Test 3

elements of a legally enforceable contract: Offer and acceptance with mutual agreement

-An offer is made by one party and accepted by another party —and they enter into a contract. -The parties must have a clear understanding of what they are undertaking and the contract must show mutual agreement.

Characteristics of a valid consideration: Adequacy

-Judging whether or not the exchange of promises in a contract was fair. -in an attempt to level the playing field, many consumer protection statutes have been passed -the notion of unconscionable contracts and contracts of adhesion are not widely applied

Illegal restraints of trade

-Restraint of trade -monopoly power

Offer termination by rejection

-a direct, unqualified rejection, or refusal to accept, terminates an offer. the offer, once rejected by the offeree, cannot be revived or made into a counteroffer once the communication of the rejection has been received to the offeror

Valid Contracts

-a majority of the contracts entered into business transactions are of this type. ex: an Italian restaurant owner agrees in writing to have a custom-made sign erected outside of her building

Agreements that violate government statutes are not enforceable by the courts are:

-agreements made on Sundays or legal holidays -gambling and wagering agreements -usurious agreements -unlicensed transactions

Void Contracts

-an agreement that lacks one or more of the essential elements of a contract is a void contract

Voidable Contract

-an agreement that may be rejected by one of the parties (for a legally acceptable reason) -such a contract is valid and enforceable unless and until it is rejected by the party who has the right to withdraw

Agreements that obstruct or perfect Justice

-an agreement to conceal a crime or not to prosecute a criminal (such as a thief if he or she returns the stolen property) -an agreement to encourage a lawsuit in which one or more of the parties have no legitimate interest, called *champerty* -an agreement to give false testimony or to suppress evidence -an agreement to bribe a juror or a court official -an agreement to refrain from testifying as a witness in a legal action

offer termination by revocation

-an offer that has been neither accepted nor rejected by the offeree can be revoked, or withdrawn, by the offeror. the offeror may communicate the revocation to the offeree in either spoken or written words -however, according to the UCC, an offer that includes specific time limits expires automatically when the time is up, unless the offeror chooses to extend the offer.

Status of Contracts

-contracts usually have a long life at any particular time, a contract may be awaiting the first act of the parties to execute its terms, in the process of completion, or completed

Executed Contract

-if all the terms of the agreement have been fully performed by both parties, it is an executed contract -it is more a record of an agreement that has been completed by all the parties

When goods are advertised at an incorrect price

-if the error is the merchant's fault, he or she is required to honor the lower price -if the error is not the merchants fault, he or she might decide to honor the lower price, even if not profitable

Executory Contract

-it is a contract where a future act or obligation remains to be performed under its terms -a contract is *completely* executory if no part of it has been performed -it is *partly* executory if some parts have been performed and some have yet to be performed

Requirements for a valid acceptance

-it must be communicated to the offeror -it must be unconditional *it is important to determine how an acceptance is communicated and when such acceptance becomes effective

Advertising

-many advertisements are regarded an invitation to trade (or an invitation to make an offer) -for the advertisement to be a valid offer, it must contain sufficient words of commitment to sell

Offer termination by death or incapacity

-mutual agreement cannot occur if either the offeror or the offeree die or become incompetent. an offer is immediately terminated as a result of the death or legal incapacity of either the offeror or the offeree. -however, if either the offeror or the offeree are bound by an *option contract* which has provision to keep an offer open for a certain period of time, the surviving party may still be obligated to the contract

The general rule of a contract

-the acceptance of an offer must be the same as the offer -if there are any material (important) differences between he offer and the acceptance, the acceptance is regarded as a rejection of the offer

Bids, advertising, and public offers

-the requirement of offer and acceptance is usually fairly straightforward in contracts involving few parties -complications can arise when: there is little or no direct contact between the parties ex: bidding, advertising and public offers

Contract

A legally enforceable agreement that is created when two or more competent parties agree to perform, or to avoid performing, certain acts that they have a legal right to do and they meet certain legal requirements.

Silence as Acceptance

A person cannot be compelled to speak or to write to avoid a binding agreement, and is under no obligation to reply to an offer. however, silence may indicate assent to an offer when ____________ this is to be the means of acceptance.

Unilateral Contract

A promise in exchange for a requested action ex: The offeror wants the oferee todo something, not to promise to do something. IF jim loses his dog, he may post a sign saying "$50 reward for the safe return of my poodle, frenchie" when mike calls and says "don't worry ill find your dog" this is not a contract because the unilateral contract calls for action, not a promise

Bilateral contract

A promise in exchanged for a promise ex: When shannon promises to pay gary $1000 in exchange for his promise to paint her car on july 1st, they have a bilateral contract

Promise

A promise of an act by one party in exchange for the promise of an act by another is a valid consideration -*the exchange of money is not a requirement* -ex: joanne promised to paint elaine's office room if elaine helps her with her landscape project

Entire Contract

Also known as an indivisible contract, it has two or more parts. Each part is dependent on the others for satisfactory performance. Such a contract must be completely performed.

