Test 3

settlement of claims

-accord and satisfaction: debtor offers to pay a lesser amount than the creditor claims to be owed -release: forfeiting the right to pursue a legal claim against the other party in exchange for consideration -covenant not to sue: agreement to substitute some other type of legal action based on a valid claim with a contractual obligation

definition of a contract

-agreement that can be enforced in court (someone gives a promise then it has to be determined whether it was legally enforceable or not) -formed by two or more parties -failure to perform results in breach and damages (monetary most common: money) (equitable remedy too) -when determining if a contract is formed, it is important to look to the parties intent (voluntary or not?)

informal contracts

-all other contracts -doesn't require a specific form or method of creation to be valid -also called simple contracts -ex: some must be written to ensure proof but it's based on their substance rather than form (oral, written on a napkin)

what is an agreement

-a valid legal offer and acceptance -mutual understanding of the minds b/w two or more individuals regarding the terms of a contract -objective theory of contracts: helps convey more meaning b/c words fail to convey the precise meaning intended (RPS) (offeror can revoke, offeree can reject)

requirements for a valid, enforceable contract

*need all of them* 1. Agreement (offer and acceptance): includes an offer to enter into a legal agreement and an acceptance of the terms 2. Consideration: something of value received or promised (mutual exchange: what pushes you) (you ask for a coffee and pay because you expect to receive the drink, then since the barista has the money it should push him to make the drink) 3. Capacity: must posses characteristics that qualify them as competent parties (being drunk when making a contract doesn't make a contract legal) 4. Legality: not against public policy, must be legal (drug dealer contract isn't one)

covenant not to sue

-Adam hits Beth a contract to pay for all resulting damages from accident to give up the negligence claim -this goes on forever because he would pay for the medical expenses, like each time she goes to the doctor he would have to pay, happens less frequently than release -if he didn't pay for one of the doctors appointments then he would be breaching the contract (CNS)

Contracts in the Constitution

-Article 1 Section 10 -anyone can voluntarily enter into contracts -Ex: w/o it we wouldn't be able to buy food

Mistakes review

-Was it a mistake of value or fact? -What was in the contract? material mistake of fact: can be bilateral (both parties mistaken) or unilateral (one party mistaken) -bilateral mistake: contract can be rescinded by either party -unilateral: contract enforceable unless other party knew or should have known that mistake was made or mistake was due to substantial mathematical error made inadvertently and without gross negligence -if there is a contract for someone to take all of the junk in the house, but find a million dollar worth record. This wouldn't be considered junk so not part of contract -was there a mistake in the contract? Bilateral mistake because both thought it was made of quartz but it was actually diamond. mistake of value: one or both parties mistaken, contract cannot be rescinded by either party -if they knew it was a gem but don't define one in particular then there wouldn't be mistake of fact, shouldn't have contracted because it would be a mistake of value

Conditions of performance

-a condition is a possible future event that may or may not happen -triggers or terminates performance (discharges obligations) -absolute: you have to do it (condition: if it rains friday and you have to paint a house, but you have to paint it the next sunny day = *flexibility*) -condition precedent: prior to performance, before (four houses you have to get funding, an appraisal, inspection), hoops you have to jump through to properly perform -condition subsequent: follows initial performance (Julie wants to hire Sarah to run cash register. Julie is afraid she can't pay her sometime in the future so she says she'll pay as long as they are having profits of $5000 a week) -concurrent conditions: occur simultaneously, performance happens at the same time (pay and get groceries) (kids are afraid the other is going to take both candies out of the parent's hand so they both snatch it out of their parent's hand at the same time)

legality

-a contract to do something prohibited by federal, state, or local statute is illegal and therefore void (contracts that call for a tortious act and contract that calls for an act contrary to public policy) -contracts contrary to statute (usury: charging an obscene amount of interest on loans and charge more than whats on the contract is illegal, gambling: if you cant gamble in the state then it's voidable, sabbath laws/blue laws: , licensing statutes: state imposes on individual professions to protect the public (lawyers, doctors) if you enter into a contract with a lawyer and they aren't licensed then it's voidable; the next one is for revenue purposes (licensed barber for example won't impact the public so its not voidable), contracts to commit a crime: it's illegal so its void) -contract contrary to public policy are void: contracts to commit an immoral act (to prohibit a marriage, selling children) and contracts that restrain trade (protect assets and to make sure there maintains goodwill) -anti-competitive agreements are void except: covenant not to compete accompanying the sale of a business (a contractual promise of one party to refrain from conducting business similar to that of another party for certain period of time and within a specified geographical area) and covenant not to compete accompanying an employment agreement (not to go to an opposing business right away) -unconscionable contracts or clauses: one is taking advantage over the other, a contract or clause that is void on the basis of public policy because one party was forced to accept the terms that are unfairly burdensome and that unfairly benefit the other party) -exculpatory clause: void things not liable for intentional or harmful actions, like saying battery is ok on a contract isn't legal, a clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault -discriminatory contracts: civil rights act -contract for the commission of a tort: a contract t beat someone up

contracts are based on...

