Contracts and Sales, Chapter 5

Contract Performance

A contract can be set up so that there are conditions that must occur. If the duty to perform has a condition precedent to performance, then the duty to perform does not rise until the condition has been met. The condition being met precedes the party's performance. If the condition is a condition subsequent, then performance is due until and unless the condition is met. Most conditions are concurrent conditions. That is, the performance by both parties takes place at the same time. Unless a party makes arrangements to the contrary, conditions are usually concurrent. In order to bring a cause of action for breach, a party would be required to have attempted to perform as per the contract and the other party did not perform as agreed.

Delegation

A transfer of contractual duties by the obligor to a third party for performance.

Type of Acceptance

Acceptance can be direct or indirect.

Part Performance Exception

Allows an oral contract for land to be enforceable if the party moves on , makes improvements, and pays part of the consideration.

What is the difference between an assignment and a delegation of contract?

An assignment gives one's rights in a contract to a third party not involved in the contract originally; a delegation gives the duty to perform to a third party.

Agreements for an executor to be personally bound

An executor is the individual appointed in a will to take charge of the decedent's estate. Agreements in which an executor agrees to be personally bound to pay the decedent's debts must be in writing to be enforceable.

Illusory Promise

An illusory promise looks like someone is making a commitment to an agreement, but upon closer inspection, they are not.

Assignment of all rights

Assignment of all rights under a contract Delegation of all duties under a contract

Capacity

Capacity addresses whether parties entering into a contract have the minimal age or mental ability to comprehend what they have done by agreeing to be bound. In addressing capacity, the law has "three I's". That is, it protects three groups in particular regarding capacity: Infants, Intoxicants and Incompetents. Infants - This is what the law calls those under the legal age for contracting in the state--generally 18. Parties must be very careful when dealing with minors. If a party is below the legal age for contracting, his or her contracts are voidable at their option and only their option. They may disaffirm, or get out of, the contract any time before reaching the age of majority, or within a short time thereafter (time depends on the circumstances). If they do not wish to disaffirm the contract, they can ratify it by continuing the contract after reaching the age of majority, in which case the contract will be binding. Disaffirmance and ratification can be accomplished directly or indirectly. In most states when a minor disaffirms a contract he has the right to the full return of whatever he gave the other party. If the minor contracts for necessaries (generally defined as food, clothing or shelter) then decides to disaffirm, she can do so, but the other party is entitled to receive reasonable value for whatever he or she provided the minor. Incompetents - the law requires that the parties to a contract be able to know and understand what they are doing by entering into the contract. The incompetent party need not be declared incompetent by a court. If she is, the contract is void, rather than voidable. If, however, she ratifies the contract during a lucid moment the contract will be fully enforceable Intoxicants - This includes those whose mental faculties are voluntarily or involuntarily temporarily impaired because of drugs, alcohol, or some other mind-altering substance. Intoxicants lack capacity to enter into contracts and can disaffirm them if made. They can also ratify upon becoming sober and the contract becomes enforceable.

Capacity

Capacity ensures that those who enter into agreements understand the nature and effect of their agreements. Therefore those who are under the legal age of contracting (generally 18), those who are intoxicated, or otherwise under the influence of mind altering drugs, or those who are mentally incompetent lack capacity.

Conditions to Contract Performance

Conditions Precedent An event that must occur before a party is obligated to perform under a contract. Conditions Subsequent Performance is not due until and unless a condition is met. Concurrent Conditions Parties to a contract must perform at the same time.

Goods of $500 or more...

Contracts for the sale of goods of $500 or more must be in writing to be enforceable. This is a UCC rule. There are four exceptions to the rule: -specially manufactured goods upon which performance has begun. -part performance (if one of the parties partially preforms the contract, then the contract will be enforceable to the extent it was preformed. if the contract can not be divided because of it's nature, it will be enforceable in its entirety.) -admissions in court documents (only responsible for the amount admitted in court and no more). -written confirmation between merchants. (merchants only rule under UCC)

What are the ways that an offer can be terminated?

Death of either party, destruction of the subject matter, revocation by the offeror, rejection by the offeree, incapacity of either party, illegality of the subject matter, or lapse of stated or reasonable time.

Gratuitous Promises

Gratuitous promises will also not act as good consideration to support a contract. A gratuitous promise is a promise to give someone a gift.

What is not good as adequate consideration to support a contract?

Gratuitous promises, past consideration, pre-existing legal or contractual obligation, moral obligation, or illusory promise.

Condition Subsequent

If the condition is a condition subsequent, then preface is due until and unless the condition is met. That is, the performance by both parties take place at the same time. Example: Buying groceries...the delivery of the groceries and the payment of the grocery bill are done at the same time.