Formal Contract

Also referred to as *specialty contract, it is a written contract under seal. the seal may consist of simply the word seal or L.S. (locus sigilli), a scroll, a wafer, or an impression on the paper.

Which Article of the UCC is relevant to contract law but only applies to transactions in goods or other tangible personal property

Article 2

elements of a legally enforceable contract: consideration

Each party to a contract must promise to give up something. The exchange of promises (where each party gives the other something of value) is called consideration

Mailbox Rule

If the offer is silent as to the time the acceptance is effective, the mailbox rule states that an acceptance sent via the postal system or by courier is effective when sent -courts have been divided on whether an acceptance sent via email or text message is effective when sent or when received.

Express Contracts

One that specifically states the agreement of the parties (either written or real)

Agreements supported by past consideration

Past consideration: a promise to repay someone for a benefit after it has been received. this type of promise is generally not a valid consideration and is considered a gratuitous promise. -ex: mike promised his brother joe that he would give him tow Super Bowl tickets when joe graduated form college. as planned, joe graduated and mike gave him the tickets. when joe realized how expensive the tickers were, he promised to pay mike one half of the ticket price. joe later changed his mind and decided not to keep his promise. now will not be legally held to his promise since it was based on past consideration.

Written Contracts

Reduced to writing on a *permanent surface*. A written contract can be simply a handwritten note or any other memorandum containing the terms of the agreement, as long as it is signed by the party or parties who wish to be bound by the agreement

elements of a legally enforceable contract: proper form

Requirements for contracts are known as proper form. Contracts must not only be in writing but also follow a prescribed form, such as containing the signatures of the parties

Agreements against public policy

Some agreements are unenforceable because they are contrary to the interests of the public: -obstruct or pervert justice -restrain marriage -interfere with public service -defraud creditors and other persons -contain exculpatory clauses

Blue Laws

Some statutes and local ordinances that regulate the creation and performance of certain types of contracts on sundays and legal holidays -in some jurisdictions, a contract that is made on sunday but carried out on a weekday is invalid -in some states, a sunday agreement must be ratified on a weekday -contracts made on a legal holiday can generally be performed the next business day following the holiday ex: -contracts involving the payment of a note -delivery of merchandise

Acceptance must be unconditional

The UCC also provides that "additional (or different) terms are to be construed as proposals for addition to the contract, and between merchants, become part of the contract...unless the offer expressly limits acceptance to the terms of the offer, they materially alter it; or notification of objection to them.. is given within a reasonable time after (they) are received"

elements of a legally enforceable contract: legality of purpose

The intent of the contract must not violate the law. The courts will not enforce a contract that violates the law.

elements of a legally enforceable contract: competent parties

The parties to a contract must be competent and capable of understanding what they are doing. (Example: legal age, mentally stable)

Common Law

The source of contract law regarding the sale of fixed assets, services, or intangibles

agreements that restrain marriage

VOID ex: a person's promise to pay money to his or her child on the condition that the child never marries would not be enforceable. if the child agreed to this arrangement and avoided marrying, he or she could not enforce the agreement.

Agreements to defraud creditors and other persons

VOID AND UNENFORCEABLE ex: an agreement to sell or give away property with the intention of defrauding creditors in anticipation of brankcruptcy

Gambling and wagering agreements

a gambling agreement is one in which performance by one party depends on the occurrence of an uncertain event -soem states permit betting on horse or dog races; other states permit state-run lotteries -the state regulates the nature of the betting and usually derives considerable revenue from it -in some states, gambling on native american reservations is legal -examples of illegal gambling: --office basketball pools --football pools

Characteristics of a valid consideration: Possibility of performance

a legally enforceable contract cannot be based on a promise that is *impossible* to fulfill

consideration in a contract may be more than just the promises exchanged by the parties, but the actual benefit gained and the detriment suffered by them

a party who makes a promise, the promisor, may make a promise to pay a sum of money to another party, the promisee, for the performance of a certain act

Agreements supported by moral consideration

a person is not legal bound to do what he or she may feel obligated to do because of love, friendship, honor, sympathy, conscience, or some other moral consideration. -some courts, however, will justify the enforcement of some contracts, even though there is no consideration, by stating that there was "moral consideration"

