chapter 8 - contract law

mirror image rule (requirements for an enforceable offer)

For an acceptance to create a binding contract, standard contract law requires that the acceptance must "mirror" the offer, that is, must match it exactly. If the acceptance changes the terms of the offer or adds new terms, it is not really an acceptance. It is a counteroffer, and negotiations continue.

requirements for an enforceable offer (acceptance)

Acceptance of an offer is necessary to create a valid, enforceable contract. An offer to enter into a bilateral contract is accepted by the offeree's making the required promise. When Toni offers Aaron certain vinyl flooring for $2,500 to be delivered by November 30 on 90-day credit terms, and Aaron accepts, Aaron is promising to pay $2,500 on 90-day credit terms.

express contract

An exchange of promises in which the terms by which the parties agree to be bound are declared either orally or in writing, or a combination of both, at the time it is made.

mailbox rule or deposited acceptance rule

When does the acceptance become legally binding on the offeror? Unless the offeror specifies a particular time, the acceptance usually binds the parties when the offeree dispatches it. Since the offeree frequently mails the acceptance, the acceptance becomes binding when it is "deposited" with the postal service. the offeror cannot revoke the offer once the offeree has accepted it. An added significance is that an offeror's revocation is not effective until the offeree actually receives it.

(executory contract) Contractual Performance Terminology

When the parties have not yet performed their agreement

bilateral contract

a reciprocal arrangement between two parties by which each promises to perform an act in exchange for the other party's act.

contractual enforcement terminology (Voidable)

an agreement when at least one party has the right to withdraw from the promise made without incurring any legal liability. That party has the power to end the enforcement that these agreements are enforceable in court until a party with the legal right to do so decides to void the contract, thereby making the agreement unenforceable. Typically this middle ground situation arises when a party to the contract lacks capacity or is disadvantaged by specific situations.

(executed contract) Contractual Performance Terminology

contract in which the parties have performed their promises

duress

force or threat of force. The force may be physical or, in some instances, economic. cannot be based on one's assertion of legitimate business consequences; it must rise to the level of a tort. For example, if a seller informs a buyer that his or her offer is so advantageous the buyer's business will suffer if the buyer does not form a contract,

unilateral mistake

if only one party is mistaken about some aspect of the contract We do not want to impose the costs of one party's mistake on the other party who acted with complete knowledge. For example, suppose that Royal Carpet Co. bids $8.70 per yard for certain carpet material instead of $7.80 per yard as it had intended. If the seller accepts Royal Carpet's bid, a contract results.

meeting of the minds - fraud

involves an intentional misstatement of fact that induces another to enter into a contract to which they would not otherwise agree. example, if a person selling a ring with a glass stone states that it is a diamond ring instead, the misstatement must be a knowing lie (tort)

implied-in-fact contracts

obligations arising from a mutual agreement and intent to promise where the agreement and promise have not been expressed in words. Such contracts are implied from facts and circumstances showing a mutual intent to contract, and may arise by the conduct of the parties. (lawyer sitting with people they have just met asking for law advice in an informal setting then lawyer billing them afterwards)

undue influence

occurs when one is taken advantage of unfairly through a contract by a party who misuses a position of relationship or legal confidence. often arise when persons weakened by age or illness are persuaded to enter into a disadvantageous contract. (grandma's will)

unilateral contract

one party pays the other party to perform a certain duty. If the first party fulfills the duty, the second party is obligated to transfer the specified funds. However, the first party is under no binding obligation: they only have to fulfill the task if they want to. (missing dog. whoever actually brings it gets paid)

contractual enforcement terminology (Void)

one that appears to be an agreement but lacks an essential requirement for validity and enforceability. The most typical example of a void contract is an apparent agreement that has an illegal purpose.

meeting of the minds

parties to a contract have a mutual understanding of the essential terms and underlying facts. if it is clear that the parties had fundamentally different beliefs about the contract, it may be voidable. In most cases, a mutual understanding is assumed unless evidence to the contrary exists. A party usually raises the lack of mutual agreement as a defense to enforcement.

