law chapter 7
offeree 134
the party to whom the offer is made.
informal contract 135
(also called simple contracts) include all other contracts. No special form is required (except for certain types of contracts that must be in writing), as the contracts are usually based on their substance rather than their form. Typically, businesspersons put their contracts in writing to ensure that there is some proof of a contract's existence should problems arise. A contract that does not require a specified form or formality to be valid.
promisor 133
(the person making the promise)
promisee 133
(the person to whom the promise is made) may decide to honor their agreement for other reasons. A person to whom a promise is made.
quasi contract 136
*** misleading in a contract contracts implied in law, are wholly different from actual contracts. Express contracts and implied contracts are actual or true contracts formed by the words or actions of the parties. The word quasi is Latin for "as if" or "analogous to." Quasi contracts are not true contracts because they do not arise from any agreement, express or implied, between the parties themselves. A fictional contract imposed on the parties by a court in the interests of fairness and justice; usually imposed to avoid the unjust enrichment of one party at the expense of another. ****Fictional, equitable remedy created by court to avoid unjust enrichment of one party. Plaintiff can recover in quantum meruit. CASE 7.2 Sheerer v. Fisher (2010). How did the plaintiffs prove a valid claim for a quasi contract? ***Limitations on Quasi-Contractual Recovery. When a contract already exists, quasi contract cannot be used.
contract 133
>> referred to as K and are objective (four connors) must have at least 2 people bargain for exchange an agreement that can be enforced in court. It is formed by two or more parties who agree to perform or to refrain from performing some act now or in the future. Generally, contract disputes arise when there is a promise of future performance. An agreement that can be enforced in court; formed by two or more competent parties who agree, for consideration, to perform or to refrain from performing some legal act now or in the future. ****Promise or set of promises,For breach of which, The law provides a remedy, or The performance of which the law in some way recognizes as a duty.
executed contract 136
A contract that has been fully performed on both sides A contract that has been completely performed by both parties.
executory contract 136
A contract that has not been fully performed on either side If one party has fully performed but the other has not, the contract is said to be executed on the one side and executory on the other, but the contract is still classified as executory. A contract that has not as yet been fully performed.
implied contract 136
A contract that is implied from the conduct of the parties also refered to as implied-in-fact contract. This type of contract differs from an express contract in that the conduct of the parties, rather than their words, creates and defines at least some of the terms of the contract. Normally, if the following conditions are met, a court will hold that an implied contract was formed: 1. The plaintiff furnished some service or property. 2. The plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected (by using the objective-theory-ofcontracts test discussed on page 133). 3. The defendant had a chance to reject the services or property and did not. A contract formed in whole or in part from the conduct of the parties (as opposed to an express contract). Also known as an implied-in-fact contract.
Requirements of a Valid Contract:
Agreement (Offer & Acceptance). Consideration: bargained-for-exchange. Contractual Capacity. Legality: purpose of contract must be legal at the time of execution.
types of contracts
Bilateral - a promise for a promise > unilateral -promise for an act formal requires a special form for creation > informal - no special form for creation Express- formed by words >implied -formed by the conduct of the parties
Objective Theory of Contacts.
Circumstances to determine intent of parties. Objective Facts include: What a party said when entering into the contract, How the party acted or appeared (intent may be inferred), and Circumstances surrounding the transaction.
Sources of Contract Law.
Common Law for all contracts except sales and leases. Sale and lease contracts - Uniform Commercial Code (UCC).
Contract Performance.
Executed - A contract that has been fully performed on both sides. Executory - A contract that has not been fully performed on either side.
Express versus Implied Contracts.
Express: oral or written. Implied: conduct creates and defines the terms of the contract. Requirements: PL furnished good or service PL expected to be paid DEF had chance to reject and did not.
Contract Formation
Formal versus Informal Contracts. Formal: must be in writing to be enforceable. Informal: all other contracts.
Plain Meaning Rule.