-a promise (a declaration by a person: the promisor) that binds the person to do or not to do a certain act -as a result the person to whom the promise is made (the promisee) has a right to expect or demand that something either will or will not happen in the future

voidable contract

-a valid contract, but one that can be avoided by one or both of the parties -despite having all the elements, can get out of it -someone committed fraud, uses duress, undue influence (psychological influence making someone sign a will and some of the people weren't there to sign it too), minors -if contract is avoided, both parties are released from it -if ratified, both parties are to fully perform their respective legal obligations

mailbox rule

-an agreement is formed when acceptance is sent or dispatched by *authorized* means -not the same rule of acceptance for contracts -valid legal agreement -acceptance when sent (UPS, FedEx, USPS, etc) -telephone and email aren't allowed -if business person wanted to take advantage of an offer, through this rule you could quickly write down on a sheet of paper put it in their mailbox, this is a form of acceptance of an offer -get a receipt to really show time and place of placing sending it to them -other parties involved that may have wanted the offer aren't made aware too *-exceptions: if acceptance is not properly dispatched it's not effective until received, if offeror stipulates that acceptance is not effective until the time specified, offeree changes his/her mind (if both acceptance and rejection are sent, whatever communication is received first determines if an agreement is formed, regardless of which was sent first, this is why you should call if you change your mind)*

Types of contracts

-bilateral contracts -unilateral contracts -formal contracts -informal contracts -express contracts -implied contracts

Breach of contract

-breach occurs when one party fails to perform part or al of the required duties under a contract -once breach (a party fails to perform or performs inadequately) occurs, the nonbreaching party can choose one or more of several remedies -most common remedies include damages, rescission and restitution, specific performance, and reformation -elections of remedies doctrine: the goal is to make you whole, not to give you more, gives the nonbreaching party the power to choose one or more remedies -remedies at law vs. equitable remedies -specific performance: you have to perform, can't not perform

intoxicated persons

-can cause a lack of contractual capacity at the time the contract is being made -contract can be either voidable or valid -courts look at *objective* indications to determine if contract is voidable -if voidable: person has the option to disaffirm and return all consideration received, or person may ratify the contract expressly or impliedly -Zehmer case -just because it's a dumb decision or a bad contract doesn't mean we can get out of it -only the person on drugs or drinking has the power to ratify or not -adult rule: disaffirm contract and return everything back and make everyone go back to the way things were originally -need really good evidence if you were drunk to have the court let you off a contract, difficult to show evidence -if you are intoxicated to the point of lacking mental capacity, you could be voidable of a contract even if it was voluntary intoxication

misrepresentation

-can occur through words or conduct -generally, does not include: sales puffery, representation of future facts, and statements of opinion -misrepresentation must be of a material fact (Exception: expert opinions made to lay persons) -misrepresentation of law: experts held to a higher standard -misrepresentation by silence: if you know something you have to say the truth -latent defect: problem that can't be discovered through reasonable inquiry (ex: House on market and there is a leaky roof. You paint over it to hide it and now one could find it. The seller has to let them be aware of defects or problems on the house.) (if you don't report it, it would be fraud -intent to deceive or scienter ("guilty knowledge): scienter exists if party knows a fact is not as stated, party makes statements he/she believes not to be true or makes statement recklessly, party says or implies that statement is made on some basis such as personal knowledge or investigation when it's not (ex: some people will want certain things in a house like smith piping. If you say you saw something that said smith on the piping it would be fraud because you really didn't know what company made the pipes and are trying to persuade them to buy.) -reliance on misrepresentation: misrepresentation must be important factor in inducing party contract -causation -injury to innocent party: measure of damages is equal to what the value of the property would have been if it had been delivered as represented, minus what the delivered, property is actually worth Injury to innocent party -enforce and seek the damages (what you were promised minus what you actually received = measure of damages + potential punitives) most contracts don't allow punitives but if you can make a good argument that someone intentionally lied to you to screw you out of money then you can get punitives, so you add it) -have to talk to your employees about this because they need to say opinions or look it up online so you don't say anything that would commit fraud

mistake of fact (material)

-can't be a random fact, there needs to be a fact at the heart of the controversy, something important to the contract, potentially can get out of contract, mistake of fact/substance unilateral mistake of material fact -mistaken party does not have the right to rescind contract unless: 1. the non-mistaken party knew or should have known about the mistake or 2. there is a clerical error -Type 1: Sam like to collect first edition books and Fred is a seller of books. Sam finds what he believes to be a first edition. He goes to Fred, but he doesn't know that Sam wants a book that is a first edition. Fred knows it is a 2nd edition. Sam pays more money thinking it's a first edition. Sam is bound to the contract because it was his own mistake, he could have asked Fred. If Fred knew that Sam wanted a first edition, it would be considered fraud if Fred didn't speak up and accepted the money -Type 2: The contractor secretary incorrectly sums up the bids of what the price would be to remodel the house. bilateral (mutual) mistakes -if both parties are mistaken, either one can rescind the contract -Both Fred and Sam don't know it was a 1st edition. They thought it was a first edition and reached an agreement. Sam goes back and finds out that it wasn't a first edition, so they'll renegotiate the terms.