Condition Precedent

If the duty to preform has a condition precedent to performance, then the duty to preform does not rise until the condition has been met. The condition being met precedes the party's performance.

Main Purpose Doctrine

If the main reason one acts as surety if for his or her own personal advantage, surety contract is enforceable though oral.

What could make a contract unenforceable?

Lack of compliance with the Statute of Frauds or the parole evidence rule.

What does a valid contract require?

Mutual assent, consideration, legality and capacity.

Assignment of Contract

Once a contract is formed, there are rights and benefits on both sides. If either side decides to allow someone else to receive their benefit in the contract, it is accomplished by an assignment. If the duties are given to a third party to perform, it is called a delegation. Parties to Assignments - The party who assigns their right is an assignor. The one to whom such rights are assigned is an assignee. The one who owes a duty to perform is the obligor. The one to whom performance is owed is the obligee. The one who delegates his or her duties is the delegator. The one to whom such duties are delegated is the delegatee. Either party to a contract can assign his or her rights to a third party and generally can do so without the permission of the original obligor in the contract. The obligor, who was to perform for the original party, must now perform, instead, for the assignee. Virtually any contract may be assigned as long as the contract is not too personal or does not substantially change the obligation of the obligor. However if the obligation is too personal, or if assigning the contract changes the obligator's duties under the contract to make performance more burdensome, the obligor can refuse to preform. There are no formalities to assigning a contract and no consideration is necessary. The assignment is an agreement between the assignor and assignee, but it is not considered to be a contract between them. When a contract is assigned, the assignee steps into the shoes of the assignor and is in the same position the assignor was under the contract. The assignee is subject to any defenses to nonperformance which the obligor has against the assignor. While the obligor's permission is not necessary for a valid assignment, if the obligor gives permission, so that now all three parties agree to the assignment, it is called a novation. A novation takes the assignor out of the contract altogether and substitutes the assignee in the assignor's place. Delegations cannot be made without the permission of the other party to the contract if the contract is based on the personal reputation or skills of the delegator.

Enforceability of Contracts

Statute of Frauds - There is no requirement that a contract be written to be valid, however, under the Statute of Frauds, certain types of contracts thought to lend themselves to "faulty memories" must be in writing in order to be enforced in court. Oral contracts about these matters are legal, and may be valid, but they simply cannot be enforced in a court of law because they are not in writing. If the contract is not in writing as required by the Statute of Frauds, check to see if there are facts supporting an exception to the Statute that applies to make the contract enforceable even though no writing is present. Contracts made in consideration of marriage - as unromantic as it may sound, if parties agree to certain promises as a prerequisite to marriage then the agreement is only enforceable if it is in writing. Contracts for an interest in land - These must be in writing to be enforceable. This includes leases of over a year, sales of real estate, mortgages and any other interests in land Contracts incapable of being performed within a year from the time they are made -these must be in writing to be enforceable. The time starts to run when the contract is made, not when it is to be performed. Agreements for an executor to be personally bound - An executor is the individual appointed in a will to take charge of the decedent's estate. Agreements in which an executor agrees to be personally bound to pay the decedent's debts must be in writing to be enforceable. Suretyship agreements - Suretyship is the legal relationships formed when someone agrees to pay another's debt if the debtor does not pay. If the surety's promise to pay is to be enforced in court when the debtor doesn't pay and the creditor wants to look to the surety for payment, the surety agreement must be in writing. Goods of $500 or more - contracts for the sale of goods of $500 or more must be in writing to be enforceable. This is a UCC rule. There are four exceptions to the rule: -specially manufactured goods upon which performance has begun -part performance -admissions in court documents -written confirmation between merchants The writing requirement - There must simply be something in writing, signed by the party who is being sued, evidencing the material terms of the agreement. If it is in more than one writing that must be read together to understand the contract, the parts must be able to relate the pieces together without explanation.

Suretyship agreements

Suretyship is the legal relationships formed when someone agrees to pay another's debt if the debtor does not pay. If the surety's promise to pay is to be enforced in court when the debtor doesn't pay and the creditor wants to look to the surety for payment, the surety agreement must be in writing. Also known as Co-Signing.

Parol Evidence Rule

The Parol Evidence Rule provides that if there is a valid, written, integrated contract between the parties, then evidence of prior or contemporaneous agreements will not be permitted to vary or alter its terms. If the parties commit the contract to writing as the sole agreement between them, but do not include in it some point they agreed on orally before signing the contract then the point is lost. Contracts are to be enforced as written.