mirror image rule

simply that accepting an agreement has to be the same terms as the original offer. If you don't accept the original offer, negotiations begin, and an agreement is reached only when an offer is accepted as it is. states that an offer must be accepted exactly with no modifications. The offeror is the master of one's own offer.

statue of frauds

• Legal requirement that certain contracts be in writing • Business contracts required in writing - Sale of an interest in land - Collateral promise to pay another's debt - Contracts that cannot be performed in a year - Sale of goods of $500 or more - Other contracts based on state statutes

contracts

• Promises that are enforceable with predictable consequences for performance failures (question of law not fact) • Enable buyers and sellers to account for future risks or have confidence in exchanging valuables • Contract need not be a formal, written document • Contract law enables private agreements to be legally enforceable • Provides flexibility and precision in business dealings

common law under contracts

•Judges' decisions •Contracts for other than goods

legislation under contracts

•Uniform Commercial Code •Contracts for goods

mutual mistake

when each party misunderstands something very basic and material about a contract Although no tortious act has occurred, such a situation goes right to the heart of whether there has been voluntary consent to a single set of terms.

lawful purpose

• Contracts that require commission of a crime or tort or violate accepted standards of behavior are void • Courts typically do not take action on such contracts

oral contracts

• Generally as enforceable as written agreements • Informal • Everyday examples: - Buying fast food - Vending machines

meeting of the minds - misrepresentation

When a party misrepresents a material fact without intent to mislead, harm still occurs. However, this "innocent" misrepresentation simply makes the contract voidable by the innocent party. Heightened remedies such as punitive damages are inappropriate without the intent to deceive.

contractual enforcement terminology (Valid)

When an agreement is enforceable because all the essential requirements are present,

contractual enforcement terminology (Enforceable)

When courts uphold the validity of such promises, the resulting agreement

capacity of parties (minors)

- cannot be legally bound to contractual promises with exceptions for pessary live - contract is voidable at the election of the minor

capacity of parties (intoxicated or mentally incompetent persons)

- contracts are voidable depending on the person's capability to understanding the contract'd nature and purpose.

exceptions to the writing requirement

- part performance - judicial admission - rules involving goods

contractual enforcement terminology (unenforceable)

If a nonperforming party has a justifiable reason for noncompliance with a promise

option contract

In contracts that are not between merchants selling goods, a promise to keep an offer open for a certain time period must be supported by the offeree's consideration. real estate transactions. A seller of land may promise to let a prospective buyer have two weeks to study the deal and accept the offer at a specific price. The buyer must provide some consideration (usually a small sum of money) to the seller, or the seller's offer is not an enforceable option because it can be revoked.

implied-in-law contract or quasi contracts

No contract at all. law implies a duty or contract remedy to even playing field. An obligation created by law for the sake of justice or to avoid unjust enrichment. Neither involved party is expected to create such an agreement; this contract is arranged and imposed by a judge to correct a circumstance in which one party acquires something at the expense of the other party. Operates as a valid contract for purposes of remedy only; the general rules of contract do not apply to contracts implied in law.

consideration

Not all promises are enforceable through legal action. There must be some incentive or inducement for a person's promise or it is not binding. ucc article 2 only applies to the sale of goods.

Elements of an Enforceable contract

Offer - to enter into a contract; specific promise and specific demand Acceptance - of the offer Consideration - for each promise Capacity - of each party to enter into a binding agreement Legality - of subject matter

how can you terminate an offer?

Terminated due to explicit act by one party... • Revocation—when the offeror retracts the offer before the acceptance. • Rejection—when the offeree rejects the offer. • Counteroffer—when the offeree makes a counterproposal. Due to the mirror image rule described later, a counteroffer has the effect of rejecting the original offer and sending back a new offer for a different contract (but note the UCC flexibilities on additional terms, also described later). • Lapse of time—when the offeree fails to accept by a deadline defined in the offer or after a reasonable period of time. Automatically invalid if... A. subject matter destruction —when the object of the contract is destroyed or legally eliminated. B. offeror death or insanity —when the offeror no longer has the capacity to make the offer. C. subject matter illegality—when a change in the law renders the agreement illegal, acceptance is no longer possible.