sources of contract law

-common law governs contracts except when it has been modified or replaced by statutory law from agency regulations such as the UCC or administrative agency regulations -contracts relating to services, real estate, employment, and insurance are generally governed by the common law of contracts -UCC: Uniform Commercial Code (statutory law) = contracts for the sale and lease of goods are governed by the UCC, enforces our promises and helps keep stability, people enter because they know it's enforceable unless for an illegal purpose or against public policy

consideration

-consideration is value given in return for a promise -elements: 1) something of legally sufficient value (not economic, law sees it as value) 2) given in a bargained-for-exchange between the parties (not a gift, a gift is when one party is given something and doesn't get anything in return)

offer requirements: definiteness of terms

-offer must have reasonably definite terms so court can determine whether breach occurred -if a term is missing, courts may supply term when there is clear intent to form a contract manifested by the parties -an offer can be made without definite terms, so long as it invites an acceptance that will supply the needed terms -if you fail to make a certain term, you can get a court to help (they'll help with damages but hate trying to figure out what the person's intent was in the contract) -contract reformation -when the offeree accepts the offer they will help figure out the terms normally with quantity (dell offers in a letter that 1-8 laptops for $1500 and 9+ for $1450, then the company says they accept the offer then fill in that they want 8 laptops)

legal sufficiency and adequacy

-consideration must be something of legally sufficient value in the eyes of the law -the adequacy of consideration is the "fairness" of the bargain, although courts do not generally contemplate this if the consideration is legally sufficient -if consideration is shockingly inadequate (ex: fraud), courts may strike down the contract as unconscionable (inadequate consideration may also indicate a gift) -normally courts don't like to get involved with questions of fairness -freedom of contract: can give people the right to make good and bad contracts (ex: one party gains more monetary value from the contract) -parties can have different monetary values because of subjective values, they don't have to be equal in a contract -the parties could put together different subjective values, court doesn't ask questions about subjective (in peoples head) but objective (taste, feel), they step in when it's shockingly inadequate -grossly inadequate: her dad was worried about the gift tax so he made a contract that she was to sign and buy it for a dollar (this wasn't the right thing to do) -her daughters bear has subjective value for her (in the market it might cost 2 dollars, but to her it's more than any dollar amount) -*need objective facts to get the court involved*

mistake of value (quality)

-contract is enforceable -if mistake by one or both parties the contract is still enforceable -mistake of business risk (you can't get out a contract when you bought a stock especially if you see it doesn't go the direction you wanted) -ex: Robbie and his friends think that they found a formula to make a new soft drink and they ask Tony to invest. If the 600 shares he bought go down in value, he can't get out of it because of his expectation of the stocks to go up.

unenforceable contract

-contract that cannot be enforced because of a valid legal defense against it -a valid contract rendered unenforceable by some statute or law -ex: some contracts must be in writing, or have to voluntarily enter into the contract

parental liability

-contracts: parents not generally liable (this is why parents are usually required to sign any contract made with a minor) (exception: necessaries) -torts (statutes vary): minors are personally liable for their own torts, liability can be imposed on parents for their children's negligent acts when the acts are a result of the parents negligence, liability can be imposed on parents for willful or malicious acts of their minor children -if parents cosign, they are part of the contract so it can't be voidable -parents have to provide for kids, if parents fail to pay the necessaries its called criminal neglect -depends on the political affiliations of the state -don't want to sue the minor because they don't have the money, if you do sue kid ultimately the insurance will pay you -Torts = parent and kid are negligent: (Sam is 16 and his parents are going on vacation, they don't think he needs babysitting. He throws a party while they are gone and causes property damage to neighbors yard. The neighbors could sue both the parents and the kid. The parents were negligent of him needing supervision and he was negligent for the consequences of throwing a party.)

contractual capacity and legality

-contractual capacity: the legal ability to enter into a contractual relationship (are you in a sound mind and mentally aware) (Exceptions: sometimes grandma is mentally present and sometimes she isn't, minors get out of contractual capacity = voidable contracts) -legality: the agreement must not call for the performance of any act that is criminal, tortious, or otherwise opposed to public policy

Compensatory Damages

-court normally just does monetary damages, but can give more if the monetary damages aren't enough -if material breach the nonbreaching party doesn't have to perform, not obligated to -if minor breach, you have to perform by paying because there is substantial performance Compensatory damages -compensates injured party for the loss of the bargain caused by the breach of contract -injured party must prove actual damages -generally, compensatory damages are: the difference between the promised performance and the actual performance -incidental damages: expresses directly incurred because of the breach of contract (actual proven expenses that are added to compensatory damages) Sales of Goods -difference between the contract and the market price -want to make profit Sale of Land -want to make money -difference between the contract and the market price -buyer has to buy a different piece of land they'll get paid back what they paid for the other land (specific performance: want equitable remedy, but if the land is already sold to someone else and the party was injured there before the sale they can only get monetary remedy not equitable remedy) Construction Contracts -who breached and when they breached -not one and done typically -difference between the construction of what they were going to receive and what they did plus the amount that was in additional work -takes a long of time

what is a contract

-def: a set of promises constituting an agreement between parties, giving each a legal duty to the other and the right to seek a remedy for the breach of the promises or duties -an agreement enforceable in court that has promises between two or more parties -oral contracts are just as enforceable as physical contracts, however, oral contracts aren't as good of proof

defenses to the enforceability of a contract

-even if all requirements are met, you can claim it to be unenforceable if there wasn't: voluntary consent (didn't voluntarily go into contract, no fraud, mistakes, or duress) or form (by certain statutes and common law, contracts have to be a certain structure, some have to be written just depends on the law) -form: if no written contract for property then it isn't legal, has to be written

Contract performance

-executory contract: at least one of the parties has not performed, haven't executed all your duties yet even if paid already -executed contract: fully performed by both parties -terminology can also be used in reference to one party's performance (if one party had fully performed but the other hasn't, the contract is said to be executed on the one side and executory on the other but overall the whole contracts is still classified as executory)