What is an assignment of contract?

The decision to allow someone else to receive the benefit of the contract.

Contract Involving Third Parties

The issue is whether the third party has any rights in the contract, either to sue for breach or to demand performance. The answer to these questions depends on the type of relationship the third party has to the contract. See Assignment.

Obligee

The one to whom performance is owed is the obligee.

Delegatee

The one to whom such duties are delegated is the delegatee.

Assignee

The one to whom such rights are assigned is an assignee.

Delegator

The one who delegates his or her duties is the delegator.

Obligor

The one who owes a duty to perform is the obligor.

Assignor

The party who assigns their right is an assignor.

Assignment

The transfer of rights under a contract by the obligee to a third party

Statute of Frauds

There is no requirement that a contract be written to be valid, however, under the Statute of Frauds, certain types of contracts thought to lend themselves to "faulty memories" must be in writing in order to be enforced in court. Marriage Year Land Executor Goods Surety Oral contracts about these matters are legal, and may be valid, but they simply cannot be enforced in a court of law because they are not in writing. If the contract is not in writing as required by the Statute of Frauds, check to see if there are facts supporting an exception to the Statute that applies to make the contract enforceable even though no writing is present.

What constitutes a writing sufficient for Statute of Frauds purposes?

There must simply be something in writing, signed by the party who is being sued, evidencing the material terms of the agreement.

The Writing Requirement

There must simply be something in writing, signed by the party who is being sued, evidencing the material terms of the agreement. If it is in more than one writing that must be read together to understand the contract, the parts must be able to relate the pieces together without explanation.

Contracts incapable of being performed within a year from the time they are made

These must be in writing to be enforceable. The time starts to run when the contract is made, not when it is to be performed.

Contracts for an interest in land

These must be in writing to be enforceable. This includes leases of over a year, sales of real estate, mortgages and any other interests in land.

Third-Party Beneficiaries

Third parties can sometimes claim rights under others' contracts. Such third parties are either: Intended third-party beneficiaries -Donee beneficiaries or -Creditor beneficiaries OR Incidental third-party beneficiaries

What is the purpose of a contract?

To secure some good or performance we would not otherwise be entitled to.

What is the difference between acceptance under the UCC and under the Restatement?

Under the UCC, for the most part, any means of acceptance reasonable under the circumstances is effective as an acceptance that creates a contract. Under common law, the offeree's acceptance of an offer must be unequivocal and be a mirror image of the offer.

Unconscionability

Undue influence or duress has not been exerted over a party to the contract in the traditional sense but there is a disadvantage involved in the contract that prevents courts from enforcing it. It is primarily a UCC concept. It should be noted that some courts have taken the concept of unconscionability out of the UCC and applied it to other, non-UCC contracts. Example: Old man living alone, on a fixed income in an efficiency apartment buying cookware that he could not afford.

Effective Dates of Actions

Unless otherwise agreed by the parties, the following actions are effective as noted: Offer - Effective when received by the offeree. Acceptance - Effective when sent if properly done. If not properly done, effective when received by the offeror. Acceptance after a prior rejection - First response to each offeror is effective. Rejection - Effective when received by offeror. Revovation - Effective when received by the offeree.

Third Party Beneficiary Contracts

Unlike assignments, which have third parties enter the contract only after the contract is created third party beneficiary contracts include third parties in the contract from the outset. By design, the contract is between the offeror and offeree, but it is for the benefit of the third party beneficiary. Third party beneficiaries have rights in the contract from the time it was made and their rights cannot be abridged without their consent. Unintended beneficiaries have no right to enforce a contract as a third party beneficiary.

Classification of Contracts

Valid, Void, Voidable, Unenforceable Executory: Not all obligations performed. Executed: All obligations preformed. Unilateral: A promise for an act. Bilateral: A promise for a promise. Express: All terms actually agreed - oral or written. Implied in Fact: Created parties' conduct Implied in Law: Quasi Contract

Acceptance After a Prior Rejection

When the offeree initially rejects an offer, then later accepts it, it is deemed an acceptance after a prior rejection. In such a case, acceptance is not effective when sent. Rather, the first communication to reach the offeror is effective.

Executory Contract

When the terms of the contract have not yet been performed, it is known as an executory contract.

Can anyone not originally involved in a contract have rights in that contract?

Yes, through assignment.

Contracts made in consideration of marriage

as unromantic as it may sound, if parties agree to certain promises as a prerequisite to marriage then the agreement is only enforceable if it is in writing.

A promise for a promise is a

bilateral contract.

The four requirements of validity:

mutual assent, capacity, consideration, and legality.