Gratuitous promises

a person who makes a promise without requiring some benefit in return has mad a gratuitous promise -agreements based on such one-sided promised are generally not enforceable -ex: a golf pro promises to give her golf clubs to her friend after a tournament is over. she realizes that they are worth more than she originally though and changes her mind. the pro is not obliged to give her friend the clubs as it was a gratuitous promise

Pledge or subscription

a pledge is a promise to donate money to such organizations as churches, temples, mosques, hospitals, colleges, cultural institutions, charitable organizations, and other groups. because pledges are for a worthy cause, courts have deemed them to be enforceable -ex: john peterson makes a pledge of $20.00 to the local firefighters association

Barren promises

a promise to do something that is already required to do either by law or by contract represents no additional sacrifice and is not valid consideration. -a promise to pay an existing debt or to obey the law, or a similar promise, is called a *barren promise*

A counteroffer (conditional or qualified acceptance of an offer), is generally interpreted as:

a rejection and is not binding on the parties

Characteristics of a valid consideration: Legailty

a valid contract does not exist if the consideration is a promise to perform an illegal act ( or to avoid performing a legal act)

enforceable contract

acceptance of a public offer by anyone , as indicated by the performance of the act example: an advertisement in a local newspaper, offering $200 reward for a dog's return is valid even though it is directed to thousands of readers and only one of whom could accept it

An enforceable contract results if

an agreement imposes a legal obligation. if it imposes only a social or moral obligation, it is NOT a contract and cannot be legally enforced. Example: A friend agrees to pick up a coworker before attending a company meeting. She never shows up. The coworker has no legal grounds as the agreement was a social agreement.

Effect of illegality

an agreement with an illegal purpose is usually VOID and UNENFORCEABLE -if a divisible contract has several unrelated parts, and one or more parts have a legal purpose, then those components are enforceable -the part or parts that have an illegal purpose are not enforceable

dissafirmance of minors in contracts

an individual may disaffirm a contract, that is, state his or her intention either orally or in writing not to honor a contract that had been made before reaching legal age

offers made in _____, ____, or _____ _____ are obviously not made with the intent of entering into a valid, enforceable agreement

anger, jest, or severe emotional strain

The UCC exception to the general rule of a contract

between merchants, "a definite and reasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different amor those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms

illusory promise

consists of an indefinite, open-ended statement purporting to be an agreement. -a person who makes an illusory promises never commits to a specific or absolute act. -ex: the manager of a fleet of delivery trucks tell the owner of an auto repair shop "if your tires are high quality, i will purchase all the tires i need form you"

Exculpatory clause

def: a statement in a contract that releases one party from liability resulting from his or her own negligence throughout the performance of the contract. -exculpatory clauses are contrary to public policy --one party is protected from the consequences of his or her own negligence or willful actions, while the other party is not allowed to recover his or her losses. -exculpatory clauses are illegal when used by companies in a business directly related to the public interest, such as banks, public utilities, and transportation providers

Tangible Personal Property

defined as personal property that can be moved, such as a vehicle, kitchen table, or computer

Offer termination by destruction or illegality

if the subject matter of the contract is destroyed or declared illegal after the offer has been made but before it has been accepted, the offer is terminated

many assert it is a good business decision to honor any advertised price to retain public goodwill

many believe goodwill is worth more than gains stemming from enforcing legal rights

Oral Contracts

not in writing or signed by the parties, but it is a real contract entirely by the conversation of the parties

For a contract to be valid, there must be a proposal that is both

offered by the of offeror and accepted by the offeree

Promise of forbearance

one party to a contract may with to exchange his or her promise to pay money for a promise of inaction from the other party

Consideration definition

promises exchanged by the parties to a contract

lack of serious intent must be apparent to a

reasonable person

General release

statutes that permit a person who has a claim against another to give up, or release, his or her claim without an exchange of consideration by making a written statement to that effect -a general release may be regarded as valid consideration if the parties so intend. in such cases, the general release would be viewed as forbearance -in some states, a general release is supported by consideration only where the original claim that is being released is not regarded by the courts as frivolous

Promissory estoppel

term used in contract law that applies where, although there may not otherwise be an enforceable contract, because one party has relied on the promise of the other, it would be unfair not to enforce the agreement.

to be definite and certain, an offer should specify all the

terms and conditions of the contract

contractual capacity

the ability to make a valid contract

General offer to the public at large

when an advertisement offers a reward for information that might lead to the arrest of a criminal or for the return of a lost article

When Jane places a good with an auctioneer for sale by auction, is she making an offer, or is Kevin, who bids it? It depends on what kind of auction is taking place.

