Chapter 2- Understanding Contract Law, Part 2

implied contract

A contract whose terms and intentions are indicated by the actions of the parties to the contract and the surrounding circumstances

exculpatory clause ( exculpatory agreement)

A contractual provision purporting to excuse a party from liability resulting from negligence or an otherwise wrongful act.

competent party

A party to a contract who has the basic or minimal ability to do something and the mental ability to understand problems and make decisions.

accord and satisfaction

An agreement (accord) to substitute performance other than that required in a contract and the carrying out of that agreement (satisfaction)

noncompete agreement

An agreement between an employer (the principal) and an employee (the agent) to protect the employer's customers, trade secrets, confidential information, and other items for a specific period after an employee relationship has been terminated.

negligence

The failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming others.

offeror

The party to a contract who promises to give something in return for a promise or an act by another party.

uniform comemercial code

a code of federal laws that govern commercial transactions in the United States

Bilateral contract

a contract in which each party promises a performance

unliateral contract

a contract in which only one party makes a promise or undertakes the requested performance

Bilateral and Unilateral contracts

a contract is either a bilateral contract or a unilateral contract. With bilateral contracts, each party promises to perform an act in exchange for an act by the other party most contracts are bilateral. For example, Jay's promise to pay Tony $500 in exchange for Tony's promise to paint Jay's garage creates a bilateral contract in which each party becomes both a promisor and a promisee. If a default occurs, either party may enforce the other's promise by taking legal action. in a unilateral contract, one party promises to pay for an act of the other party. If the act isn't performed, no payment is required For example, if Jay promises to pay $500 if Tony paints the garage, Jay only has a binding requirement to pay Tony after Tony paints the garage. The performance of the specified act (painting) is required before the promise (payment) must be made. Tony doesn't breach the contract if he fails to paint the garage.

Executed and Executory Contracts

a contract is either an executed contract or an executory contract. an executed contract requires nothing more of either party to be fulfilled. For example, one party has bought and paid for goods that another party delivered. An executory contract, on the other hand, is one that hasn't been fully executed. A fire insurance policy is an example of an executory contract. The insurer's promise to perform( provide coverage) is a promise conditional on the occurrence of a fire. as long as no fire occurs, the contract remains executory

Types of Contracts

a contract may be bilateral or unilateral, executd or executory, express or implied, voidable or void.

executory contract

a contract thas has not been completely performed by one or both of the parties

implied in fact contract

a contract that is not express but that the parties presumably intended, either by tacit understanding or by the assumption that is existed

voidable contract

a contract that one of the parties can reject (avoid) based on some circumstance surrounding its execution

express contract

a contract whose terms and intentions are explicitly stated

Counteroffers

a counteroffer is not the same as a request for more information and a request for information is not a rejection of the offer. For example, if Gene offers to sell Patrick a releision for $500 and PAtrick says " I'll give you $350 for it" Patrick's reply is a counteroffer.It automatically rejects Gene's original offer and Gene is not obligated to honor his initial offer. But if Patrick had replied to Gene's offer bu inquiring " Will you accept $350?" his question is not a counteroffer or a rejection; it's an inquiry. and if Gene had responded to the inquiry saying that $350 was unsatisfactory, Patrick could still accept the $500 offer. Counter offers don't terminate an offer that inlcudes a statement that the offer will remain open beyond any counteroffers. Similarly, an offer remains open if the offeree makes it clear that the counteroffer does not reject the original offer.

unconscionable bargains

a court would not likely enforce a contract containing provisions so harsh and unfair that they cause undue suffering to the party resisiting performance. For example, a sales contract with a provision that requires the seller to provide goods for free is if the goods are delivered after a specified date could be considered unconscionable. Some state laws permit courts to refuse to enforce or limit the application of sales contracts or caluses found to be unconscionable. Courts can also revise such sales contracts to include more reasonable terms

contract

a legally enforceable agreemnt between two or more parties

competent party

a party to a contract which has the basic or minimal ability to do something and the mental ability to understand problems and make decisions

implied in law contract

an obligation tht is not an actual contract but that is imposed by law because of the parties' conduct or some special relationship between them or because one of them would otherwise be unjustly enriched

Communication to Offeree

an offer must also be communicate to and received by the offeree. An offeree can't accept a proposal before knowing about it. Take, for example, a newspaper advertisement offering " $100 to anyone who runs the 100-yard dash on July 4 and beats David". If Matt, unaware of the advertisement or offer, enters the race and beats David, no contract exists because Matt can't accept an offer of which he had no knowledge However, an offer can be valid if the offeree begins a task before learning of the offer. For example, Jerry, a burglary victim, has offered a reward for information leading to the burglar's conviction. Paul has already investigate the burglary and has determined that Katrina to the authorities. If Katrina is convicted, Paul can collect the reward from Jerry even though he began investigating the burglary before he learned of Jerry's offer. The crucial fact is that Paul knew of the offer when he reported Katrina as the burglar.

Those adjudged Insane

any agreement a person adjufed insane enters into is automatically void. A person can be adjudged or formally declared, insane by a court. A court's adjucation is conclusive and voids any contract that person has entered into while insane

Insane People

any agreement an insane person enters into is void and voidable. for purposes fo contractual liability, the law recognizes two clses of insane people: 1) those adjudged insane 2) those who claim insanity or mental incompetence ( but haven't ben adjudged insane)

Contracts to Commit Crimes or Torts

any agreementwhich one party consents to commit a crime or another wrongful act (tort) is illegal and represents a void contract. For example, contracts to cause injury or death, to induce a breach of contract, or to violate a patent right or copyright are illegal, unenforceable agreements Regarding insurance, contracts must involve legal subject matter- coverage of illegally owed or possessed goods is invalid, for example. However, if the insurance is onlyinidental to an illegal purpose, then the contract is enforceable. similarly, if an insured intentionally burns down his house, which is an illegal act, the insurance policy on the property will not permit recovery. similar issues apply in life insurance. Although cases of a beneficiary killing an insured accidentally or in self-defense may still allow the beneficiary to collect a policy's proceeds, a beneficiary who willfully causes or contributes to an insured's death generally can't collect those proceeds. Additionally, if a beneficiary obtained a life insurance policy on the property with intent and fradulent concealment are bases for avoidance for the contract and the policy would be entirely void

tip

as we noted, a contract can be illegal if it contradicts current laws or public policy. But what if a law that renders a contract illegal changes after the contract is first agreed to? would the contract then become legal? no. even if the laws that rendered a contract illegal subsequently change, the contract would remain unenforceable. A new agreement would need to be formed for it to be enforceable

