Business Law Chapter 11

Void Contracts:

A contract having no legal force or binding effect.

Valid contract:

A contract that results when elements necessary for contract formation (agreement, consideration, legal purpose, and contractual capacity) are present.

Performance:

Executed—A fully performed contract. Executory—A contract not fully performed.

Defenses to the Enforceability of a Contract:

Voluntary consent and form.

Implied contract:

A contract formed in whole or in part from the conduct of the parties (as opposed to an express contract). Also known as implied-in-fact contract.

Express contract:

A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.

Formal contracts:

A contract that by law requires a specific form, such as being executed under seal, to be valid.

Informal contracts:

A contract that does not require a specified form or formality in order to be valid.

Executed contract:

A contract that has been completely performed by both parties.

Executory contract:

A contract that has not as yet been fully performed.

Voidable Contracts:

A contract that may be legally avoided (canceled, or annulled) at the option of one of the parties.

Unilateral contract:

A contract that results when an offer can only be accepted by the offeree's performance.

Quasi contracts

A fictional contract imposed on parties by a court in the interests of fairness and justice; usually, quasi contracts are imposed to avoid the unjust enrichment of one party at the expense of another.

Promisee

A person to whom a promise is made.

Offeree:

A person to whom an offer is made.

Promisor

A person who makes a promise.

Offeror:

A person who makes an offer.

Promise:

A person's assurance that he or she will or will not do something.

Objective theory of contracts

A theory under which the intent to form a contract will be judged by outward, objective facts (what the party said when entering into the contract, how the party acted or appeared, and the circumstances surrounding the transaction) as interpreted by a reasonable person, rather than by the party's own secret, subjective intentions.

Bilateral contract:

A type of contract that arises when a promise is given in exchange for a return promise.

Unenforceable Contracts:

A valid contract rendered unenforceable by some statute or law.

Requirements of a Valid Contract:

Agreement, Consideration, Contractual capacity and Legality.

Valid contract requires:

An agreement (offer and acceptance) supported by legally sufficient consideration made by parties who have the legal capacity to enter into the contract, and a legal purpose.

Contract

An agreement that can be enforced in court; formed by two or more parties, each of whom agrees to perform or to refrain from performing some act now or in the future.

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.

Quantum meruit:

An equitable doctrine based on the concept that one who benefits from another's labor and materials should not be unjustly enriched thereby but should be required to pay a reasonable amount for the benefits received, even absent a contract.

Consideration:

Any promises made by the parties to the contract must be supported by legally sufficient and bargained-for consideration (something of value received or promised, such as money, to convince a person to make a deal).

Three types of contracts:

Bilateral and Unilateral, Formal and expressed.

Formation:

Bilateral—A promise for a promise. Unilateral—A promise for an act (acceptance is the completed performance of the act). Formal—Requires a special form for creation. Informal—Requires no special form for creation. Express—Formed by words (oral, written, or a combination). Implied—Formed by the conduct of the parties.

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.

Sources of Contract Law:

The common law governs all contracts except when it has been modified or replaced by statutory law, such as the Uniform Commercial Code (UCC),Footnote or by administrative agency regulations.

Voluntary consent:

The consent of both parties must be voluntary. For instance, if a contract was formed as a result of fraud, undue influence, mistake, or duress, the contract may not be enforceable.

Form Consent:

The contract must be in whatever form the law requires. Some contracts must be in writing to be enforceable

Legality:

The contract's purpose must be to accomplish some goal that is legal and not against public policy.

Requirements for Implied Contracts:

The plaintiff furnished some service or property. The plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected. The defendant had a chance to reject the services or property and did not.

Enforceability:

Valid—The contract has the necessary contractual elements: agreement (offer and acceptance), consideration, legal capacity of the parties, and legal purpose. Voidable—One party has the option of avoiding or enforcing the contractual obligation. Unenforceable—A contract exists, but it cannot be enforced because of a legal defense. Void—No contract exists, or there is a contract without legal obligations.

Facts as Interpreted by a Reasonable Person:

What the party said when entering into the contract. How the party acted or appeared (intent may be manifested by conduct as well as by oral or written words). The circumstances surrounding the transaction.