1. With Reserve- if nothing is stated to the contrary in the terms of the auction, an auction is presumed to be with reserve, which means the seller is merely expressing intent to receive offers a) the auctioneer may withdraw the item from auction at any time before the hammer falls, signaling acceptance of the bid. b) the bidder may also revoke the bid before that point 2. Without Reserve - the seller is making an offer to accept the highest bid and therefore must accept it

In some cases that involve contract to sell goods, the UCC dispenses with the requirement of consideration in certain contracts that involve any of the following:

1. a merchant's written firm offer that provides that the contract is irrevocable 2. a written discharge of a claim for an alleged breach of contract 3. modifications of existing contracts

3 broad classifications of illegal agreements

1. agreements that are contrary to the common law 2. agreements that have been declared illegal by statute 3. agreements the courts have found to be against the security or welfare of the general public

Consideration required in an enforceable contract can be:

1. an exchange of promises 2. forbearance 3. pledges or subscriptions

Agreements that are not enforceable because they lack consideration are:

1. barren promises 2. gratuitous promises 3. illusory promises 4. agreements supported by: -moral consideration -past consideration

3 requirements for a valid offer

1. definite and certain 2. communicated to the offer 3. made with a serious intention that the offeror will be bound by it

Offers are terminated by:

1. lapse of time 2. revocation 3. rejection 4. death or incapacity 5. destruction or illegality

Characteristics of a valid consideration

1. legality 2. adequacy 3. possibility of performance

elements of a legally enforceable contract

1. offer and acceptance with mutual agreement 2. consideration 3. competent parties 4. legality of purpose 5. proper form

Usual means of communication for an offer

1. oral communication (in person or by telephone, television, or radio) 2. written communication (letter, fax, e-mail, text message, or other written forms)

Kinds of Contracts

1. oral or written 2. express or implied 3. formal or simple 4. entire or divisible

contracts may be created to bind:

1.The sale of merchandise or services 2.Employment 3.The transfer of ownership of land (real property) or personal property such as a car **a contract also may be extended and revised as needed to reflect the wishes of the parties

Bids and estimates

A call for a bid or materials/work estimate is a request for an offer, no an offer -may be an invitation or rejected by the person calling for the bid -can be accepted or rejected by the person calling for the bid -- such an announcement or solicitation is often called a *request for approval*

Capacity to contract

A competent party is a person who must meet all the following conditions: -must be of legal age -must have normal mental capacity -is considered by law to be capable of understanding the meaning of a contract

Quasi-Contract ("implied in law" contract)

Imposed in certain cases to avoid unjust enrichment, even if all the elements of contract formation not satisfied

Usurious Agreements

Interest is the charge for the use of borrowed money, generally expressed as an annual percentage of the amount of the loan (principal) -nearly every state has laws that regulate interest charges If a loan is made at an interest rate higher than that allowed by state law, the lender is guilty of usury -in many states, the usury statues apply to retail installment credit sales and credit card transactions

Simple Contract

It is an informal contract made without seal (even though the subject matter of the contract may be extremely complex and may involve huge amounts of money)

Divisible Contract

It is made up of two or more parts, and each part is independent of the others

Unlicensed transactions

Most states require persons engaged in certain businesses, professions, and occupations to be licensed -persons in licensed professions and occupations include: doctors, dentists, lawyers, nurses, pharmacists, plumbers, barbers, and teachers An agreement with a person who does not have the required license is an unlicensed transition and is generally illegal if the purpose of the statute is regulatory and enforcement of the licensing requirements is clearly in the public interest

Offer termination by lapse of time

when the offered fails to accept an offer within the time specified, the opportunity to form a contract ends because of a termination by lapse of time

When acceptance becomes effective

the general rule is that an acceptance becomes effective when the parties so intend. the offer may explicitly state whether an acceptance is effective when it is sent by the offeree or when it is received by the offeror

Classification of contracts depends on:

the manner in which they are created, expressed, or performed

Preexisting duty

the obligation to perform acts already required

Forbearance

the promise to refrain from doing something that a party has a legal right to do or the promise of inaction

Implied Contract

the terms and actions of the parties dictate an implied contract

Contract as defined by the UCC (Uniform Commercial Code)

the total legal obligation which results from the parties' agreement as affected by the Uniform Commercial Code or any other applicable rules of law

Method of acceptance communication

the usual forms of communication (telephone, letter, fax, e-mail, text message) may be used in accepting an offer, unless the offer specifies a certain form of communication, such as "reply by registered mail," "reply by return mail" or "reply by e-mail"

agreements that interfere with public service

these activités do not involve specific contracts, but are illegal: -attempt to bribe or interfere with public officials -obtain political preference in appointments to office -pay an officer for singing a pardon -require one of the parties to the agreement to break the law -influence a lawmaking body for personal gain

According to the UCC, uncertainty with specific terms does not necessarily ______ a contract

void