If language is clear from face of contract, court will enforce a contract according to plain terms. If language clear, court cannot consider extrinsic evidence.
unilateral contract 134
If the offer is phrased so that the offeree can accept only by completing the contract performance, a "promise for an act." In other words, the contract is formed not at the moment when promises are exchanged but rather when the contract is performed. A contract that results when an offer can be accepted only by the offeree's performance. *** promise to pay for an act in the future Offeror is bargaining for performance. Offeree accepts by completing contract performance ("a promise for an act"). CASE 7.1 Schwarzrock v. Remote Technologies, Inc. (2011). Did the employer owe the bonus. Revocation of Offers for Unilateral Contracts: Offeror cannot revoke promise once performance has begun, for a reasonable time period.
bilateral contract 134
If the offeree can accept simply by promising to perform, the contract is a "promise for a promise." An example of a bilateral contract is a contract in which one person agrees to buy another person's automobile for a specified price. A type of contract that arises when a promise is given in exchange for a return promise. ***Offeror accepts Offeree's promise to perform ("a promise for a promise").
quantum meruit 137
Latin phrase meaning "as much as he or she deserves." Quantum meruit essentially describes the extent of compensation owed under a contract implied in law. The following case illustrates an application of the principle of quantum meruit.7.2 An expression (meaning "as much as he deserves") that describes the extent of liability on a quasi contract. An equitable doctrine based on the concept that one who benefits from another's labor and materials should not be unjustly enriched by them but should be required to pay a reasonable amount for the benefits received, even if there is no contract.
Interpretation of Contracts
Other Rules of Interpretation. What did the parties WRITE in the contract? Courts will generally not remake the contract into what the parties' claim their intent was when they made the contract. Ordinary usage of terms. Trade Usage, Custom, Prior Dealings. CASE 7.3 U.S. Bank, N.A. v. Tennessee Farmers Mutual Insurance Co. (2009). What words in the insurance contract were most persuasive to the court?
Function of a Contract.
Provides stability and predictability for commerce.
Contract Enforceability.
Valid: agreement, consideration, contractual capacity, and legality. Voidable (unenforceable): Valid contract can be avoided or rescinded based on certain legal defenses. Void Contracts: no contract was ever formed. Neither party has any legal obligations nor any legal rights.
Defenses to the Enforceability of a Valid Contract:
Voluntary Consent. Form: some types of contracts must be in writing.
voidable contract 136
a valid contract but one that can be avoided at the option of one or both of the parties. The party having the option can elect either to avoid any duty to perform or to ratify (make valid) the contract. If the contract is avoided, both parties are released from it. A contract that may be legally avoided (canceled, or annulled) at the option of one or both of the parties.
promise 132
an assertion that something either will or will not happen in the future. An assertion that something either will or will not happen in the future.
formal contract 135
contracts that require a special form or method of creation (formation) to be enforceable. For example, negotiable instruments, which include checks, drafts, promissory notes, and certificates of deposit (see Chapter 16), are formal contracts because, under the Uniform Commercial Code, a special form and language are required to create them. Letters of credit, which are frequently used in international sales contracts (see Chapter 31), are another type of formal contract. A contract that by law requires a specific form, such as being executed under seal, for its validity.
valid contract 136
has the four elements necessary for contract formation: (1) an agreement (offer and acceptance) (2) supported by legally sufficient consideration (3) for a legal purpose and (4) made by parties who have the legal capacity to enter into the contract. page, valid contracts may be enforceable, voidable, or unenforceable. Additionally, a contract may be referred to as a void contract. A contract that results when the elements necessary for contract formation (agreement, consideration, legal purpose, and contractual capacity) are present.
objective theory of contracts 133
importance. In contract law, intent is determined The theory is that a party's intention to enter into a contract is judged by outward, objective facts as interpreted by a reasonable person, rather than by the party's own secret, subjective intentions. Objective facts include (1) what the party said when entering into the contract, (2) how the party acted or appeared, and (3) the circumstances surrounding the transaction. Intent to form a contract may be manifested by conduct, as well as by words, oral or written. 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.
void contract 136
no contract at all. The terms void and contract are contradictory. None of the parties has any legal obligations if a contract is void. A contract having no legal force or binding effect.
offeror 134
party making the offer. offeror always promises to do or not to do something and thus is also a promisor. Whether the contract is classified as bilateral or unilateral depends on what the offeree must do to accept the offer and bind the offeror to a contract.
express contract 136
terms of the agreement are fully and explicitly stated in words, oral or written. A signed lease for an apartment or a house is an express written contract A contract in which the terms of the agreement are stated in words, oral or written.
unenforceable contract 136
that cannot be enforced because of certain legal defenses against it. It is not unenforceable because a party failed to satisfy a legal requirement of the contract; rather, it is a valid contract rendered unenforceable by some statute or law. For example, some contracts must be in writing A valid contract rendered unenforceable by some statute or law.