LGST Chp 6 Overview and Formation of Contracts

Preexisting Duty Rule

applies in circumstances where one party claims he wishes to modify an existing contract because of the unforeseen difficulties in performing his obligations

Contract Formation: Acceptance is usually communicated in

writing or orally, but can be communicated via action

Ex. Hybrid Contract (good)

you buy a high tech tv and the instillation fee is included in the price

Promissory Estoppel is Applicable when

you don't have a valid contract, as in no contract or one of the four elements are not met

Ex. Hybrid Contracts (service)

you enter into a contract with a painter to paint you a portrait.

Ex. Implied Contract

you put money on the counter with a water bottle without and buy the water bottle without directly uttering the contract

Ex. Known Unilateral Mistake

you sell a piece of artwork you thought was your grandfather's that was actually a van gogh to an art historian

Overview of a Contract Transaction

1. Formation 2. Enforceability 3. Performance

Offer Termination: Operation of Law: (4)

1. Lapse of Time 2. Death or incapacity of a party 3. Destruction of the subject matter before acceptance 4. Supervening Illegality

A valid contract is met when four elements are met: (4)

1. Mutual Assent 2. Consideration 3. Capacity 4. Legality

Essential Terms of the Agreement (4)

1. Parties to the Contract 2. Subject Matter of the Contract 3. Time for the performance or delivery 4. Price or other consideration to be exchanged

An offer may be terminated by the following actions of the parties: (4)

1. Revocation 2. Rejection 3. Counteroffer 5. Operation of law

Under the Theory of Promissory Estoppel, a Relying Party may Recover Damages if (4.)

1. The Promisor makes a promise that is reasonable 2. The promisee actually relied on the promise and suffered an injury 3. The promisee's reliance was reasonably foreseeable to the promisor 4. Principles of equity and justice are served by providing compensation to the reliant party

Predominant thrust = (2)

1. allocation price in the contract (value of service vs good) 2. uniqueness of the service

Ex. of Illusory Promises (4)

1. deathbed promise made to comfort the dying 2. promises of a gift to which no reciprocal promise is exchanged 3. promises of love and friendship 4. promises that by their terms are not binding

Peoples with limited power to enter a contract due to lack of capacity: (2)

1. minors 2. those with mental incapacity (disabled or temporarily incapacitated)

the benefits and detriments may take form of (4)

1. money 2. goods 3. services 4. forbearance

Ex. Quasi Contract (Unjust Enrichment)

A hospital treats you while you are unconscious. The hospital can male you pay because you have been enriched despite not entering into a contract with them

Written Vs. Oral Contracts

Contracts can be both written and oral, however, some contracts must be in writing to be enfroceable

Ex. Promises That By Their Own Terms are not Binding (Illusory Promise)

Cut my grass and I will give you $50 if I feel like it

Ex. Express Contract

If you give me that water bottle, I will pay you one dollar (expressed, bilateral, and oral)

Ex. of Situation Where Promissory Estoppel is Applicable

You are offered a job in another city so you quit intership and let go of apartment. Then the company says they don't need you a month later. Can't sue under contract law bc no consideration, but can sue with promissory estoppel

Contract Element: Consideration

a bargain for exchange. each party must be getting something in return for detriment (cost or action)

Voidable

a contract is voidable when the law permits one or more parties the right to cancel an otherwise valid contract

A unilateral contract does not require

a promise from a second party

Past Consideration (Invalid for Current Consideration)

a promise made in return for detriment previously made by the promisee

Contract Formation: Offer

a promise to do (or refrain from doing) a specified activity.

The law permits Quasi Contracts to

be enforceable where one party suffers losses as a result of another party's unjust enrichment, but there is no contract

Mutual Mistake in Mutual Assent

both parties had an erroneous belief

In a Hybrid Contract the source of law is established

by determining the predominant thrust of the contract's subject matter

Mutual mistake may be the basis for

canceling a contract, also known as avoiding the contract

The Mailbox Rule governs

common law contracts

Hybrid Contracts

contracts that involve terms for both goods and services

Bargained-For Exchange Aspect of Consideration

distinguishes contracts from illusory promises

Contracts definition

enforceable agreements/promises between two parties

Terminating a contract completely

evaporates the previous offer

An Implied Contract is not

expressed/articulated/uttered, but rather implied by our actions

Source of Law for Contracts with the Government

federal law

In an Express Contract the promises and performances

have been uttered and agreed upon

consideration is also called

legall detriment

For an Offer to be Valid, the parties must reach

mutual assent on all of the essential terms of the agreement

Ex. Unilateral Contract (reward situation)

my dog is lost and I promise to give money to anyone who brings it back. You find my dog and bring it back which triggers me to pay you money

Contract Element: Mutual Assent

offer and acceptance, meeting of the minds: parties have agreed to certain promises and obligations

Unilateral Contracts involve

one promise, followed by one performances, which then triggers a second performance

Unilateral Mistake in Mutual Assent

only one party has erroneous belief about basic assumption in the terms of the agreement

A Unilateral Contract is

open to be taken by an unestablished second party

Ex. of Bilateral Contract

promise to give water bottle in return for one dollar

under consideration, each party receives

something of value from the other, and each party gives up something of value

Source of Law for Service and Real Estate Contracts

state common law

Source of Law for Goods or Products Contracts

state statutory law based on Uniform Commercial Codes

When Acceptance is Effective: Mailbox Rule provides that

the acceptance of an offer is generally effective upon dispatch of the acceptance when sent in a commercially reasonable manner

An Implied Contract is one in which

the agreement is reached by the partie's' actions

Past consideration does not meet

the bargain-for exchange requirement of consideration because it is not in real-time

Forms of benefits and detriments for consideration: Forbearance

the giving up of a right you legally possess

Ex. Hybrid Contract (tv) predominant thrust is

the good because it is more valuable than the service and the service is not unique. Source of law = state statutory law

Contracts will only be enforced by the courts only if each party has

the legal capacity to enter into a contract

Parties with the right to make a contract voidable (2)

the mentally disabled and minors

Consideration

the mutual exchange of benefits and detriments.

Offer Termination: Rejection

the offeree rejects the offer

Offer Termination: Counteroffer

the offeree rejects the original offer and proposes a new offer with different terms

Contract Formation: Acceptance

the offeree's expression of agreement to the terms of the offer.

Acceptance is not effective when

the offeror receives the acceptance

Offer Termination: Revocation

the offeror revokes/withdraws the offer prior to acceptance

Contract Element: Capacity

the parties must be of majority age and have the capacity to enter a contract

Presence of a Unilateral mistake usually can't cancel a contract unless

the party who was not mistaken knew the other party was mistaken

A contract is considered voidable if

the person who was mentally incapacitated or underage wants to dismiss the contract

Ex. Hybrid Contract (portrait) predominant thrust is

the service because it costs more than the painting supplies and the service is unique. Since service, source of law is common law

Contract Element: Legality

the subject matter of the contract must be legal

Legality

to be enforceable, both the subject matter and performance of the contract must be legal

Bilateral Contracts involve

two promises and two performances (in total)

Quasi Contracts =

unjust enrichment

In order for a contract to be enforceable, it must be

valid

An Express Contract is created

when the parties have knowingly and intentionally articulated (uttered) and agreed on the promises and performances