Contracts

Bilateral Contract

A mutual contract that involves an exchange of promises or other consideration between two parties. The contract legally binds Jan and Tom

Express Contract

A state (written or oral) agreement between two parties to specific terms

Liquidated damages

Allows the aggrieved party to collect reasonable damages, even if damages are hard to calculate

Consent

Also called voluntary agreement. A contract must be entered into as a free and voluntary act, without undue influence or duress.

Lease With Option To Buy

An options is an offer. When the buyer exercises the option, the buyer is accepting the offer. Because options leave the seller hanging in a way (not being able to sell to another purchases), they are only open for a specified period of time.

Saul was unhappy after he and Janelle liquidated their business. Janelle sold some items for less than he'd initially agreed to and he wanted the full price to be included in the profit split. He wanted to sue, but he was required to pursue other options. What contract clause kept Saul from being able to sue?

Arbitration

Voidable

A contract that may be cancelled by one or more parties for one of several reasons. It may be missing an essential element and thus invalid; it may contain a mistake or a misrepresentation, or it may have been created or executed by a party under duress.

Unenforceable Contract

A contract that will not hold up in court

Enforceable Contract

A contract that will stand up in court

Void Contract

A contract with no legal force or effect. If someone is drunk, they are not competent and the contract is void

Legal Purpose

A contracts must be written for a legal purpose; that is, they must have a lawful objective. A contract for an illegal purpose is void.

Right of First Refusal

A lease option is a right of first refusal. With a right of first refusal, the holder may purchase the property if the seller decides to sell to anyone. The order of events is this: 1) The prospective purchaser asks for (and often pays a fee for) a right of first refusal 2) At some point, the owner may put the property up for sale or lease 3) Another party makes an offer to the owner 4) The holder of the right of first refusal now has to "put up or shut up" - either match the new party's offer, or allow the property to be sold or leased to the third party

Legally Competent Parties

A legally competent party has the capacity (legal and mental) to enter into a contract. If the party does not have legal capacity and enters into a contract anyway, the contract is void by the party lacking capacity.

Uniform Electronic Transactions Act

The Uniform Electronic Transaction Act, or UETA, was enacted to give electronic signatures, records, and contracts legal recognition equal to that of paper records and signatures.

If a minor enters into a contract with an adult, which of the following is true?

The minor may legally hold the adult to the contract, but the adult cannot legally hold the minor to the contract

Hank leases 150 acres from Sara and Jesse. He has an option contract attached to his lease, with an option to purchase that can be exercised within the next two years. What type of contact is this?

Unilateral

Contract Clauses

1) Choice of law 2) Notices 3) Statute of limitations 4) Time of performance 5) Indemnification 6) Severability 7) Arbitration 8) Liquidated damages

Types of Contracts (12)

1) Express 2) Implied 3) Bilateral 4) Unilateral 5) Enforceable 6) Unenforceable 7) Valid 8) Invalid 9) Void 10) Voidable 11) Executed 12) Executory

Essential Contract Elements

1) Legally competent parties 2) Offer and acceptance 3) Consent 4) Legal purpose 5) Consideration

Implied Contract

A contract that is based on the actions or behaviors of the parties, not on words

Executed Contract

A contract in which all the parties have met all terms of the contract

Unilateral Contract

A contract in which consideration (such as a promise) is only given by one party to the other. The contract legally binds Jan but not Tom

Invalid Contract

A contract in which one or more of the essential elements is missing

What is a contract?

A contract is an agreement between competent legal parties to do or refrain from doing some legal act in exchange for consideration

Valid Contract

A contract that contains all the essential elements

Statue of Frauds

Adopted from a 1677 English Law for use as a defense in a breach of contract lawsuit. Each state has its own version of the statute of frauds, but in general the law prevents injury from fraudulent conduct in certain types of agreements, including property transfers. To meet the statute's requirements, the written agreement must, identify the contracting parties, clearly identify the subject matter of the contract, and present the essential terms and conditions of the contract. It is a law requiring contracts conveying ownership in real property to be in writing to be enforceable.

Executory Contract

All contract in progress; one or more terms of the contract remain undone

Desmond has a signed listing agreement with his clients, the Harpers. In exchange for helping the Harpers list, market, and sell their home, the Harpers have agreed to pay Desmond a commission. What type of agreement do Desmond and the Harpers have?

Bilateral

Notices

Describes how contract-related notice may be made and when notice is considered to have been received. For example, a purchase or listing contract may permit contract parties to select whether notices may be delivered electronically.

Undue influence

Exists when an act of persuasion overcomes another individual's free will and judgement.

Consideration

For a contract to be legally binding, an offer and an acceptance must be supported by consideration. Consideration is defined as something of value offered by both parties. Consideration can include money, property, labor, love, good wishes, or physical action.

Duress

Includes the use or threat of force, such as a blackmail or bodily harm.

Severability

Notified the parties that even if one part of the contract is found invalid, the other parts of the contract can be valid and enforceable

Which element of a valid contract is established by getting the signatures of all parties?

Offer and Acceptance

Choice of Law

Points out that the contract will be interpreted under the laws of the given jurisdiction

Indemnification

Releases one or more parties from liability or loss

Trait of a Sales Contract

Sales Contracts are: 1) Express 2) Bilateral 3) Valid (in writing, for starters) 4) Enforceable 5) Executed or executory

Arbitration

Specifies that contract disputes will be settled through arbitration rather than through a lawsuit

Time of Performance

Specifies the date by which performance of the contract needs to be completed

Statue of Limitations

States the time frame in which a party can file a lawsuit relative to the contract

Offer and Acceptance

This is also called mutual agreement, or just acceptance. Offer and acceptance occurs only when there is a meeting of the minds, or when the parties are in complete agreement about the purpose and terms of the contract. Most states require this in writing. Offer: a promise made by one party, requesting something in exchange for that promise. Acceptance: a promise to be bound by the exact terms made in the offer.

Parole Evidence Rule

This rule provides that in most cases, a written agreement is the final and comprehensive expression of the parties' agreement, and generally prohibits the introduction of earlier verbal or written statements that contradict, augment, or otherwise change the written contract's terms.