUS IMPLIED CONTRACTS Express Contracts In an express contract the terms of the agreement are fully and explicitly stated in words oral or written A signed lease for an apartment or a house is an express written contract If one classmate calls another on the phone and agrees to buy his textbooks from last semester for 300 an express oral contract has been made Implied Contracts A contract that is implied from the conduct of the parties is called an implied contract or an implied in fact contract This type of contract differs from an express contract in that the conduct of the parties rather than their words creates and de nes the terms of the contract Implied Contract requirments 1 The plaintiff furnished some service or property 2 The plaintiff expected to be paid for that service or property and the defendant knew or should have known that payment was expected 3 The defendant had a chance to reject the services or property and did not A contract that has been fully performed on both sides is called an executed contract A contract that has not been fully performed by the parties is called an executory contract Elements of a valid contract Agreement o Offer 1 Intention 2 Content Id parties Subject matter Price Rime for performance 3 Communication o Acceptance o Consideration When an offer is not valid An expression of opinion is not an offer It does not indicate an o Expressions of Opinion o Statements of Future Intent intention to enter into a binding agreement is not an offer o Advertisement o Preliminary Negotiations expresses a willingness to discuss the possibility of entering into a contract A request or invitation to negotiate is not an offer It only A statement of an intention to do something in the future Consideration needs Legally sufficient value o The something of legally sufficient value may consist of 1 a promise to do something that one has no prior legal duty to do 2 the performance of an action that one is otherwise not obligated to undertake or 3 the refraining from an action that one has a legal right to undertake called a forbearance Bargained for exchange o The item of value must be given or promised by the promisor offeror in return for the performance or promise of performance o This element of bargained for exchange distinguishes contracts from gifts Adequacy of consideration o Involves how much consideration is given Essentially it concerns the fairness of the bargain On the surface when the items exchanged are of unequal value fairness would appear to be an issue Agreements that lack consideration Unforeseen Dif culties The rule regarding preexisting duty is meant to prevent extortion and Under most circumstances a promise to do what one already has a legal PREEXISTING DUTY duty to do does not constitute legally suf cient consideration the so called holdup game Rescission and New Contract or cancel their contract at least to the extent thatv it is executory still to be carried out Rescission18is the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made PAST CONSIDERATION place are unenforceable These promises lack consideration in that the element of bargained for exchange is miss ing Past consideration is no consideration Promises made in return for actions or events that have already taken The law recognizes that two parties can mutually agree to rescind Promissory Estoppel Under the doctrine of promissory estoppel a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery Contractual Capacity In addition to agreement and consideration for a contract to be deemed valid the parties to the contract must have contractual capacity the legal ability to enter into a contractual relationship Mininors for contractual purposes is eighteen years n intoxication is a condition in which a person s normal capacity to Intoxicatio act or think is inhibited by alcohol or some other drug If the person was suf ciently intoxicated to lack mental capacity then the agreement may be voidable even if the intoxication was purely voluntary Mental Incompetence mentally incompetent and has appointed a guardian to represent the individual any contract made by
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