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.

What are the types of intended beneficiaries? What is the difference?

Donor and third party creditor beneficiaries. A donor beneficiary is the recipient of a gift not supported by consideration. A third party creditor beneficiary is supported by consideration.

Silence as Acceptance

Generally, silence by the offeree after being given an offer does not constitute. If the parties have a contract, previous relationship or history making silence an acceptance, then silence will operate as acceptance.

Undue influence

A rebuttable presumption of undue influence arises when it is shown that: the person accused of exerting undue influence had a dominant relationship with the other party to the contract; the unduly influenced party is shown to be in a subservient position to the accused; there was opportunity for the dominant party to exert undue influence over the subservient party; and, there is a contract which appears to give an unreasonable advantage to the dominant party.

Contacts Implied in Fact

A contract implied in fact is created when the parties enter into the agreement by their actions rather than because they have actually discussed the matter. Vast majority of contracts are actually contracts implied in fact. Example: An implied in fact contract is formed if you are sitting in a bar drinking club soda and signal the bartender and point to your glass. Your actions are understand to mean the bartender is to give you another club soda and you will pay, so she does and you are bound. The two of you have not actually discussed a contract in the usual sense, but your actions indicated one has been formed.

What is the difference between a contract implied in law and implied in fact?

A contract implied in fact is created when the parties enter into the agreement by their actions rather than because they have actually discussed the matter. Contacts implied in law are an obligation imposed by law upon an individual who receives a benefit under circumstances in which they would ordinarily be required to pay but no agreement to pay exists.

What is a contract?

A contract is a voluntary promise/agreement between two or more parties for which the law will provide a remedy for nonperformance (breach).

Legal Benefit

A legal benefit is a party gaining something to which he or she would not otherwise be entitled in the absence of an agreement.

Legal Detriment

A legal detriment is a party doing something they do not have to do, or not doing something they could do if they wanted to.

What is the difference between a unilateral and a bilateral contract?

A promise in exchange for an act is a unilateral contract; a promise in exchange for a promise is a bilateral contract.

Requirements for a Valid Contract

A valid contract is a bundle of rights surrounding an agreement. Making sure we have our complete bundle of rights for validity is important because if we do not and the contract is breached, we may not be able to have the breach remedied. The four requirements of validity are mutual assent, capacity, consideration and legality, we must also give attention to any writing requirements that address the enforceability of our agreement.

Acceptance under the UCC, Acceptance with Varied Terms

Acceptance under the UCC is a bit more relaxed than under the Restatement. Acceptance with varied terms - Under the UCC an acceptance that changes to the offer is only considered a counteroffer if the offeree so intends. Otherwise, the offeree is said to have given the offeror an acceptance with varied terms. Unlike a counteroffer, an acceptance with varied terms does not have the effect of terminating the original offer. The varied terms that were different from the original offer will be considered as proposals for addition to the contract that must be negotiated into the contract in order to become a part of it. If the acceptance is not definite or seasonable, then there is no acceptance and no contract. Seasonable means the offer was accepted within the time set out by the offeror, or if none is given, then a reasonable time based upon the circumstances. Definiteness addresses the overall impression that the offer is being accepted rather than rejected.

Offer

An offer is the communication by the offeror that will create a contract upon acceptance by the offer. In order for an offer to be sufficient to create a contract by it's acceptance, it must meet certain requirements.

What are the two sources of contract law?

Common law or Restatements and the Uniform Commercial Code.

What kinds of acts result in illegal contracts?

Anything that is illegal to do is illegal to contract to do or have done.

Uniform Commercial Code (UCC)

Article 2 of the UCC deals with buying and selling goods. Addresses contracts for the sale of goods, defined as tangible, movable, personal property. The Restatement and the UCC, which have been adopted in some form by all states together cover all contract actions, with contracts for the sale of goods addressed by the UCC, while contracts involving land, services or intangibles addressed by the Restatement or common law.

Mutual Ignorance

Both parties are aware that they do not know all they need to know before contracting, and they contract anyway. Both are bound by the contract even though things turn out differently than the parties thought they would.

Mutual mistake

Both parties think they are agreeing to something, when, in fact, neither has the same thing in mind.

Genuineness of Assent

Closely aligned with this matter of how acceptance is accomplished is the issue of whether the agreement between the parties is, in fact, voluntary and legitimate. Example: Someone signs over the deed to their house but only because they were being held at gunpoint.