minors, part 2

most courts require a minor to amke restitution of any benefits received before avoiding a contract; a minor can't challenge a contract and at the same time retain contract benefits. A minor who has purchased an item and then trades if for something else must return the same or a comparable item upon rejecting the contract. Additionall, minors can't confirm contracts Unlike most contracts that minors enter into, a minor's contract to purchase necessaries is not voidable, and minors must fulfill their obligation under such contracts. A minor is liable only for the reasoanble value of necessary clothing actually received- for example, the reasonable value of necessary clothing purchased. Necessaries include anything related to a minor's health, education and comfort appropriate to the minor's standard of living. this is intended to protect minors. making contracts for neceddaries easily voidable would discourage people from entering into them. consequently, minors whose parents are unwilling or unable to provide for them would have difficulty obtaining what they need. However, contracts entered into by minors to obtain necessities may be voidable when their parents supply the necessities of life the concept of necessaries usually does not apply to tiems used for business purposes. Courts have held minors not liable under contracts for fire insruance and life insurance because these contracts are not necessaries. however, when a vehicle is one of a minor's necessaries, mandatory auto insurance could arguably be necessary for that minor Contracts involving minors are nonvoiable under several other circumstances. for example, if a minor has married, has assumed the obligation of a bail bond, or has the duty of child support, public polcy considerations require binding the minor to those commitments. Similarily, if a court has approved a contract for performance of services by a child, such as a child actor , the court will enforce the contract against the minor. In some jurisdictions, minors actively engaged in business pursuits are liable for contracts involving the conduct of those pursuits- for example,matters involving transferrinf stock, handling bank accounts, and obtaining loans for higher education a parent is generally not liable for a minor child's contracts. For a court to hold otherwise would permit indirect enforcement of a minor's agreement For example, if a minor contracts to purchase a boat and a parent has not become a party to the agreeemtn by signing or otherwise promising to assume the obligation, then the parent is not liable if the minor defaults. In contrast, a parent who has cosigned a minor child's contract is personally liable if the child fails to perform the contract obligations. The parent's liabilty is the same as that imposed on any other consigner who assumes liability for another's default However, the law does impose liabilty on a parent for a minor child's contracts in several other situations. For example, the parent is liable if a child has acted on the parent's benefit. Similarly, if a parent has neglected or refused to payfor necessaries for a child and the child contracts to purchase them, the contracting party can take legal action against the minor or the parent to recover the reaonsable value of the necessaries

Lapse of Time

offers don't remain open indefinitely. An offer ceases to be binding when the timing specified in the offer expires or, absent a specific time, when a reaosnable amount of time passes. What is reasonable depends on the contract's subject matter and the general commercial setting. For example, in an offer to sell perishable goods, the time span during which the goods remain fresh is a key facotr. After an offer is terminated, any attempt to accpet that offer becomes a counteroffer, which the original offeror can either accept or reject

adequacy of consideration

oscar has written a book and given it to Antonia read. Antonia, thinking the book is piblishable, offers Oscars $10,000 for the manuscript. Oscar accepts the offer. Before paying Oscar, Antonia attempts but fails to find a publisher,so refuses to pay Oscar.He then sues for the $10,000. Antonia defends against the suit on the basis that she received no consideration because the manuscript was not worth $10,000. A court rules Antoina' defense invalid because adequacy of the consideration is not an issue. The manuscript was sufficient consideration; that she could not sell it to a publisher is immaterial to the case. Antonia must pay the $10,000

contracts that must be in writing

some contracts are legally enforeceable only when agreed to in writing. For example, the Uniform Commercial code (UCC) requires that all agreements for commercial sales that are greater than $500 in value be in writing. Other examples are real estate leases or securitie, such as loans and mortgages real estate sale agreements are also required to be in writing throughout the US, but specific language regarding those requirements can vary from state

capacity to contract

some parties are considered incapable of entering into legally binding contracts. However, this general rue has some exceptions under certain circumstances. Because insurance policies are contracts, it's important for insurance professionals to understand the situations in which these exceptions arise only a competent party can enter into a legally binding contract and several parties lack the capacity to do so

those claiming insanity or incompetence

some people attempt to avoid liability under their contracts by claiming that they were insane or otherwise mentally incompetent when they entered into the contracts . Contracts of people who claim insanity but have not been adjudicated insane by a court are voidable, although they remain in full force and effect until avoided by the parties claiming insanity

consideration definition

something of value or bargained for and exchanged by the parties to a contract

executed contract

A contract that has been completely performed by both parties.

under five circumstances, genuine assent to a contract may be considered lacking:

1) Fraud- theintentional misrepresentation of facts that causes harm to a person or an organization. The offended party usually has the option of rescinding the contract or, in some circumstances, suing for damages 2) mistake-people can make mistakes regarding the facts of a transaction or laws affecting an agreement. While some mistakes do not affect the partis' rights, others can make an agreement voidable or unenforceable. 3) duress- a party who enters a contract under duress may have given genuine assent 4) undue influence- the improper use of power or trust to deprive a person of free will and to substitute his ir her objective with someone else's can remove the possibility of geniune assent. For example, an attorney may give advice to a client that benefits the attorney rather then ensures the best possible outcome for the client 5) innocent misrepresentation- often, innocent misrepresentation will look like fraud, in that important facts are inccorectly portrayed. The difference between fraud and innocent misrepresentation is that while the latter can lead to a contract being voided, monetary damages are not awarded for it. in these situations, courts do not uphold contracts and will sometimes award financial damages to the aggrieved parties

To avoid a contract, a person claiming insanity but not adjugded insane must prove one of these conditions:

1) the person did not know that a contract was forming 2) the person did not understand the legal consequences of acts purporting to form the contract

In the Form Required by Law

A contact must also be in a proper, legally stipulated form to be binding. Most people assume that for a contract to be valid, it must be in writing, but that's not true. in fact, many contracts are oral. However, these kinds of contracts almost always have to be in writing: - the sale of real estate - agreements that can't be performed within one year - transactions worth $500 or more involving personal property ( under the Uniform Commercial Code) - Agreements to pay a debt owned by another person - agreements where an executor of an estate promises to pay estate debts from personal finds when a contract must be in writing, a simple note, memorandum, or series of communication may suffice to create a legally binding contract- as long as there is evidence that a contract was created. States allow some forms of oral insurance contracts to be legally enforceable, but most insurance contracts end up being written because of their complexity. Writing requirements vary by state

counteroffer

A proposal an offeree makes to an offeror that varies in some material way from the original offer, resulting in rejection of the original offer and constituting a new offer.

insurable interest

An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred.

Elements of A Legally Binding Contract

For a contract to be legally enforceable, it must have these elements: agreement ( which includes the offer and acceptance), capacity( or the competence of all involved parties), mutual assent, consideration, legal purpose, and the form required by law. Here's a quick overview of each.