When is a contract complete

-failure of a condition (qualification of a contract, if you don't want to perform unless there is a certain thing in the contract) -performance -breach -agreement (mutual agreement to change or not) -operation of law (law might have to step in because contract was altered)

enforceable contract

-failure to perform is a breach

function of contracts

-fundamental to business -creates rights and duties between parties -provides stability and predictability by assuring the parties to these private agreements that the promises they make will be enforceable -good faith in commercial agreements

Discharge by operation of law

-have a valid contract, but law steps in to terminate contract Contract Alteration -have contract in place -one of the parties makes a change without the agreement of the other party -court comes in and says that the party unaware of the change is not liable for the contract now because there was no agreement between the parties Statutes of Limitation -how long you can wait to seek damages -depends on type on contract: written (4-5 years) and oral (2-3 years) -pushes you to utilize the opportunity to seek damages Bankruptcy -want to do business with financial stable/solvent companies -federal government, state government, then city government get the money first -if Tim owes you money and all the taxation from the government takes all his money away after he declares bankruptcy, Tim isn't liable to pay you now, so I can't go after him now Impossibility of Performance -valid enforceable contract, but some circumstance arises and ends the contract needs to be an objective impossibility: you aren't able to do it, can't, (it's not "I don't want to perform" - that would be a breach) -person dies or incapacitation: your photographer gets hit by a car (objectively impossible for the person to perform) but not objectively impossible for the photography company because they'll have other photographers -subject matter is destroyed -performance becomes illegal -commercially impracticable: make the performance to be really hard or expensive to perform your duties (well digging example but it becomes so bad that I can ask for money to perform to continue to find water or I can just end the contract because it's so expensive and difficult to perform) -frustration of purpose: your reasons had prevented your ability to perform (Larry is going to lease a building to Emily for her to be used for a restaurant. If the city came in and deemed it to not be able to be a restaurant or if a tornado destroyed it: commercially impracticable) (Emily is very open to Larry and wants to open very healthy. She is going to offer only Tibetan speckled lizard meat. Then one day the lizard goes extinct. Now she doesn't have to go into contract: frustration of purpose) Temporary Impossibility -it holds you back from performing for a little -example flooding when you are paving roads

implied contract

-implied-in-fact: based on conduct -party furnished service or property -party expects to be compensated and other party knew or should have known of compensation expectation -other party had a chance to reject and didn't -formed in whole or in part from the conduct of the parties, conduct express contract *contracts can be a mix of implied and expressed* -ex: Tony is paid to mow lawn, every two weeks they pay him. She wakes up one day and he is outside mowing already. Because Tony is expecting to be paid he'll perform the action, if you tell him no to then you aren't liable to pay. But she doesn't say anything so she'll be liable to pay. (RPS)

Quasi Contract

-implied-in-law contracts, not actual contracts -fictional contract, an obligation or contract imposed by law (a court) in the absence of an agreement,created by court to avoid unjust enrichment -limitations on Quasi-contractual recovery: no quasi contract for benefits thrust upon you (sometimes the party who obtained a benefit is not liable for its fair value), courts will not ordinarily impose a quasi contract when there is a contract covering the matter already, no quasi contract when the benefit was conferred unnecessarily or as a result of negligence (if they say they don't need assistance but you keep helping) -rare -court has to be involved -no contract if no lawsuit -court is going to create a fictitious contract because court looks at the action and then looks at what the two parties are in (if one party has benefited at the expense of another then they have to pay them called: quantum meruit) -quantum meruit: "as much as he or she deserves" this expression describes the extent of compensation owed under a quasi contract -equitable rather than legal contracts -goal is to bring the person to where they should be

minors

-in most states a person is no longer a minor for contractual purposes at the age of 18 -a minor can enter into any contract that an adult can (unless prohibited by law): but a contract entered into by a minor is voidable at the option of the minor only -two ways to have contractual capacity for minors: emancipation (when a child's parents or legal guardian relinquishes the legal right to exercise control over the child or when a child leaves and supports himself) and marriage -disaffirmance: a contract can be disaffirmed at any time during minority or for a reasonable period after minor reaches age of majority, minor must disaffirm the entire contract, disaffirmance can be expressed or implied

Mitigation of Damages

-injured party has a legal duty to mitigate damages -if the injured party fails to mitigate their award for breach is reduced by the amount they could have mitigated -if Tyler got the message then stopped working, you wouldn't get the compensatory damages -if he sat around and could have gotten another job or worked so they'll subtract failure to mitigate -the goal is to push the economy forward, don't allow damages to accumulate -if Tyler doesn't account for mitigation, the court will do it for you

release

-legal claim that tries to get it solved without the court -Adam hits Beth and makes an offer at a set amount of money to be released from the negligence lawsuit or to have her forego filing suit -Beth gets a set amount of money but she might have received more if she went to court or has greater injuries than thought so gets less money to fulfill recovery injuries -she give up her right to sue for negligence -if she didn't accept release then should could go to court and get a greater amount of compensation or even less -happens more frequently than Covenant not to sue

legal sufficient value

-legal value is separate from the distinct economic value (if any) of the thing promised -consideration can include forbearance: the act of refraining from an action that one as a legal right to undertake (Hamer v. Sidway) -three considerations: a promise to do an action, performance to do something, forbearance (promising to give up a legal right, have the legal ability to pay for a house but they put a forward payment to keep it open this puts the legal liability on the homeowner to not sell it yet)

