Ch. 4 Contract Law
What are two important rules that govern revocation?
1) An offer can be revoked any time before it is accepted 2) A revocation becomes effective when it is received by or communicated to the offeree
What ways can a contract be described as?
1) Valid, void, voidable, or unenforceable 2) Express or implied 3) Bilateral or unilateral 4) Oral or written
Can minors have a voidable contract?
A contract between two minors could be voidable by either of them because minors have the right to get out of contracts.
Express Contract
A contract statement that may be oral or written.
Implied Contract
A contract that comes about from the actions of the parties.
Unilateral Contract
A contract that contains a promise by only person to do something, if and when the other party performs some act.
Bilateral Contract
A contract that contains two promises. One party promises to do something in exchange for the other's promise to do something else. Most contracts are created this way.
Offer
A proposal by one party to another intended to create a legally binding agreement.
Rejection
A refusal of an offer by the offeree that brings the offer to an end.
Counteroffer
A response to an offer in which the terms of the original offer are changed.
The Uniform Commercial Code (UCC)
A set of statutes that covers the law of sales as well as other areas of commercial law. It was drafted to make trade among the states easier and has been adopted with minor variations by 49 states. Only Louisiana has not adopted all of its provisions.
Definiteness and Certainty
An offer must be definite and certain to be enforceable .
Serious Intent
An offer must be made with the intention of entering into a legal obligation.
Unenforceable
An unenforceable contract is one the court will not uphold, generally because of some rule of law, like the statutes of limitations. If you wait too long to bring a lawsuit for breach of contract, the statute of limitation will run its course, making the contract unenforceable.
Contract
Any agreement enforceable by law
Invitations to negotiate
Are invitations to deal, trade, or make an offer.
Written Contract
Assures that both parties know the exact terms of the contract and also provides proof that the agreement was made.
What can destroy the genuineness of an agreement?
Circumstances like fraud, misrepresentation, mistake, under influence, and economic duress.
Oral Contract
Created by word of mouth and comes into existence when two or more people form a contract by speaking to each other. One person usually offers to do something, and the other party agrees to do something else in return
Death or Insanity
If the offeror dies or becomes insane before the offer is accepted , the offer comes to an end. Although death ends an offer, it does not end a contract, except for contracts related to personal services.
What contracts are exceptions to the mirror image rule?
Includes contracts for personal property
What are the three basic requirements for offer?
Made seriously, definite and certain, and communicated to the offeree
Genuine Agreement
Mean that an agreement is true and genuine: a valid offer is met by a valid acceptance.
Valid
Means legally good, thus a valid contract is one that is legally binding.
The Mirror Image Rule
Means that the terms stated in the acceptance must exactly mirror or match the terms of the offer.
What does a contact need to be legally complete?
Must include all 6 of the elements.
What are the 6 elements of a contract?
Offer, acceptance, genuine agreement, consideration, capacity, and legality.
Communication to the Offeree
Offers may be made by telephone, letter, telegram, fax, e-mail, or by any other method that communicates the offer to the offeree.
Legality
Parties are not allowed to enforce contracts that involve illegal acts. Some illegal contracts involve agreements to commit a crime or a tort. Others involve activities made illegal by statutory law.
What are 5 ways a termination may occur?
Revocation, rejection, counteroffer, expiration of time, and death or insanity.
What law requires certain contracts must be in writing to be enforceable?
The Statute of Frauds
Where are the primary exceptions created?
The Uniform Commercial Code (UCC)
Requirements of an Acceptance
The acceptance must be unconditional and must follow the rules regarding the method of acceptance.
Unconditional acceptance
The acceptance must not change the terms of the original offer in any way according to the mirror image rule
The Will Theory of Contract Law
The courts focus on the exercise of each party's will: they asked whether the parties really had agreed to the terms of an agreement.
Formalist Theory of Contract Law
The courts tried to determine if the parties had reached a meeting of the minds and, gradually, this led to a search for elements that consistently appeared in genuine agreements. The courts focused on the form of agreements.
Capacity
The law presumes that anyone entering a contract has the legal capacity to do so. Minors are generally excused from contractual responsibility, as are mentally impaired people and individuals under the influence of drugs or alcohol.
Equity Theory of Contract Law
The legal responsibilities associated with contracts are based on what the parties involved do and say to one another. In the past, courts asked whether the parties to a contract exchanged things of equal value.
Offeror
The person making the offer
Offeree
The person who receives the offer
Acceptance
The second party's unqualified willingness to go along with the first party's proposal.
Revocation
The taking back of an offer by the offeror
Consideration
The thing of value promised to one party in a contract in exchange for something else of value promised by the other party. The mutual exchange binds the parties together.
Voidable
When a party to a contract is able to void or cancel a contract for some legal reason, it is a voidable contract. It is not void in itself but may be voided by one or more of the parties.
Expiration of Time
When the offeror sets a time limit for the acceptance of the offer, it must be honored.
Void
a contract that is void has no legal effect. If the contract is missing any of the elements then it is void