Offeror's Revocation

Generally, an offeror can revoke or withdraw, an offer any time before acceptance. But the revocation is effective only when it's communicated to and received by the offeree. Similarly, if the offeror mails a revocation but the offeree accepts the offer by phone before receiving the mailde revocation, a contract exists. For offer made to the general public, offerors must recoke those offers thorugh the same means of communcation they used to make the original offers. For example, if a person offers a reward in an advertisement. The revocation, once advertised, is effective even when someonw who has not seen the revocation tries to accept the originlal offer. in certain situations, an offer can be revoked by the offeror even if the offeror states that the offer is irrevocable for a specific period if, in a unilateral contract offer, the offeree has performed a substantial amount of the acts requested by the offer, most courts rule that the offer isreevocable. for example, MArie promises to pay JOhn $2,000 if John excavates Marie's property. John has completed one-thrid of the excavation when Marie attempts to revoke the offer. Once a substantial perforamance, like this occurs, most courts agree that the offer is reevocable, as long as the offeree performs the entire act within a reasonable period.

void versus voidable contracts

How do you distinguish void versus voidable? A void contract is one that can't be enforced by the law, and thus is not a valid contract. For example, a contract in which one party pays the other for commission of a crime would be void because it can't be legally enforced. Avoidable contract, however, is a valid contract which may be nullified by one of the parties. reasons for nullifying a contract would be that one party is a minor, or one party was coerced into agreeing the contract A voidable contract that is nullified then becomes a void contract

types of consideration, part 2

However, in some situations they will review the value of consideration if an agreement could be found to be unconscionable , such as if a large seller was charging an excessively high price to a small buyer that had no alternative but to accept the seller's price the second form of consideration to support a contract- and one that is commonly seen in cases of compromise- is forbearance, which is the act of giving up or the promise to give up a legal right. For example, a person injured in an automobile accident may have a right to sue for damages, but a promise to refrain from filing a lawsuit in return for the other party's promise to pay a sum of money constitutes forbearabce Forbearance can be valuable consideration even if it benefits the forbearing party. For example, if a grandfather promises to give $5,000 to his 16 year old granddaughter if she refrains from smoking, drinking or gambling until age 21, a court might hold the granddaughter's forbearance sufficient consideration to enforce the promise eventhough, in the long run, she would also benefit health-wise present and future consideration constitute the third and fouth types ofconsideration. To be characterized as valuable consideration, an act or a promise must involve a present or futrue commitment such as paying to purchasea car from someone. However, sometimes, because one party is a minor ( an thus unable to legally enter a contract), the promisor goes bankrupt, or the agreed-upon period for payment ends, an existing obligation may become unenforceable. In these situations, any new promises to pay the old debt will be found enforceable by most jurisdictions.

Offers that are not valid

Social invitations: if a person withdraw a social invitation or cancels a social event, the recipient of the invitation has no legal remedy because no contract exists Predictions - if a doctor predicts that a patient will be hospitalized for only a few days, but the patient ultimately needs to be hospitalized for much longer, the doctor's prediction is not an enfroceable promise Offers made in excitement or jest: - is a reasonable person would recognize that a statement was made in a jest or in the heat of ange, then acceptance of the statement does not create a contract. However, determining whether a statement was amde in excitement or jest isn't always easy and a contractual obligation may arise in some cases Note: courts consider all the circustances in a case to determine whether a statement could reasoably be considered an offer

those claiming insanity or incompetence, part 2

a party's being exxentric or epxeriecing delusions or intervals of insanity doesn't affect a contract in the absence of one of those conditions. Also, it's not necessary to show that a person is permanently insane, only that the individual was insane at the time of contract formation. contracts made by mentally ill people during lucid intervals are binding. A person confined to or receiving treatment in a mental institution could be competent to contract if he or she has not adjudged insane and does not meet one of these two conditions. only the incompetent or insane partyhas the power to avoid a contract. However, if the insane person has a guardian, then the guardian can avoid the contract. An insane party who has regained comptenecy can affirm a previously made contract. A party who has claimed insanity or mental incompetence and has avoided a contract must make full restitution if the other party acted in good faithand was unaware of the insanity insane people's liability for contracts for necessaries is the same as that for minors. To determine what constitutes necessaries, courts examine the individual's station in life, includingthe need for nursing and medical attention. for example, if the person is institutionalized, legal services to obtain release from custody can be necesary if an agreement benefits a person claiming insanity and the other party is unaware of the infriminty, the insane person can't avoid the contract. The party to a contract with an insane person can enforce the contract by proving these facts: - the sane party lacked knowledge of the insanity - the contract benefits the insane person

third-party beneficiary

a person who is not a party to a contract but who benefits from it and has a legal right to enforce the contract if it is breached by either of the contracting parties

offer

a promise that requires some action by the intended recipient to make an agreement

in pari delicto agreement

an illegal transaction in which both parties are equally at fault

competent parties

a valid offer and a valid accpetance form an agreement, but for that agreement to qualify as a contract, the parties to it must have legal capacity to contract. Capacity refers to one's ability to understand the consequences of one's action, enter into an enforceable contract and to sue or be sued A party who lacks legal capacity to contract is consdiered incompetent under the law. A party deemed competent to contract is one who has the mental ability to understand problems and make decisions. An incompetent person who enters a contract can challenge its validity by aruing that the agreement is avoidable contract. Successfully challenging a contract is referred to as avoiding the contract

Voidable and Void Contracts

a voidable contract is a valid contract that can continue in force, and the parties can execute it completely unless an innocent or injured party chooses to avoid it. The behavior of one of the contracting parties, such as an act of fraud or illegal decieit, can also make a contract voidable For example, if a party intentionally misrepresents an important fact relating to the contract, that can be an act of fraud- which makes the contract voidable. Similarily, a party who has entered into a contract as the result of duress, a form of compulsion, can avoid the contract within a reasonable time. However, an injurd party can ratify, or affirm, a voidable contract. For instance, if fraud or duress has occurred, the innocent party can nevertheless elect to abide by the agreement and hold the other party to the contract Some agreements are automatically void. The term "void contract" is contradictory because such an agreement never met the necessary criteria to be considered a contract. But courts use it to describe agreements that the parties intended to be contracts. Void contracts are not legally enforceable or binding. An agreemet to commit a crime, for example, is void and unenforceable because it is made for unlawful purposes

Unconditional and unequivocal acceptance

acceptances must be unconditional and unequivocal. Sometimes, however, they may contain wording that merely appears to be conditional but isn't. For example, a real estate buyer's acceptance that states, "Good title must be passed", may seem conditional, but it doesn't actually create a condition because the law requires a good title (legal ownership) in real estate transactions. In other words, a good title would have to pass regardless of whether the offeree sys so in the acceptance some acceptances include wording such as " Details will be worked out" whether this consititutes unconditional acceptance depends on the detials. If they are simply clerical, the wording can be considered unconditional. in contrast, if they relate to essential terms that are not et defined, and a court is unable to determine what terms would be, the acceptance can't be considered valid. For example, an offer to build a house and reply that accepts the offer " subject to details to be worked out" does not create a biding agreement because essntial elements are missing in addition to being unconditional, an acceptance must be unequiocal or clear. A vauge resonse can be equivocal or open to interpretation so it can't serve as an acceptance, counteroffer, or even rejection. For example, "I hope to have the cash for you next Friday morning" is not a definitive repsonse and its therefore meaningless in a contract negotiation

void contract

an agreement that despite the parties' intentions, never reaches contract status and is therefore not legally enforceable or binding