Liquidated damages vs. Penalties

-liquidated: fixed, certain dollar amount agreed to by parties, paid in the event of breach (enforceable), if there is a breach then the party is supposed to pay certain amount, this is enforceable as long as it doesn't impose a penalty, amount has to be reasonable (have to show the exact the value was hard to remember so you do something reasonable), used all the time -penalty: designed to penalize the party (not enforceable)

option contract

-offeree says they like the offer so they can offer money to Dell, pay the seller to leave the offer open while you look at other options if they determined the time they have to actually accept the offer, terminated offer if time limit goes by

bilateral contracts

-offeror and offeree exchange promises to each other -a contract is formed when offeree *promises* to perform -promise for a promise -offeror says I'll pay you $30 (promise of offeror) if you deliver this package (if accepted, promise of offeree) -not as secure because they could take the money and not do what they promised to do

Discharge by breach

-material breach: when performance is not substantial, innocent party (nonbreaching party) is excused from performance and has the right to sue for damages, a minor breach may be cured, but nonbreaching party can still sue for damages (if any); nonbreaching party is only discharged from contract when there is a material breach -Ex: I'm not going to pay the person because I think they didn't do substantial performance (breach of contract), then if the court looks and thinks there is substantial performance I would be breaching the contract -better to error on the side of caution -only discharged from performance if there is substantial performance, if not enough performance then it is a breach -anticipatory repudiation: one party gives notice of refusal to perform, innocent party can treat the anticipatory repudiation as a material breach immediately or once the actual breach occurs-calls you up and gives you notice that they aren't performing or can't perform the performance -when you find out about this breach, you can go seek someone else on the same day you receive notice -or you can wait to see if the person can actually do it, if they can't then you can sue for damages -Call Jeff up to set up a contract to buy gravel for the driveway. Jeff calls me back to say he can't do it because he doesn't have enough drivers. On the same day I can call someone else to get the job completed. Normally you would wait because it isn't as timely to call and set up a new contract. It would be easier if Jeff calls back the following day saying there was a cancellation and can get a truck to you that day. (giving flexibility)

Fraudulent Misrepresentation

-misrepresentation: know the answer but you act like you don't -causation: whatever they said that lead to injury -injury: just have to show injury and not the cost innocent party can normally either: -rescind (cancel) the contract and be restored to original position -enforce the contract and seek damages for injuries caused by the fraud plaintiff must show: -misrepresentation of a material fact by conduct, words, or even silence in some cases -intent to deceive -innocent party must have justifiably relied on the misrepresentation -causation -to collect damages plaintiff must show a legally recognized injury -Danny wants a car that is a Camaro that has 80,000 miles or less. He crashes the car and they find fraud that the odometer was moved back. Danny would get the amount of damages for what he overpaid.

types of mistakes

-mistake of value vs. mistake of fact -can be a lack of voluntary consent -first question: What kind of mistake was made?

discharge by performance

-most contracts are discharged by performance (performance also includes tender) -tendering performance: ready, willing, and able to perform (deemed performance of law, you are ready to perform but you don't have to make certain the other party is ready) -continuum (material breach to perfect performance): when you have substantial performance you are still obligated to pay. If a certain portion wasn't done exactly performed you can get damages. (the person who breached: good faith, show performance didn't vary greatly, substantially same benefit) (if the partial breach you would get paid but a little less than the contract said because of the minor breach for not perfect performance) -complete vs. Substantial performance -complete performance: perfect performance under the contract -substantial performance: technically a minor breach, but as long as breach is made in good faith, the nonbreaching party remains liable to pay/perform (less damages from the minor breach) -satisfaction contract: performance is conditioned on reasonable satisfaction (-Ernest is 14 days late to finish a remodel and this had a possible less sales. -Ernest had substantial performance, she now could subtract the sales she lost from what the contract was supposed to be (minor breach) -subjective, the job can be done if person is satisfied with performance) Contracts with remodeling or building -sometimes certain materials might not be present at the time and you wanted it to get completed on time (good faith, substantial performance, and same benefit)

bargained-for exchange

-must be sufficient to induce the offeree to incur a legal detriment and vice versus -the money that pushes the barista to make the coffee and the ability to get the coffee pushes the buyer -distinguishes contracts from gifts

void contract

-no contract at all -a contract for an illegal purpose or contract against public policy (human trafficking, retrain a marriage, or discriminatory) -a contract having no legal force or binding effect

objective theory of contract

-objective: what you observe and intent -def: the view that contracting parties shall only be bound by terms that can be objectively inferred from promises made (RPS) -how intent is determined in contract law -objective facts: what the party said when entering into the contract, how the party acted or appeared, and the circumstances surrounding the transaction -Katie says she hates her car and would sell give $1000 to someone to take it, then her friend says deal. Katie didn't volunteer into a contract she simply stated something.