Restatement of Contracts (Common Law)

Compilation of the most common approaches to states' common law of contracts (governs how contracts are made and enforced in it's state), but is not, in and of itself, law. Rather than know the law is in each state, states' contract laws have been distilled into a compilation called the Restatement of Contracts. The Restatement and the UCC, which have been adopted in some form by all states together cover all contract actions, with contracts for the sale of goods addressed by the UCC, while contracts involving land, services or intangibles addressed by the Restatement or common law.

Adequate Consideration

Consideration can be anything the parties decide it is. -A legal detriment is a party doing something they do not have to do, or not doing something they could do if they wanted to. -Not doing something you can do if you want to do is called forbearance. -A legal benefit is a party gaining something to which he or she would not otherwise be entitled in the absence of an agreement. Some kinds of consideration do not qualify as adequate consideration to create a binding contract because they lack one of the requirements of the three-pronged definition above. If the consideration is lacking, then no contract is formed. To help you determine what is being used as consideration in an agreement, put the agreement in the "consideration sentence": "In exchange for _________, I will give you/do ________."

Consideration

Consideration ensures that parties to the contract actually bind themselves to the agreement by exchanging an agreed upon legal detriment, that is, the parties agree to do something they do not have to do or, or agree to forbear from doing something they could do if they wanted to. In contracting to buy a car, you agree to exchange money you otherwise would not have to give the dealer in exchange for title and possession of a car the dealer would otherwise not have to give you. Consideration is the thing of value exchanged between the parties to a contract. If there is no consideration between the parties, there is no valid and binding contract. Consideration is often defined as "bargained for legal detriment exchanged between the parties." The law does not deal with the value of consideration unless fraud is involved. The parties can agree to consideration of as little or as much as they want.

What is the definition of consideration?

Consideration is the thing of value exchanged between the parties to a contract.

Contacts Implied in Law (Quasi Contracts)

Contacts implied in law are obligations imposed by law upon an individual who receives a benefit under circumstances in which they would ordinarily be required to pay but no agreement to pay exists. The law prevents the party receiving the benefit from being unjustly enriched at the expense of the party who provided the benefit by imposing upon the recipient a duty to pay to the party who performed the service the reasonable value of the benefit received by the recipient. In a way the law builds on ethics here because the law understands that it would be unethical for a person who receives something of benefit, under circumstances in which they would ordinarily expect to pay, to not pay and be able to hide behind the fact that there was no agreement, so it imposes liability under such circumstances. Example: Doctor finds and helps unconscious patient and then sends them a bill. The patient must pay the bill because ordinarily he would pay a doctors bill. The doctor may not get to charge her normal contract price, but does not away empty handed. The patient is not required to pay the usual contract amount, but only the reasonable value of what was received. (Quantum Merit)

What types of contracts must be in writing to be enforced?

Contracts made in consideration of marriage, contracts for an interest in land, contracts incapable of being performed within a year from the time they are made, agreements for an executor to be personally bound, suretyship agreements, and goods of $500 or more.

Termination of Offers

Death of Either Party Destruction of the Subject Matter Revocation by the Offeror Rejection by the Offeree Incapacity of either party Illegality of the subject matter Lapse of stated or reasonable time

Definite

Definiteness addresses the overall impression that the offer is being accepted rather than rejected.

Definiteness of Terms

Definiteness of terms ensures that the parties understand exactly what is being offered. Anything the parties wish to have as part of the contract should be included in the offer.

Terminating an Offer (Factors)

Destruction of the Subject matter - the subject matter of the contract is destroyed through no fault of the parties. Death or Incapacity - The death or incapacity of either party immediately terminates the offer. Rejection - If the offeree declines to accept the offer, the offer is terminated. If the offer is under the Restatement and the offeree changes the terms of the offer in any way, it is considered to be a counteroffer which terminates the original offer and creates a new offer by the old offeree who now becomes the offeror. Under the UCC a change in the offer by offeree will only be considered a counteroffer if the offeree intends it to be so. Revocation - The offeror takes back the offer before it is accepted. The general rule is that an offer can be revoked by an offeror any time prior to acceptance by the offeree unless it meets one of the three exceptions: Option contract - An option contract is a contractual agreement, complete with consideration, that the offeror will hold the offer open for the offeree for an agreed upon period of time. The offeror cannot revoke the offer during the period of the option. Unilateral offer upon which performance has begun - Unilateral offers are accepted and create contracts by the offeree completely performing the act requested by the offeror. Since the offeree has not yet accepted by completing performance of the requested act, the offer can be revoked. However, the law provides that if the offeree substantially begins performance, the offeror's power to revoke is suspended until the performance is finished or the time has come for the performance to be completed, even if it is not. Merchant's firm offer - If a merchant gives written, signed, assurances that an offer will be held open for a specified period of time, then even without consideration to hold the offer open (as is needed with an option contract), the offer cannot be revoked by the offeror. (UCC) Incapacity - if either of the parties becomes incapacitated while the offer is pending then the offer is terminated and has no legal significance. Illegality - If an offer is made but before it can be accepted the subject matter of the offer becomes illegal, the offer is terminated. Lapse of Stated or Reasonable Time - If the offeror specifies a time within which the offer must be accepted, it must be accepted within that time or the offer is terminated. Under the UCC, if no time is specified in the offer, then the law will impose a reasonable time based on the circumstances.