Exceptions to the Legal Purpose Requirement

as with most things in the law, there are expections to the rule that an illegal contract is unenforceable. these exceptions involve overriding consideration of equity or public policy a contract that might be illegal can still be enforceable under three types of conditions, each involving overriding considerations of equity or public policy: - when a specific group is protected by law, an illegal contract might be enforceable. For example, say a corporation unlawfully issues a type of stock. Under strict interpretation of guidelines for dealing with illegal contracts, the stock purchasers would have no recourse to recover their money. However, because of the imbalance of power in this situation and because the issuing company is more likely to understand its legal capabilities than the average stock purchaser, buyers are allowed to sue to reocver the money paid under the illegal transaction. Similarly, an insurer that issues an illegal policy can't use its own wrongdoing to defend itself in an insured's lawsuit to collect policy proceeds 2) in the case of in pari delicto agreements, if both parties are equally at fault, the contract is not enforceable. However, if the parties are equally at fault, the contract is not enforceable. However, if the parties bear significantly unequal degree of fault, an illegal contract might be enforceable against the party at greater fault 3) in a severable contract, failure to perform one promise does not necessarily put the promisor in breach of the entire contract. When contracts contain both legal and illegal provisions, courts can - at their discretion- enforce the legal parts. However, if the illegal provisions have tainted the entire transaction, a court may void the contract entirely courts will not aid a party in recovering a loss if that party knowingly entered into an illegal contract. However, some courts permit a party to repent before the completion of an illegal contract and to obtain return of any consideration paid. A person electing to repent an illegal act before consummating it can recover any money or goods transferred under the contract- but only if repentance occurs before the contract is performed

consideration

consideration goes hand in hand with mutual assent and is something of value that is given in return for a promise. It can be monetary or a promise to perform or refrain from an act Think of mutual assent and consideratiom this way. A contract has to be a two-way street in which both parties exchange something of value and agree on what will be exchanged

express and implied contracts

contracts are either express contracts or implied contract. In express contracts, the terms are clearly stated. This can be done orally or in writing. A roofing company agreeing to install a new roof on Mehmer's house for the payment of $4,000 is an example of an express contract because the terms are clearly stated and agreed upon by both parties Implied contracts are created by nonverbal, nonwritten conduct of the parties. They can either implied in fact contracts or implied in law contracts in an implied-in - fact contract, an unambiguous offer and acceptance have been made, such as through an ongoing but informal arrangement. Implied in law contracts are not actual contract and are sometimes called quasi contracts. These are obligations that do not arise from the parties' apparent intentions but from courts' notions of justice and equity in certain cases. In particular, they serve to prevent one party from being unjustly enrichde by the actions of another.

Contracts in Restraint of Marriage

contracts restraining the freedom to marry contrary to public policy and therefore illegal. Examples include these: 1) contracts between two persons to bring about or prevent the marriage of a third person 2) marriage brokerage contracts restraining the freedom of choice in entering into marriage it is possible, however, that a restraint on marriage incidental to another legitimate purpose may be valid. For example, people who promise not to marry until age twenty-one can enforce such contracts against parties who have promised to pay them to delay marriage. However, a similar contract that did not have a time limit would probably be unenforcable

artificial entities

corporations, although artificial creations of the state, are people in the eyes of the law. They can hold property, sue and be sued, commit crimes and tors and enter into contracts. the extent of a corporation's competence to enter into contracts depends on the scope of the power its charter grants. most states permit corporations to engage in any lawful business and do no restrict the types of contracts they can make. However, specially licensed and controlled corporations such as those in insurance, banking, and transportation are subject to different restrictions traditionally, an attempted contract that fell outside corporate powers was voidable as an ultra vires contract, meaning a contract "beyond its power" Either party could avoid such a contract while it was fully executory ( still unperformed). If either party had performed its part of the contract, however, the other party must perform. As for a fully executed contract, niether party could avoid the agreement even though an ultra vires act was involved. Most states have abolished the defense of ultra vires, but courts often use the term when discussing corporate concepts in written decisions

Defininte Terms

definite terms required to make an agreement enforceable because such terms make it possible to determine whether the parties have fulfilled their promises. They also facilitate the calculation of damages if the contract is breached an offer's terms must be stated with at least a reasonable degree of certainty. reasonable certainty generally means identifying the contracting parties, the contract's subject matter, the price, and when an act will be performed. But an offer isn't necessarily invalid if one or more of these elements is missing Courts may ask whether the offer's terms are clear enough to provide a basis for a remedy if a breach occurs. If necessary, a court may attempt to supply missing terms. For example, if the parties don't designate a time to perform an act, a court may consider the circumstances of the case and find an implication that the act was to performed within a certain time. If the offer is definite enough to determine the parties' intentioned, then a court can enforce the offer, even if some terms must be inferred. however, if the parties to an agreement or its subject matter can't be idenitfied, the terms are considered indefinite, and the offer is impossible to accept contracts to do business with one supplier, called requirement contracts, are usually enforceable even though the need for the goods might never arise. For example, Allen's promise to buy "all steel required" from Anu is definite enough to enforce- Allen promises to buy all steel required from Anu, and Anu promises to sell Allen the steel. In contract, if Anu promises is too indefinite to provide a remedy in court because of the fact that Anu might not wish to supply any steel

Duration and Termination

duration and termination are key to determining whether an offer is valid. Facotrs considered include lapse of time, operation of law, offeree's rejection, counterofferes and offeror's revocation

minors

each state has its own statute setting the age of majority for contracts. The most common age of majority is eighteen. The law protects minors from disposing of their property while they are underage Generally, minors can assert their minority as a defense against liability in contracts. Even if a minor misrepresents his or her age to induce another party to enter into a contract, the minor can avoid the contrac. In this case, however, the other party can also avoid the contract on the grounds of misrepresentation minors can avoid contracts during minority by any expression of intent to renounce the agreement. In addition, any act inconsistent with the contract constitutes avoidance. For example, a minor who contracts to sell property to one person but sells it to another immediately after reaching the age of majority has effectively avoided the original contract. if a minor has not avoided, a contract within a reasonable time after coming of age, most court hold that the minor has ratified the contract. What constitutes a reasonable time is a decision for the court

usury contracts

each state limits the amount of interest lenders may charge for loans. Any contract allowing a lender more than the maximum legal interest is a usury contract and is illegal. In most states, a lender that has charged an illegal rate is barred from collecting interest on the loan but can still recover the principal amount loaned. Other states permit recovering interest up to the maximum legal rate.