ratification by minor

-occurs when a minor, on or after reaching majority, indicates (expressly or impliedly) an intention to become bound by a contract made as a minor -if minor fails to disaffirm within a reasonable amount of time after reaching the age of majority, the court must determine if conduct implies ratification or disaffirmance -emancipation: terminates minority status -expressly: 16 year old buys a car and continues to use it until he is 18 -Issue: try to disaffirm but your 18, adult says you ran out of time because you turned 18, Court has to decide if there was ample time to fully grasp what was required by the contract, use statutes if over emancipation, reasonable time varies, if they fail to disaffirm a contract within a reasonable time after reaching the age of majority, a court will likely hold that the contract has been ratified

what is an offer

-offer involves two parties, offeror and offeree -promise to do or refrain from doing something specific in the future that one has a legal right to do -requirements: serious objective intention by the offeror, reasonably definite terms (courts had to be able to figure out what you were trying to do to determine breach or not), and the offer must be communicated to the offeree (can't accept offer if you don't know about it, email, phone, face to face) -refrain is forebearance

offer requirements: communication to offeree

-offer must be communicated to offeree

Voluntary consent

-to determine if voluntary consent exists, courts will look to objective intent -must be "meeting of the minds" (agree to terms) -voluntary consent is essential to justice (it wouldn't be fair if you weren't able to get out of contract if you were lied to)

unilateral contract

-offeror wants performance in exchange for his promise -contract is formed when offeree *performs* -promise for an act or performance -revocation of offer: modern view is that an offer is irrevocable once the offeree has substantially performed (RPS) -revoke: promisor attempts to cancel the offer after the promisee has begun performance, but before being substantially done -offeror says I'll pay you $30 (promise) after you deliver the package -more secure because the offeree will have to perform to get $30 *have to accept the terms* -Ex: Katie says she'll pay after Tyler paints the garage, but even if she doesn't like it she'll have to pay him for his action or performance

offer requirements: Serious objective intention

-offers made in obvious anger, jest or undue excitement are not offers -Lucy v. Zehmer (Lucy wins) -Opinions aren't offers, it's just an expression of a suggestion or thinking -statements of intent are not offers (we are going to paint this room then put lights in) -preliminary negotiations are not offers: a request or invitation to negotiate, it only expresses a willingness to discuss the possibility of entering into a contract (contractor bids) (figuring out the cost of changing the room) -the bid that a person puts together is an offer (have to write up the contract, that tells the person the price, if accepted the person is bound to fix the room) -ads, catalogues, price lists, and circulars are not offers (Pepsi Harrier Jet Commercial: circuit court of appeals, obvious jest). (the offer happens when you offer to pay, not seeing the ad on facebook or signs) (can deny if you are out of stock because if you click to pay, the company gets to choose if they want to accept it or not) (offer: I want that tv, not the ad) Exceptions (want the law to be consistent): definite promise (classified ads, this car is worth $1500 then go and pay) and solicits performance (reward poster for a cat or dog, the person should be given the award) -auctions: with ([resumed and most common type of auction, allows the owner of the product to withdraw before the sale becomes final) and without reserve (once you put the item in, you can't decline a bid, goes to the highest bidder) -auctions: the offers are the people biding for the items

Parties involved in contracts

-promisor/offeror: makes the promise -promisee/offeree: to whom the promise is made

Promissory Estoppel

-promissory estoppel ("detrimental reliance") doctrine applies when a person relies on the promise of another to her legal detriment (relying party can recover even though the promise was made without consideration) -offeror makes a promise to the offeree, offeree relies on the detrimental promise (no contract, there is nothing coming back in return but you can go back to court and ask for) -like Quasi Contract, but there is a promise with promissory and no promise with Quasi -like unilateral, but there is a promise and nothing coming back in return for promissory -rely on determent/promise that caused injury

Formal contract

-require special form or method to be enforceable (ex: under seal) -contracts that require a special form or method of creation to be enforceable -ex: negotiable instruments (checks, drafts, promissory notes, certificates of deposit) b/c under UCC a special formal language is required. Also letters of credit (international sales contracts)

specific performance vs. voluntary consent

-specific performance: get ready to buy a house and the seller doesn't show up to make the deal, you go to the judge and ask that the seller sell it to you -voluntary consent: did the person want to enter into the contract (objective theory of contract)

Termination of offer

-terminated either by the action of the parties or by operation of law -act of parties: revocation by offeror (offers can be revoked at any time before acceptance, valid upon receipt and can be expressed or implied: in the Dell example they can send a letter or phone call, only valid when they receive it, its best when they, phone is quicker (beat the offeree to it), can done expressly but want to do it better like calling, emailing, letter (apply), exception: irrevocable offers) and rejection by offeree (can be expressed or implied and valid upon receipt and counteroffer: acts as rejection and simultaneous new offer, be careful with wording if you don't mean to counteroffer) -operation of law: lapse of time (if you don't make a decision on time with the time requirement offer goes away, if there is no time restriction then its case specific and left up to the RPS by the jury), destruction of the subject matter (no acceptance of the offer to buy car and the car explodes so no offer anymore, can be damaged, not totaled), death or incompetence (offer is personal between the two people, if one of the parties dies then the offer no longer exists, you can leave it on the table if you have a option contract (knew the person was going to die for example), the estate/administrator (legal entity that exists once you die, all the assets the person had) is in charge once the person (offeror or offeree) dies), supervening illegality (change in law, can't have a contract with an illegal purpose, no option contract here)

expressed contract

-terms of contract are set forth either in writing or orally -you talked or wrote out the promise (what, when, how) -writing much better -the terms of the agreement are stated in words, oral, or written (formed by words) -ex: signed lease for an apartment: written, accept offer to buy someones textbooks: oral)

