Chapter 9 Formation and Requirements of Contracts

electronic license (e-license)

An electronic contract that licenses the use of computer and software information.

insane but not adjudged insane

Being insane but not having been adjudged insane by a court or an administrative agency. A contract entered into by such person is generally voidable. Some states hold that such a contract is void.

Contracts contrary to public policy

Certain contracts that are illegal because they are contrary to public policy. These kind of contracts are void.

preexisting duty

Something a person is already under an obligation to do. A promise lacks consideration if a person promises to perform a preexisting duty.

consideration

Something of legal value given in exchange for a promise

bargained-for exchange

Exchange that parties engage in that leads to an enforceable contract.

Rejection

Express words or conduct by the offer to reject an offer. Rejection terminates the offer.

revocation

withdrawal of an offer by the offeror that terminates the offer.

Legally enforceable contract

A contract in which, if one party fails to perform as promised, that other party can use the court system to enforce the contract and recover damages or other remedy.

contracts contrary to law

Contracts to perform activities that are prohibited by law.

4 requirements to make a contract enforceable

1. Agreement: agreement between parties. 2. Consideration: A promise bust be supported by a bargained-for consideration that is legally sufficient. Money, personal property, real property, provision of services, and the like, qualify as consideration. 3. Contractual Capacity: The parties must have contractual capacity for the contract to be enforceable against them. Contracts can not be enforced against parties who lacked contractual capacity when they entered into the contracts. 4. Lawful object: The object of a contract must be lawful. Most contracts have a lawful object. However, contracts that have an illegal object are void and cannot be enforced.

Defenses to the Enforcement of a Contract

1. Genuineness of assent: The consent of the parties to create a contract must be genuine. If the consent is obtained by duress, undue influence, or fraud, there is no real consent. 2. Writing and a form: That law requires that certain contracts be in writing or in a certain form. Failure of such a contract to be in writing or to be in proper form may be raised against the enforcement of the contract.

common formal contracts

1. Negotiable instrument: a check needs the words "Pay to the order of" 2. Letter of Credit: Bank guarantees the payment by a buyer who purchases goods on credit from seller if the buyer does not pay for the goods 3. Recognizance: someone agrees to pay a sum of money if another person does not pay (e.g., a bail bond) 4. Contract under seal: Wax seal is placed on Contract.

Elements of an offer

1. The offeror must objectively intend to be bound by the offer 2. The terms of the offer must be definite or reasonably certain 3. the offer must be communicated to the offeree.

Terms in an offer (and contract)

1. identification of the parties 2. identification of the subject matter and quantity 3. consideration to paid 4. time of performance

bilateral Contract

A contract entered into by way of exchange of promises of the parties; "a promise for a promise." This exchange of promises creates an enforceable contract. No act of performance is necessary to create a bilateral contract.

implied-in-fact contract

A contract in which agreement between parties has been inferred from their conduct.

voidable contract

A contract in which one or both parties have the option to void their contractual obligations. If a contract is voided, both parties are released from their contractual obligations.

unenforceable contract

A contract in which the essential elements to create a valid contract are met but there is some legal defense to the enforcement of the contract.

Unilateral Contract

A contract in which the offeror's offer can be accepted only by the performance of an act by the offeree; a "promise for an act".

adjudged insane

Declare legally insane by a proper court or administrative agency. A contract entered into by a person adjudged insane is void.

Illusory promise (illusory contract)

A contract into which both parties enter but in which one or both of the parties can choose not to perform their contractual obligations. Thus, the contract lacks consideration.

unconscionable contract

A contract that courts refuse to enforce in part or all because it is so oppressive or manifestly unfair as to be unjust.

illegal contract

A contract that has an illegal object. Such contracts are void.

executed contract

A contract that has been fully performed on both sides; a completed contract.

executory contract

A contract that has not been fully performed by either or both sides.

electronic contract

A contract that is formed electronically.

Informal contract (simple contract)

A contract that is not formal. Valid informal contracts are fully enforceable and may be sued upon if breached.

valid contract

A contract that meets all the essential elements to establish a contract; a contract that is enforceable by at least one of the parties.

formal contract

A contract that requires a special form or method of creation.

Exculpatory clause (release of liability clause) Like a Waiver

A contractual provision that relieves one (or both) of the parties to a contract from tort liability for ordinary negligence.

infancy doctrine

A doctrine that allows minors to disaffirm (cancel) most contracts they have entered into with adults.

acceptance

A manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts. (Section 50 of the Restatement (second) of Contracts)

minor

A person who has not reached the age of majority

intoxicated person

A person who is under contractual incapacity because of ingestion of alcohol or drugs to the point of incompetence.

past consideration

A prior act of performance. Past consideration (e.g. prior acts) do not support a new contract. New consideration must be given.

gift promise (gratuitous promise)

A promise that is unenforceable because it lacks consideration.

illegal consideration

A promise to refrain from doing an illegal act. Such promise does not support a contract.

Counteroffer

A response by an offer that contains terms and conditions different from or in addition to those of the offer. A counteroffer terminates the previous offer.

acceptance-upon-dispatch rule (mailbox rule)

A rule stating that an acceptance is effective when it is dispatched, even if it is lost in transmission

mirror image rule

A rule stating that, for an acceptance to exist, the offeree must accept the terms as stated in the offer.

lapse of time

A stated time period after which an offer terminates. If no time is stated, an offer terminates after a reasonable time.

objective theory of contracts

A theory stating that the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties.

Contract

According to the Restatement (Second) of Contracts, " A promise or a set of promises for the breach of which the law in some way recognizes a duty."

express contract

An agreement that is expressed in written or oral words.

auction without reserve

An auction in which the seller expressly gives up his or her right to withdraw the goods from sale and must accept the highest bid.

auction with reserve

An auction in which the seller retains the right to refuse the highest bid and withdraw the goods from sale. Unless expressly stated otherwise, an auction is an auction with reserve.

implied-in-law contract (quasi contract)

An equitable doctrine whereby a court may award monetary damages to a plaintiff for providing work or services to a defendant even though no actual contract existed. The doctrine is intended to prevent unjust enrichment and unjust detriment.

void contract

No contract exists

legal value

Support for a contract when either 1) the promisee suffers a legal detriment or 2) the promisor receives a legal benefit.

disaffirm

The act of a minor to rescind a contract under the infancy doctrine. Disaffirmance may be done orally, in writing , or by the minor's conduct.

agreement

The manifestation by two or more persons of the substance of a contract.

offer

The manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it (Section 24 of the Restatement (second) of Contracts)

offeree

The party to whom an offer to enter into a contract is made.

offeror

The party who makes an offer to enter into a contract.

electronic commerce (e-commerce)

The sale and lease of good and services and other property and the licensing of software over the internet or by other electronic means.