Requirements of A Valid Acceptance

establishing the agreement needed to create a contract requires not only a vali ofer but also valid acceptance of that offer. There are several requirements that must be fulfilled to have a valid acceptance to establish a contract that is legally enforceable, the parties involved must mutually agree to the same terms. This requires the offeror to present the offer and the offeree to accept the offer properly to understand hat constitutes a valid acceptance, it's necessary to differentiate between legally binding contracts and simple argreements. these are the requirements needed to establish a valid acceptance when forming a legally binding contract: the offer must be accepted by the offeree, the acceptance must be unconditional and unequivocal and the offeree must appropriately communicate acceptance to the offeror

contracts to transfer liability for negligence

exculpatory clauses are sometimes include in contracts by one party to relieve itself of responsibility for its own negligence. Courts often find these clauses illegal because they are contraty to public policy, especially when the other party is at a bargaining disadvantage. For example,it's unlikely a court would enforce a clause in a residential lease excusing the owner from liability if the building burns down because of the owner's negligence Common carriers, such as trains, airlines and bus lines often attempt to limit their liability for negligence as do certain public utilities and other monopolies. Such limits are prohibited unless permitted by statute, administrative agency ruling or international agreement. The lack of equality of bargaining power between a large and powerful entity and the relatively powerless consumer is an important consideration in determining the legality of limits to liability hold-harmless agreements or indemnity agreements are another form liability transfer. in contrast to exculpatory clauses, hold-harmless agreeements are generally accepted as viable provisions obligating one party to assume another party's legal liability in the event of a specified loss. For example,a snowplow operator might agree to accept a parking lot owner's liability for any damage to parked autos that occurs because of the plow driver's actions

types of consideration

five types of consideration are sufficient to form an enforceable contract, and each type has its own set of legal rules: 1) valuable consideration 2) forbearance 3) present consideration 4) future consideration 5) binding promise the first, valuable consideration, is the amount of consideration necessary to support a valid contract. Usually, courts will not inquire into the adequacy of valuable consideration. In a basic sense, the courts aren't concerned if people are willing to overpay or underpay for an item.

legal purpose of a contract

for a contract to be binding, its purpose must be legal. A contract written to sell illegal narcotics from one party to another would not be legally binding, for example. To determine whether a contract is legally bindin, it's necessary to have an understanding of the types of contracts that are illegal a contract is illegal when it conflicts with constitutional, statutory or case law or public policy. In most circumstances, an illegal contract is void, and neither party to an illegal contract can recover damages for breach of contract or seek recovery for the value of partial performance but as with almost all rules, there are execptions. Some overriding considerations of equity or public policy may nullify the legal purpose requirement

capacity

for a contract to be legally binding, all parties who enter into it must be mentally competent- that is, they must be able to understand the nature and consequences of the agreement those who do not typically meet this requirement include minors, insane or tonicated individuals and artifical entities ( such as insurers) that are restricted from entering into certain contracts

genuine assent

for a contract to have genuine assent, the involved parties must've intended to form the contract, as evidenced by their words or actions For example,let's say that two friends, Samuel and Erin are having lunch when Erin mentions that she'd like to owna business someday. Samuel, who owns a small retail store but has been complaining about the long hours, offers to sell her his store. Over lunch, they work out the details and write up a contract for the sale on a bank piece of paper if both Erin and Samuel were satisfied, then the hastily written contract could be onsidered valid. But even if Samuel thought they were just joking and he was participating only because of his wry sense of humor, the contract may still be valid. This is because Samuel's words and actions could be interpreted as showing that he did intend to enter an actual contract, whether he thought the process was a joke or not.

Consideration

for the element of consideration to be represented in a valid contract, the promisor must receive a legal benefit, such as money, or the promisee must suffer a legal detriment, such as inconvenience, loss or relinquishment of something of value. The consideration necessary to make a promise enforceable can be a return promise, an act performed, or forbearance from acting

Intoxicated people

generally, a person can't avoid a contract if he or she was intociated, by use of either alcohol or drugs, when entering the contract. the law usuallt does not protect people from their owne follies. case law has softended this rule,however, and exceptions have developed that makes contracts voidable if the person's judgement was impaired, using the same conditions applied to case of insanity: - the person did not know that a contract was forming - the person did not understand the legal consequences of acts pruporting to form the contract additionally, if one party to a contract has purposely caused the other party to become intociated to obtain an unfair advantage, the innocent party can avoid the contract> in most states, courts can adjudge people as habitual drunkards, just as they can adjudge them insane. Adjudication is a matter of public record and serves as notice to the public that contracts such as person attempts to make are void. in such cases, the other party to the transaction can't calim lack of knowledge of the party's condition. Conversely, if a contracting party has no knowledge of the other party's intoxication, the contract may be enforceable a person whose judgement was impaired because of intoxication when entering into a contract can either avoid or ratify the contract upo becoming sober. However, the other party can claim lack of knowledge of the person's condition to avoid the contract. the party who avoids a contract can't later retract the avoidance and must return any items of value received

types of illegal contracts

if a contract is illegal when it's first agreed to, it's always illegal. Conversely, if a contract is legal at the outset but later becomes illegal as a result of a statute or court decisions, then neither party needs to continue honoring the contract. The parties could recover the value of their performance that occurred while the contract was legal , but they would not be entitled to any recovery for acts that took place after the contract became illegal for example, let's say a contractor was hired to insulate to building with a sepcific material. Halfway through the job, the material specified in the contract is outlawed because of possible negative healtheffects. At the moment, both parties are released from the contract's requirements, but the contractor is entitled to payment for completed work the nine categories of illegal contracts will be discussed next.

timing of acceptance

if acceptance is neither triggered by performance or nonperformance of a specified act nor specified in the offer, questions can arise about when the acceptance actually becomes effective in most cases and jurisdictions, the acceptance is effective as sson as it leaves the offeree's possession, as long as it's sent in an envelope or package that's properly addressed to the offeror with prepaid postage. This notion is based on the traditional "mailbox rule" which says that acceptance by mail is effective when the letter is transferred to the control of postal authorities. This acceptance is effective even if it never reaches the offeror and aplies to all communication services, regardless of whether they're under the offeree's control For example, a contract is created when accpetance is given to a private messenger to deliver to the offeror. when it's faxed to the offeror's number, or when it's verbally conveyed as appropriate and applicable some jurisdictions, however, mandate that acceptance is given to a private messenger to deliver to the offeror, when it's faxed to the offeror's number, or when it's verbally conveyed, as appropriate and applicable some jurisdictions, however, mandate that acceptance is effective only after the offeror has received it from the offeree. Jurisdiction's rules also vary on when an offeree's acceptance sent though email becomes effective. Courts often find that communication of acceptance occurs when an email is sent, unless the circumstances dictate that actual knowledge of the acceptance by the offeree is important An offeror can expressly state that an offer is conditional upon receipt of the acceptance. For example, Amy mails an offer to lease land to Callum ,stating :send me a yes or no answer. If I do not hear from you by noon on Wednesday, I will conclude that your answer is no" Callum mails an acceptance, but Amy does not receive the letter until after noon on Wednesday Callum and Amy have not formed a contract because Amy didn't receive the acceptance within the period she prescribed if the offeree simply tells a third person about accepting the offer, the acceptance is not valid. Also, an offeree can't withdraw or revoke an acceptance once it's made uness conditions for doing so have been established