disaffirmance

-the legal avoidance, or setting aside of a contractual obligation -a minor must express through words or conduct to show they don't want to be bound by the contract -anytime when they're a minor -have a reasonable amount of time to think through the obligation they are in, whether they'd be bound or not -have to go out of entire contract (ex: if you are a minor and bought a lot of things and realized it was stupid, have to return all of it, can't keep one shirt) -generally, a minor only needs to return the goods subject to the contract, if the goods (consideration) are still in the minor's possession or control -minority of states are requiring the minor to restore the adult to the position held before the contract was made -exceptions: certain types of contracts as a matter of public policy, misrepresentation of age applies only in a few states, contracts for necessaries (liable for reasonable value of goods or services used/consumed) (necessary: essential to minor's existence and value of the necessary item may be up to a level required to maintain the minor's standard of living or financial and social status) -Girl spends $4000 on a dress and spills drink on it, she then wants to return it, she'll get the $4000 back if it was her money -bound to their contractual obligations of store, but they won't want to be publicly backlashed by going after a kid so probably give in to payment -if the kid knows about this to defraud the store, the store can sue for fraud, but most kids don't know about this -has to be the kids money, parents money can't be used (this is why credit cards are connected to parents and insurance) -this is why you want parents to cosign -if a kid bought a car then crashes and has to take all pieces of the car he'll get paid back for what it's worth, not what he bought it for Exceptions -could lie about age of being 18 then buy the car, and return it and get full value in majority of states -could lie about age of being 18 then buy the car, and return it get value of what it is, not what was paid -necessary item: what was used or consumed, like me eating cafeteria food and Paris Hilton ate caviar, based on social class -don't have to have insurance unless it's for transportation Its here for protecting kids

contracts that lack consideration

-under some circumstances, the promises or actions of a party will not qualify as consideration and thus, no enforceable contract is formed -pre-existing duty: if you are already under a contract and a make a new promise, then you aren't held to that promise (homeowner is told that they need to be paid more money to finish, they originally said it would take $40000 to build but come back and say you need to pay more $20000, you can promise to pay the extra amount but you don't have to pay it); exceptions: unforeseen difficulties (unforeseeable to the original contract, there is change circumstance, bargain), (expected to drill through sand to find water, took forever and longer than expected, they went past the estimated distance of where they thought they'd find water but hit hard rock and broke their drill, so the company asked for money to help with the drill and longer length of time to find water, the people then agree pay extra) and recession (parties come together and say we unmake the old contract, a promise for a promise to not do something) -past consideration: make a promise to an event that already occurred, bargain for exchange, if she promised to pay for getting the shoes it's a contract, whereas getting the shoes then promising to pay isn't enough to be a valid consideration -illusory promises: promises have to be certain, not valid consideration (Person says to me: "I might be able to clean your car unless I have practice, hw, or have to hangout with my girlfriend." I don't know if he is going to do it or not now)

Contract enforceability

-valid contract: voidable contract, unenforceable contract, enforceable contract (four necessary elements: agreement, consideration, legal purposes, parties have legal capacity to enter into the contract) -void contract: no contract at all

mentally incompetent persons

-void (and unenforceable): if a person has been adjudged mentally incompetent by court of law and a guardian has been appointed; has been shown that you can't contract and are given a guardian to contract for you -voidable: if a person does not know he/she is entering into the contract or lacks the mental capacity to comprehend its nature, purpose, and consequences (Can be ratified or disaffirmed, but consideration must be returned if disaffirmed); have to really assess it because they could end up disaffirming the contract even though originally you were about to make a contract -valid: if person is able to understand the nature and effect of entering into a contract, but lacks capacity to engage in other activities, lucid interval (know whats going on, then next moment you dont know your name); the time you enter into the contract the person needs to know and understand the contract, even if the person is normally is lucid -need to constantly be double checking and asking questions to know if they are of capacity so you have a valid contract -payee: they do all the finances for older women (85 and older) -lady enter into a 15 year payoff for a grand piano, next day she is confused why she got it (voidable)

acceptance

-voluntary act by offeree that shows assent to terms of original offer -can be expressed (best way, through email, phone, face to face) or implied -mirror image rule: offeree must unequivocally accept offer (acceptance must adhere exactly to the terms of the offer), additional or new conditions or terms that materially alter the offer may be considered a counteroffer (if you pay someone saying "please send it to her" = not a counteroffer) (if you say "I'll pay you *if* you send it to her = counteroffer) -acceptance by silence: ordinarily, silence isn't acceptance (normally has to be expressed); exceptions: offeree is silent but take benefit of offered goods or services (Tony mows the lawn and you see him, you have the opportunity to say something to stop him, but you don't so it shows acceptance) or silence can be an acceptance when the parties have had prior dealings (by not saying anything when a supplier provides baker with flour that the baker didn't necessarily want or need but still takes it because he didn't say he didn't need it since of prior dealing)

accord and satisfaction

-was there true consideration to be an effective agreement -has to be a dispute about the amount owed -if they agree on the amount owed, then not accord -if you owe creditor to pay a lesser amount than that of the contract and they accept, the satisfaction is fine because they want to get paid something even if it's not the previous amount

valid contract

-when the elements necessary for contract formation (agreement, consideration, capacity, legality) are present -agreement: offer and acceptance -consideration: must be pushed into it -Ex: If Bob's Burgers has a sign on a plane that says if you swim across a channel of water we'll pay you $10,000. Tim jumps in and starts swimming, while he is halfway there another sign says they stopped the deal. This is unilateral and contract and not implied because written. Have to show if it was substantially performed