Challenges to Mutual Assent

Duress Undue Influence Mutual Mistake Unilateral Mistake Mutual Ignorance Unconscionability Fraud in the inducement Fraud in the execution -Duress - exerting pressure through threats or use of physical force, economic disadvantage, exposure of private matters, etc., to get a party to enter into a contract. The contract is voidable by the party experiencing the duress. -If threat of deadly force is used (gun, knife, etc.,) to obtain assent the contract is void. -Undue influence - a rebuttable presumption of undue influence arises when it is shown that: the person accused of exerting undue influence had a dominant relationship with the other party to the contract; the unduly influenced party is shown to be in a subservient position to the accused; there was opportunity for the dominant party to exert undue influence over the subservient party; and, there is a contract which appears to give an unreasonable advantage to the dominant party. -Mutual mistake - both parties think they are agreeing to something, when, in fact, neither has the same thing in mind. -Unilateral mistake - If a mistake is made by only one party to the contract and the other knows of the mistake, the court will not allow the innocent party to be taken advantage of. The contract will be on the terms both were aware of. -Mutual Ignorance - Both parties are aware that they do not know all they need to know before contracting, and they contract anyway. Both are bound by the contract even though things turn out differently than the parties thought they would. -Unconscionability - Undue influence or duress has not been exerted over a party to the contract in the traditional sense but there is a disadvantage involved in the contract that prevents courts from enforcing it. It is primarily a UCC concept. It should be noted that some courts have taken the concept of unconscionability out of the UCC and applied it to other, non-UCC contracts. -Fraud - Intentionally making untrue statements to a person in order to get him or her to enter into an agreement is fraud.

What can adversely impact the genuineness of assent to an offer?

Duress, mutual ignorance, undue influence, unconscionability, mutual mistake, fraud in the inducement, unilateral mistake, and fraud in the execution.

Parties to a Contract

Every contract involves at least two parties.

Duress

Exerting pressure through threats or use of physical force, economic disadvantage, exposure of private matters, etc., to get a party to enter into a contract. The contract is voidable by the party experiencing the duress.

Gap Filling

For instance, if there is no term for where delivery will take place, under the UCC delivery will take place at the seller's place of business, or if none, the seller's home. The process of using UCC provisions to fill in terms left out of an offer is called gap filling.

Inadequate Consideration

Gratuitous Promises Promissory Estoppel Past Consideration Pre-existing legal or contractual obligation Moral obligation Illusory promise Sometimes parties make agreements to exchange something that is to act as consideration for the agreement, and it does not meet the legal requirements. Past consideration - Past consideration is not adequate consideration to support a promise, therefore, it will not create a contract. Moral Obligation - If a promise is based only upon a moral obligation, it will not be adequate consideration to support the promise and create a contract. Pre-existing legal or contractual obligation - If the act that forms the basis of the contract is based on a pre-existing legal or contractual obligation, then it will not be adequate consideration to support a contract. Gratuitous promises - Gratuitous promises will also not act as good consideration to support a contract. A gratuitous promise is a promise to give someone a gift. Promissory estoppel is an equitable concept and can be thought of as rather a "substitute" for consideration that sometimes can be used where actual consideration is not present and injustice would otherwise result. Illusory promise - An illusory promise looks like someone is making a commitment to an agreement, but upon closer inspection, they are not.

Unenforceable

If a contract is valid, but is required to be in writing and is not, or part of an agreement reached orally before or at the time of contracting is not included in the final written agreement (whether or not the agreement was required to be in writing), then the contract will be unenforceable.

Voidable

If a contract is valid, except one or both of the parties was not of legal age, or there was fraud in the inducement as the basis for a party to enter the contract, then the contract is voidable.

Unilateral mistake

If a mistake is made by only one party to the contract and the other knows of the mistake, the court will not allow the innocent party to be taken advantage of. The contract will be on the terms both were aware of.