Contracts Harmful to Public Interest

if an agreement is harmful to the public interest, such as an agreement to buy or sell a public office, a court may find it illegal. Similarly, agreements to procure government contracts illegally and agreements to contribute to political campaigns in amounts that exceed legal limits are contrary to public policy and therefore void. ininsurance contracts, public policy requires the insured to have an insurable interest are illegal and void; they are conisderd wagering contracts because they gamble on others' lives or property for example, a person who would purchase property insurance on his or her neighbor's house is likely hoping it will burn down. This increases the likelihood of intentional harm or destruction. In property- casualty insurance, the insurable interest must exist at the time the loss occurs. for life insurance, the insurable interest in a life must exist at the time the applicant obtains insurance coverage. An insurable interest exists only if the potential beneficiary receives economic benefit from the relationship with the covered person, such as by blood or marriage For casualty insurance, potential legal liability represents a party's insurable interest. For example, a gossip columnist may have reason to purchase a professional liability policy in casse he or she is sued for libel. The columnist's neighbor, however, would not have an insurable interest in purchasing a similar policy on the columnist because the neighbor would not be responsible for any libel the columnist committed.

Offeree's communication of Acceptance

if an offer contains strict provisions on how the offer must be accepted- such as by stipulating a deadline, place or form of acceptance- the offeree must comply with those provisions to achieve valid acceptance. If the offer doesn't specify how it must be accepted, the offeree can coney acceptance in just about any reasonable manner that is used in similar circumstances what the offeree must communicate depends on the type of offer. Most offers are bilatreal in the sense that they require a return promise from the offeree. When it's unclear whether the parties intended a unilaterla or bilateral contract, courts usually rule in favor of bilateral With bilateral contracts, acceptance isn't complete until the offeree provides the offeror with the requires return promise. The offeror can revoke the offer at any time until the offeree communicates the return promise to the offeror or the offeror's agent while bilateral contract offers are usually accepted in the form of the offeree providing a return promise, the offeree can instead choose to perform the act requrested as a form of acceptance for example, say Sofia write to Barry " I'll pay you $1,000 if you'll promise to paint my garage by June 1". barry doesn't necessarily have to reply to the letter to accept the offer. If he proceeds to paint Sofia's garage with her knowledge and completes the work before June 1, a court would likely conclude that a bilateral contract was formed

offeree's communication of acceptance, part 2

in unilateral contracts, the offeror seeks either performance of a specified act or forbearance from the offeree as acceptance of the offer. The offeree doesn't have to communicate acceptance because, presumably, the offeror will learn of the offeree's acceptance when the offeree performs the specified act. Still, in some cases, an offer may stipulate that the offeree notify the offeror when the specified act has been performed problems can arise if the offeror revokes the offer while the offeree is still performing the specified act. Most courts hold that an offeree's substantial performance suspends the offeror's right to revoke the offer but that the offeree must complete the act within a reasonable amount of time. Generally, preparing to perform a specified act does not qualify as substantial performance

Operation of Law

sometimes, an outstanding offer can be terminated by operation of law, which means that rules of law apply atomatically to a situation, without any act by the parties. Any one of several events that can occur before an offer is accepted might trigger termination. For example, an offer is terminated by operation of law if the activity offered becomes illegal after the offer is made. If a law is passed that prohibits selling certain godds, then a preexisting offer to sell those foods would be automatically terminated by the enactment of the law. Similarly, if the subject matter of an ooffer is destroed before acceptance, the offer terminates at the time of desstruction, even if the offeree does not know about the destruction also, if an offeror or offeree dies or is formally declared insame before an offer is accepted, the offer is automatically terminated by law. For example, Andre wirte to Angela to offer to sell her his home. Andre dies before the letter reaches Angela. Andre's offer automatically terminated when he passed away Once a contract arises, death or insanity will terminate it unless it involved the deceased or insane party's personal or professional service. A contract not involving personl or professional services is enforceble against the deceased party's estate

contracts with unliecensed practitioners

state statutes require people engaged in particular trades or ocupations- such as lawyers, doctors, dentists or barbers- to have licenses. These laws are designed to protect the public against unqualified and incompetent people performing specialized services if a person engages in a occupation without a reqquired license, the implief contract is illegal and the recipients of the person's services can refuse to pray for them. The licensing laws that apply in a given situation are those of the state in which services are performed. For example, a surveyor licensed in one state can't sue to recover a fee for work performed under contract in a defferent state where he or she is unlicensed

forbearance

the act of giving up or the promise to give up a legal right

acceptance

the assent to an offer that occurs when the party to whom an offer has been made either agrees to the proposal or does what has been proposed

usury

the charging of an illegally high rate of interest on a loan

breach of contract

the failure, without legal excuse, to fulfill a contractual promise

agreeement

the first element is an agreemet between all parties. An agreement must include an offer and its acceptance to create a legally enforceable contract, the offeror ( party making the offer) must use language that clearly establishes a desire to create a binding contract with the offeree the offer can be a demand or promise, made orally or in writing to one person, a group or class of people, or the public. It must include definite terms, such as a price, quantity and/or delivery date of specifc goods or services, so that all parties can easily determine whether agreed-to terms have been fulfilled. Finally, the offer must be communicated to and received by, an offeree acceptance requires the offeree to agree the to the offer unconditionally and unequivocally . If the offeree reqeusts changes to conditions of the offer, the offer becomes a counteroffer; in such an instance, the original offeror needs to accept the counteroffer for it to become a binding contract if an offeree's acceptance does not comply with specified terms, it is not valid. For example, if the offer requires acceptance in writing, the offeree must comply

contracts: what's necessary to have a valid agreement

the first element needed for a contract to be legally binding is a valid agreement For an agreement to be valid, it must include these: Offer: intent to contract, definite terms, communication to the offeree acceptance: acceptance by the offeree, unconditional and unequivocal acceptance, the offeree's communication of acceptance