communication of acceptance

-whether the offeror needs to be notified of acceptance depends upon the type of contract, some states require it (unilateral: usually not required) (bilateral: required) -also required if requested, mandated by law, or is the only way to determine if performance was provided -acceptance must be made in a timely fashion -acceptance is effective (agreement formed) when it is sent or dispatched by means authorized by the offeror (mailbox rule) -the authorized means of acceptance is either expressly stated or implied by the form of offer (acceptance sent by unauthorized means is not normally effective until receipt) -if offeror doesn't specify a means of communication, common law impliedly authorizes acceptance by: same or faster means used by the offeror, mail if parties are at a distance, by any reasonable medium (if dealing with oil pricing, use phone if no specific because its reasonable since pricing drastically changes)

discharge by agreement

Discharge By Mutual Rescission -parties agree to cancel their current contract. -can make a new contract to unmake the old one; as long as there is consideration like bilateral: promise for a promise, so both parties can promise to unmake it (restitution: if the person already performed you'll have to pay them for performance, but you can still make a new contract if you want) Discharge by Novation (Substitution): -new contract with substitution of a third party for one of the original parties. -Requires: (Previous valid contract. An agreement of all parties to a new contract. The extinguishment of the old obligation. A valid new contract.); -find a third party to replace one of the original parties -Oliver currently owes $20 to Amy but he doesn't have money right now. Susan owes Oliver $20 for dinner last night. So now Susan can just pay Amy the $20 so Susan doesn't have to go through Oliver. -need a new party Discharge by Accord and Satisfaction: -settlement to discharge original contract. -agree to more or less amount (accord) and payment (satisfaction), create a new contract to get rid of an old one -its taking away the old amount and paying the new amount -dispute over debt

Equations for damages

Nominal Damages = few $ to show technical breach OR Value of what was expected/promised - value received = compensatory damages/value of breach (+incidentals) (+consequentials) (+punitiives?) - failure to mitigate

Damages

What is the purpose or goal of the contract? (tells us the compensatory level) Consequential (Special) Damages -foreseeable damages that flow from the consequences or results of a breach -but, the damages are caused by special circumstances beyond or other than the contract itself -Hadley v. Baxendale: shows to let people know ahead of time of this information because consequential damages are big ticket items -store has a contract with a supplier and the supplier is aware of what they are supposed to do. What would happen if the supplier didn't come? If they don't come the store is going to have to pay higher prices to find another supplier. (Consequential: beyond the delivery they could lose profits and the supplier could foresee that. Its not about the delivery its about the sale of goods) Punitive (Exemplary) Damages -deter wrongdoer, set example -didn't incur damages, they are to punish you for damages -when there is a breach and a tort involved -you just add on the punitives if they occurred into the equation Nominal Damages -few dollars for technical breach -here is the breach and we're going to illustrate a technical breach -rarely happens, but an ongoing relationship and one of the parties starts slipping so they sue to get their attention -not much is paid back

requirements for promissory estoppel

for promisor to be "estopped" (precluded) from revoking the promise and claiming lack of consideration as a defense, there must be: -clear and definite promise -promisor should have expected that the promisee would rely on promise (expectation of reliance) -promisee reasonably relied on the promise by acting or refraining from an act (justifiable reliance) -Promisee's reliance was definite and resulted in substantial detriment (definite reliance and substantial detriment) -enforcement of the promise is necessary or to avoid injustice (justice is served by enforcing the promise) Examples: -donations for making a building, but they are just promises, the potential donor could take back promise (charities and donation drives) -Andrew gets a promotion and has no use in his car, Chad isn't doing well and has a shitty car. Andrew says he'll give Chad his car for his birthday. Andrew promises to give his car but then decides to give it to charity -business owner promises of retirement package to set money aside for employees retirement for the time they work at the company. Fred relies on it planning to retire earlier because of the help of his employer. Owner decides to set aside retirement money for only two years, not his entire working career. So now Fred won't be able to retire as early

undue influence and duress

undue influence: -typically arises from a special relationship of trust, a stronger party overcomes a weaker party's free will by exerting psychological influence -contract entered is voidable and can be rescinded due to the lack of voluntary consent -special relationships (parent and child, lawyer and client) -a party has a stronger will causing them to be pushed to a contract (might want to rescind and get out or enforce and seek damages) -ex: Dorothy lives in a prominent family and the family tries to come and see her. She has plenty of money and wants to give some to her family. Doris realizes there is opportunity to get a mansion Dorothy owns. Doris says I'll take better care of it because you family doesn't love you and can't be here. They enter into a contract so she can. Dorothy can then rescind or seek damages.) = have to show lack of voluntary consent (lots go under the radar so kids would need to come in and help) (not illegal) duress: -threat of physical force, blackmail, or extortion -contract entered under duress is voidable and can serve as a basis for rescission of the contract -generally, economic need, by itself, is not duress -renders their right to free will -they are threatening you -lack voluntary -rescind/get out or enforce and seek damages -not extortion: buying groceries at a set price. Could pick different stores if you don't like price. -Extortion: can only contract for example agreeing to pay $15000 because the person says I'll only give file your taxes that I've already done if you pay me. -they have the power to make you pay and complete the contract