Remedies

If a party does not perform the contract as agreed, the non-breaching party is generally entitled to remedies for breach. If one party fails to perform as promised, the other party can use the court system to enforce the contract and recover damages or other property. Remedies put the non-breaching party in the position he or she would have been in had there been no breach. These remedies can take the form of legal remedies or equitable remedies. Legal Damages -Money damages -Punitive damages Equitable Damages Money damages may be the most likely way to make the non-breaching party whole, but if not, then equitable remedies may be used, as appropriate. Punitive damages are generally not awarded in breach of contract actions. However, if the breach was malicious, fraudulent, or connected with a tort, they may be awarded.

Moral Obligation

If a promise is based only upon a moral obligation, it will not be adequate consideration to support the promise and create a contract.

Breach of contract

If one of the parties does not perform as promised, then that party has breached the contract. The law will allow recovery for the breach by generally requiring the breaching party to put the non-breaching party in the position the non-breaching party would have been in had there been no breach. In order to be able to recover for breach of contract, the parties to the contract must meet the requirements of a valid contract or none will exist to serve as a basis for breach. The contract must have 1) legal subject matter , 2) capacity of the parties to enter into contracts, 3) the exchange of consideration or something of agreed value between them, and 4) mutual assent between the parties, i.e., true agreement between the parties as to the contract's terms.

Unilateral

If one party promises to do an act if the other party does something, it is a unilateral contract. If it is not clear from the language whether the contract is unilateral or bilateral, treat it as bilateral. However, the law will recognize unilateral contracts if they parties so intend. Always pay close attention to any information in quotation marks when trying to determine if it is one or the other. Example: Jan says to Pedro, "I promise to give you $400 if you drive my car to Malibu from San Francisco." Since Jan requested the act of driving the car, this creates a unilateral contract when the car reached Malibu, and Jan must pay Pedro. If instead Jan said to Pedro, "I promise to give you $400 if you promise to drive my car to Malibu from San Francisco," Jan requested from Pedro a return promise and it creates a bilateral contract when Pedro accepts the offer by agreeing. This difference between the two becomes quite important if Jan takes back his promise and decides not to have Pedro make the trip. If Jan had made a unilateral offer and before Pedro accepted by driving the car to San Francisco Jan takes back the offer, there would be no contract upon which Pedro could sue for breach when Jan fails to preform as promised. If, instead, Jan's offer is for a bilateral contract, a contract was formed as soon as Pedro agreed to Jan's offer so there is no longer an offer for Jan to take back. There is a contract Jan must preform and failure of Jan to do so gives rise to breach.

Bilateral

If one party promises to do something if the other promises to do something, it is a bilateral contract. If it is not clear from the language whether the contract is unilateral or bilateral, treat it as bilateral. However, the law will recognize unilateral contracts if they parties so intend. Always pay close attention to any information in quotation marks when trying to determine if it is one or the other. Example: Jan says to Pedro, "I promise to give you $400 if you drive my car to Malibu from San Francisco." Since Jan requested the act of driving the car, this creates a unilateral contract when the car reached Malibu, and Jan must pay Pedro. If instead Jan said to Pedro, "I promise to give you $400 if you promise to drive my car to Malibu from San Francisco," Jan requested from Pedro a return promise and it creates a bilateral contract when Pedro accepts the offer by agreeing. This difference between the two becomes quite important if Jan takes back his promise and decides not to have Pedro make the trip. If Jan had made a unilateral offer and before Pedro accepted by driving the car to San Francisco Jan takes back the offer, there would be no contract upon which Pedro could sue for breach when Jan fails to preform as promised. If, instead, Jan's offer is for a bilateral contract, a contract was formed as soon as Pedro agreed to Jan's offer so there is no longer an offer for Jan to take back. There is a contract Jan must preform and failure of Jan to do so gives rise to breach.

Pre-Existing Legal or Contractual Obligation

If the act that forms the basis of the contract is based on a pre-existing legal or contractual obligation, then it will not be adequate consideration to support a contract.

Void

If the contract does not have legal subject matter or there was fraud in the execution, in entering into the agreement, then the contract does not actually exist at all. This is called a void contract. Void contracts have no legal force and effect and therefore cannot be enforced when the non-breaching party sues for breach of contract.

What is an express contract?

If the parties to the contract actually discuss the contract and reach agreement, then it is an express contract.

Express Contracts

If the parties to the contract actually discuss the contract and reach agreement, then it is an express contract. Express contracts may be either written or oral. If they do not commit the contract to writing, it is still an express contract.

Executed Contract

If the terms of a contract have been fully performed, it is known as an executed contract. It is possible to have a contract that is partially executed, in that some, but not all of it has been performed. For instance, if Jane takes out a school loan at the bank, the bank's duty is executed since it has given Jane the money. Jane's duties are executory since, since she must repay, generally on a monthly basis. When Jane completes the repayment, the contract will be executed on her part as well.