Intent to Contract

the first essential requirement of an offer is the intent to contract. The offeror must intend or appear to intend, to create a legally enforceable conract with the offeree in the event that the offeree accepts the offer. the offeror's language is the most important factor in determining whether a communication is an offer. A valid offer must be a prmoise, so words of promise are definite, explicit and umambiguous. Without specific words of promise, the communication is only a general statement of intention or an invitation for an offer intent to contract can be tested by considering how a reasoable person would interpret the language describing the intent, not the party's actual intent if a general statement of intention conveys no words of promise, it is not an offer. Say, for example, that Anne says to Miguel "I'am going to sell my car for $5,000. and Miguel replies "All right, I'll pay $5,000 for your car". Have Anne and Miguel created a contract? the answer depends on whether, under the circumstances, a reasonable person would conclude that Anne intended to promise to sell her car specifically to Miguel. A reasonable would not draw that conclusion in this case, as Anne's statement expresses only an intention to sell her car in the future and does not make an explicit offer to Miguel. therefore, a contract was not made. If anne says to Miguel, " I will not sell my property for less than $20,000 and Miguel replies, " I accept your offer", there is no contract. A reasonable person would not conlcude that Anne's statement of a minimum price was a promise to sell at the figure mentioned. Now. if Anne says " Migue, I agree to sell my property to you for $20,000" and Miguel accepts, a reasonable person would likely conclude that Anne is promising to sell her property to Miguel Some communications are intended to induce others to respond with offers, such as Anne mentioning her desire to sell her car. But considered on their own, these communications are not offers because they express no present intent to create a contract. Most advertisements, catalogs, and sales letters meet this description. They are considered invitations to negotiate or to make an offer. However, some advertisements do constitute offers that would create a contract if accepted by a customer. For example, an advertisements for a store that indicates that the first customer to enter the store can buy specific goods at a specific price has made a promise and described circumsntaces under which a customer could purchase the goods ( the conditions of acceptance). now, when the first person who enter the store agrees to buy the goods, a contract is formed a party that asks for offers is free to accept them or reject them. In construction, for example, a project owner can ask for bids and then elect to accept one or reject them all. In addition, a bidder can withdraw its bid at any time before it is acceoted and the party requesting bids can accept any bid, regardless of whether it's the lowest (unless the party is required by law to accept the lowest bid)

Requirements of a valid offer

the first thing needed to create a legally binding contract is an agreement between the parties. An agreement includes a valid offer and valid acceptance. Several requirements must be met for an offer to be valid an offer can be made to a person, a group or class of people, or the public. An offer is valid if it inlcudes these requirements: an intent to contract, definite terms and communication to the other party. duration of an offer and when it can be terminated are also key factors for determining whether an offer is valid.

consideration in insurance contracts

the insurance contract, like any other contract requires valuable consideration. The insurer's consideration is its promise to indemnify or pay on behalf of an insured for loss resulting form a covered occurrence. the insured's consideration is the premium payment of the promise of premium payment. an insured's obligation to pay a property-casualty insurance premium differ from the obligation to pay a life insurance premium. In property- casualty insurance, prepaying the premiumis not a condition necessary to make the contract valid. in life insurance, the application or the policy itself usually provides that the insurance will not take effect until the purchaser pays the first full premium in property-casualty insruance, if an imsured suffers a loss before paying a premium at the outset of a policy period, an insurer can't refuse to pay based on lack of consideration. Payment of the entire premium becomes an obligation as soon as the coverage begins. Howecer, parties can agree for example, that the insured will pay the premium for an annual policy on a monthly basis. Even so, the premium is generally due and payable at the beginning of the agreed -on period. Any premium owed becomes the insured's debt. Cancelling the policy during the coverage period requires an appropriate adjustment for collecting earned premiumm or refunding unearned premium in life insurance,the policyholder has no duty to pay premium after payment of the first premium, but nonpayment of premiums can result in forfeiture of policy rights. the insurer may have the right to avoid the life insurance policy. if the policyholder has paid premiums for a number of yeras, the insurer might have to return any accumulated cash values to the insured at policy termination.

Offeree's Rejection

the offeree's rejection of the offer terminates it. A rejection occurs when the offeree notifies the offeror of an intention to not accept the offer. An offeree may reject an offer either by expressly refusing to accept it or by making a new offer to the offeror. Once the rejection is communciated, the offeree can't attempt to accept the offer. Any such attempt then becomes a new offer, which must then be accepted by the original offeror

Acceptance by Offeree

the offeror has the right to choose with whom to contract, and only the offeree can accept an offer. For example, if Dan dies after receiving an offer from Alan, the executor of Dan's estate can't accept the offer. The offer's has the right to choose with whom to contract and only the offeree can accept an offer. the offer's language and circumstances establish the identity of the offeree. Say, for example, janet promises to sell and deliver books to Lisa if Lisa' father promises to pay $100 for the books. Lisa's father is the offeree, because he has to make the return promise. Therefore, only he can accept the offeree. When an offer is made to a particular group, any member of that group can accept it. if an offer is amde to the public, as in the case of a reward advertisement, anyone can accept it. An acceptance xpresses the offeree's consent to the offer's terms but the offeree doesn't have to use the word "accept" for acceptance to take place. The offeree can use any language that shows he or she agrees to the proposal

promisor

the party to a contract making a promise

promisee

the party to a contract to whom a promise is made

offeree

the party to a contract who makes a promise or acts in return for something offered by another party

substantial performance

the performance of the primary, necessary terms of an agreement

privity of contract

the relationship that exists betwen the parties to a contract

restitution

the return of specific property by court order

duress

the use of restraint, violence, threats of violence or wrongful pressure to compel a party to act contrary to hir or her wishes or interests

Legal Purposes

this may seem obvious, but for a contract to be legally enforceable, it must serve a legal (rather than illegal) purpose. Courts will likely consider a contract illegal if it purpose runs counter to the law or public policy ( as defined by the courts) for example, a contract that says William will pay $1,000 to Charles for supplying illegal drugs is not legally enforceable because selling the drugs is against the law. Another example is an agreement to pay a bribe to a government official in exchange for receiving a government job. This contract would not be enforced by h the courts because such activity is against public policy

What is not valid consideration?

