MANGMT 3540 1st Edition Exam 2 Study Guide Lectures 9 13 Lecture 9 October 6 Chapter 7 Introduction to Contracts What is a Contract A contract is a legally enforceable promise or set of promises What are Four Requirements for a Valid Contract 1 Mutual Manifestation of Assent Consent Definition an outward expression of agreement by all parties o hence why subjective intent doesn t matter Offer a specific offer made by the offeror requesting something in return Acceptance an expression by the offeree of a complete agreement to the offer o Complete meaning that the offeree can t not change add delete modify any terms of the offer made by the offeror 2 Consideration Definition something of value given or detriment suffered in exchange for a promise o Aka bargained for exchange or quid pro quo which is the latin term for this for that This element is important because consideration is what makes the difference between a contract and a gift 3 Capacity Certain individuals lack the legal or mental capacity to enter into contracts If someone lacking capacity does enter into a contract they may be able to get out of it however the person on the other end of the deal who does have capacity cannot use this as a defense Examples of lack of capacity minors under 18 mentally incompetent persons highly intoxicated persons 4 Legality This applies to both the terms and the performance of a contract if either are illegal the contract is automatically void What are Defenses to a Contract if a question on the exam asks Which of the following are defenses to a contract these are the answers you should be looking for Don t get creative 1 Lack of Reality of Consent Assent This describes any situation where consent to a contract is not real or voluntary usually because it is obtained through a false representation a lie or duress force Note This does NOT include times when one party tries to get out of a contract by saying they were joking just kidding etc when they entered into the contract 2 Noncompliance with Formalities Formalities say that certain contracts MUST be in writing in order to be enforceable Examples include 1 contracts for the sale of real estate no matter how much or how little land is involved it could involves just a few square feet and the contract must still be in writing to be enforced and 2 contracts for the sale of goods priced at 500 or more What are Types of Contracts Bilateral Unilateral Definition A promise in exchange for a promise acceptance in this case is a promise a completed act acceptance by performance Duty of offeror the one making the offer Arises on verbal acceptance by the offeree Arises when the act is completed by the offeree Duty of offeree the one who accepts or rejects the offer Arises when the offeree accepts the offer No duty to perform Example Josh promises to pay Bill 100 if Bill agrees to tutor Josh in Bus Law for the rest of the semester Once Bill agrees Josh has a duty to pay him 100 and Bill has a duty to tutor Josh for the rest of the semester Jessica lost her Bus Law book so she sends out an email to everyone in the business school saying she will pay 25 to whoever returns the book to her Jessica is the offeror whoever finds the book and takes the action to return it to her is the offeree Note that no one has a duty to return Jessica s book even if they know where it is However if someone does return it Jessica will have a duty to pay that person 25 Notes Most contracts are bilateral because they require an act of acceptance to bind both parties Saying I will pay you 25 to sell me your book is a bilateral contract because the other party will agree to the sale as a matter of acceptance and at that point they are bound to sell you the book and you are bound to pay them It is not unilateral because selling the book requires some acceptance it is not something that can just be completed What are more types of Contracts Express created by specific words o These are the easiest to identify because one party makes a written or verbal offer and the other party makes a written or verbal acceptance o Example Offeror I offer to sell you my car for 7 000 Offeree I agree to buy your car for 7 000 the part in need not actually be said Implied in Fact These are created by the conduct of the parties conduct not words o These contracts are incredibly common o Example When you go grocery shopping You accept the store s offer to sell you groceries at a certain price by choosing those items and giving them to the cashier You don t walk up to the cashier and say I accept your offer to sell me apples for 2 99 lb You just bring the cashier the apples and it is implied that you will pay 2 99 lb for them Implied in law aka Quasi Contracts These are created when the court recognizes that some requirement of contracts is missing but if the court says there is no contract then one party will be unjustly enriched thus the court ignores the missing piece and says that there is a contract in order to avoid this injustice o Example One day in west Philadelphia where you were born and raised you were out on the playground where you spent most of your days On this day you were chillin out maxin and relaxin all cool as you shot some b ball outside of the school Unfortunately for you a couple of guys who were up to no good started making trouble in your neighborhood You got in one little fight well not so little because you got stabbed Lucky for you there was a doctor nearby who came to your aid and provided you with life saving medical care Even though you have no contract with this doctor you must pay him for his services otherwise you have been unjustly enriched you are alive when you may not be otherwise Despite there never being offer acceptance or consideration the court will imply that you have a contract with the doctor and require you to pay him for his help o PS If you didn t catch that reference you re failing at life and need to study up http www youtube com watch v 3qHA366oRMs What are the Levels of Enforceability Valid o o Void o o Enforceable by all parties Everything is fine with the contract so all parties are in a position to enforce it Not enforceable by any party essentially it s as though there is no contract If the contract involves illegality examples drugs prostitution murder larceny etc then it will be deemed void Voidable o May be avoided by one or more parties note usually the party that gets screwed over will …