three types of consideration are insufficient when it comes to forming a binding contract: 1) past consideration- an action that is completed or a product delivered before a contract is actually formed can't be use as consideration. for Example, if a person mows a lawn without the proprety owenr's knowledge, the owner's subsequent promies to pay for the work is not enforceable. Similarly, suppose that a person makes a wooden rocking horse for his neighbor, who later offers to pay for the materials used. The rocking horse exchanged for the neighbor's promise represents a past consideration and is not sufficient to create an enforceable agreement. 2) promise to perform an exisitng obligation- a promise to perform an act that the promisor is already legally required is not consideration. For example, a police officer's promiseto the public to arrest a criminal is not enforceable because it represents pat of the officer's job 3) compromise and release of claims- generally, partial payment of money owed is insufficient consideration to discharge on original obligation. When a debtor owes $1,000 and promises to pay $500 if the creditor will accept that amount as full payment , the promise is not binding. In some situations, however, a promise to accept less than the original amount ca be binding, such as when a creditor communicates to debtor that it will accept less than the amount owed in the form of an earlier payment. other examples, include bond fide, or good-faith, disputes about the amounts of money owed; when several creditors join and each agrees to tkae a certain percentage of the original obilgation owed; or accord and satisfaction

mutual assent

to be enforceable, contracts require mutual assent. This is the act of two or more parties deliberately negotiating all terms to achieve consensus. The corresponding agreement forms the basis of the contract

legally Binding Contracts

to create an effective, binding contract, you need to understand what elements are needed to create a legally enforceable agreement and the different types of contracts contract- legally enforceable agreement People enter into agreements for many purposes, but not all agreements are legally binding contracts Each party to a contract may be both a promisor and a promisee. When two or more parties enter into a conotract, they are said to be in privity of contract ordinarily, a party can't sue for breach of contract without being in privity of contract with the other party. However, contracts frequently involve third parties' interests. A third-party beneficiary of a contract has legaly right to enforce the contract in the case of a breach of contract by either of the contracting parties

types of consideration, part 3

to illustrate: when sha was 17, Francine promised to buy a car from Lakshimi for $7,000. francine's promise was unenforceable because she was a minor. upon reaching age 18, Francine makes a new promise to pay the $7,000 owed on the car. Frnacine's new promise is enforceable a new promise to pay a debt previously unpaid because of bankurptcy is enforceable without any additional consideration. The promisor must clearly express the promise to pay, and some states require renewal promises to be in writing the final type of consideration is a binding promise. for example, a promisor's agreement to buy from the promisee all the coal the promisor requires during a specified period is a binding promise. Similarly, a company's promise is a binding promise in each case, the question is whether any requirements or outputs are involved. If some level of previous output has been established or an exptected requirement fulfilled between the parties, then the promise to continue meeting those requirements or providing the output is sufficinet consideration. However, if the promisor does not anticipate any need for coal, then the promise to buy what it needs from one source is illusory and does not qualify as consideration

silence and complaints

typically, an offeree's silence is not an aceptance, regardless of any language in the offer that aims to note otherwise. But, in some circusmtances, the parties' prior delaing may impose a duty to reject a current offer to avoid acceptance For example, say two parties have a long-standing agreement in which the seller sends goods to the buyer and the buyer pays the seller after receiving them. under this arrangement, if the buyer receives a shipment that wasn't ordered, the buyer would have to reject it to avoid having to pay for it. In this case, silence would indicate acceptance A complaint does not negate an acceptance. For example, a valid acceptance results even if an offree replies to an offer by writing , " your price is unfai. If I didn't urgently need the property, I would never accept at this price. Enclosed is my check for the unfair amount you demand

Contracts in restraint of Trade

under statutory and common law, contracts that unreasonably restrain trade or strfle competition are illegl and void. Such issues often arise in the sale of businesses and in employment contracts for example, in the sale of business, a contract provision may require the seller to refrain from opening a new business within a certain distance and time to compete with the buyer. Whether such a restriction is legal depends on its extent. If the restriction bars the seller from ever again competing in the same business or in a particular area, it will likely be found unreasonable and invalid. But if the restriction prohibits the seller only from competing with the buyer for one year and within two miles of the business sold, it will likely be enforceable similarly, noncompete agreements are generally enforceable if the restrictions is necessary to protect the employer and is reasonable regarding the time and distance constraints on the employee

wagering contracts

wagering ( gambling) contracts depend on the occurrence of an uncertainevent, such as a bet placed on the outcome of election. In most states, these contracts are unenforceable, but determining whether a contract involves wagering can be difficult for example, futures contracts in the commodity markets are legal. These contracts are unforceable, but determining whether a contract involves wagering can be difficult for example, futures contracts in the commondity markets are legal. These contracts generally include hedging transactions, making simulaneous contracts to purchase and sell particular commodities at a future date. The intention is that a gain on one transaction will offset a loss on another. Those contracts protect against market price fluctuation and are not considered though they're precipitated on undertermined events.

assent and consideration

when it comes to creating a contract that is binding for both parties, two of the elements that must be present are genuine assent and consideration failing to secure both of these could nullify a contract or result in awarding financial damages to one of its parties assent and consideration are critical to ensuring that both parties have entered into a contract in good faith. In this way, these elements protect individuals from parties with ill intent

Liability Transfer in Bailments

when the owner of personal property (bailor) temporarily gives that property to another person ( bailee), the transaction is a bailment. For example, a customer (bailor) entrusting car keys to a parking attendant (bailee) or a coat to a checkroom attendant are bailments bailees' attempts to disclaim liability for negligence raise illegal contract issues. The bailee of the goods generally has a duty to exercise reasonably care under all circumstances. Many bailees attempt to limit their liability for negligence in such places as parking lots or coat checkrooms by placing notices disclaiming liability for lost or damages property on the receipts for the goods. Some courts hold these clauses to be illegal because the limitations could encourage all bailees to attempt to restrict liability, a result contraty to public policy

Exceptions to the Consideration Requirement

while consideration is a key component of most contracts, some contracts are enforceable without it. Generally, this can happen for equitable or public policy reasons, or because state laws highlight certain exceptions. For example, gratuitous promises ( promise to make gifts without condiseration in return) are generally unenforceable. However, inequities resulting from the application of this rule led courts to develop the concept of promissory estoppel It applies when three elements are proved: 1) a party has made a promise expecting another party to act, or to forbeat from acting, in reliance on that promise 2) the other party has justifiably relied on the promise to his or her detriment and acts or forbears from acting 3) only enforcement of the promise would achieve justice under the doctrine of promissory estoppel, a court seeks to grant whatever remedy is necessary to prevent injustice or substantial economic damages. For example,let's say a business owner, Sota, promised to employ Maria for an indefinite amount of time. Maria, who lived 1,000 miles away, incuured considerable expense to move closer to Sota's company because of this promise. When Maria arrived at Sota's office to accept the job, Sota reneged on his offer of employment. Because she relied on Sota's job offer as a reason to relocate, Maria can sue Sota for damages even thought she provided no valuable consideration in exchange for the promise of a job in the instance of charitable subscriptions or other forms of montary pledge to charitable organizations that depend on vlountary contributions, the obligation to follow through is more than a gratuitous promise to make a gift. In this situation, some courts apply the doctrine of promissory estoppel on the basis that the organization has relied on the pledge to its detriment by undertaking projects the pledge would support and that injustice would result if the promise were not enforced. However, in practive, many pledge solicitations include statements that the pledge is not legally binding