What is the difference between an executory contract and an executed contract?

If the terms of a contract have been fully performed, it is known as an executed contract. When the terms of the contract have not yet been performed, it is known as an executory contract.

Varied Terms between Merchants (UCC)

If the varied terms are between (meaning both buyer and seller) merchants (those who deal in goods of the kind), then the rule about acceptance with varied terms is somewhat different. The UCC presumes that merchants understand and know the landscape they are dealing with in buying and selling goods, so they can deal with each other in sort of a shortcut way. The course of the parties' dealings and the usage of trade gives a measure of predictability to the transactions that allow the UCC to do this. If the varied terms are different, in that they change what is actually in the offer to something else (you say you accept the offer but you want a car, not a truck), then it is like the above rule, in that there will be a contract if there is a definite and seasonable acceptance, and the varied terms will have to be negotiated into the contract or the original offer stands. If, instead, the offeree's varied terms are additional in that the different terms leave what is in the original offer, but add something to it then the varied terms automatically become a part of the contract unless: -The offer is expressly limited to its terms (the offeror indicates in the offer that he is unwilling to consider any other terms). -The offeror objects to the different terms within ten days of receiving them, (offeree gives the additional terms and offeror says no). -The newly proposed terms materially alter the original offer (You want the car in the offer and 6 other cars too). If any of these 3 exceptions occur, then the first rule above applies and the varied terms are treated as proposals for addition to the contract that must be negotiated in to become a part of it.

Requirements for Valid and Enforceable Contract

In order to be sufficient to create a contract, the offer must contain: 1) Definiteness of Terms 2) Intent 3) Communication All three requirements must be met in order to have an effective offer. Definiteness of terms ensures that the parties understand exactly what is being offered. Anything the parties wish to have as part of the contract should be included in the offer. For the UCC, that means at a minimum, quantity, quality, and price. If terms are left out, it is not fatal because they can be filled in by UCC provisions. For instance, if there is no term for where delivery will take place, under the UCC delivery will take place at the seller's place of business, or if none, the seller's home. The process of using UCC provisions to fill in terms left out of an offer is called gap filling. For non-UCC contracts, all pertinent terms of the offer should be included, as the Restatement does not permit gap filling as the UCC does. Intent ensures that the offeror intended to actually make an offer and was not merely exploring, joking, or angry or in the midst of great excitement. Generally courts look to the objective intent actually manifested by the offeror to determine intent, rather than the subjective intent of what was in his or her head. What an offeror says or does is considered in determining intent, not what he or she was thinking. If an offeror appears to be serious in making an offer, then it matters little that in the offeror's mind it was only a joke. Communication of the offer must be made to the offeree by the offeror or the offeror's agent. It is not sufficient for the offer to simply hear about the offer and respond to it. Termination of offers - In order for an offer to create a contract upon acceptance by the offeree, the offer must still be alive and viable when accepted by the offeree.

What categories of capacity does the law protect?

Infants, intoxicants and incompetents.

To what types of contracts does the parole evidence rule apply?

Integrated, written contracts.

What are the categories of third party intended beneficiaries?

Intended and incidental beneficiaries

Fraud

Intentionally making untrue statements to a person in order to get him or her to enter into an agreement is fraud.

What happens if an offer is made in jest, anger or great excitement?

It's unenforceable.

What could make a contract voidable?

Lack of mutual assent, consideration, legality, or capacity.

What remedies are available for breach of contracts?

Legal or equitable remedies.

Legality

Legality refers to the subject matter of the contract being legal. Generally, if it is illegal to do an act, then it is illegal to contract to have the act done. -Usury -Gambling -Unlicensed Professionals -Violation of Public Policy In order for a contract to be legal, what it proposes to do must be legal. If it is not, the contract is void. Generally, anything that is illegal to do is illegal to contract to do or have done. Courts also will not enforce agreements that may not actually be illegal, but are considered to violate public policy.

Mutual Assent

Mutual assent is agreement between the parties as to the contract's terms and their intent to actually enter into a contract rather than just inquiring or joking with each other. It consist of the offeror extending an offer and the offer accepting the offer.

What rights does an unintended third party beneficiary have?

None.

Forbearance

Not doing something you can do if you want to do is called forbearance.

What comprises mutual assent?

Offer and acceptance.

Past Consideration

Past consideration is not adequate consideration to support a promise, therefore, it will not create a contract.

Quantum Meruit

Payment for reasonable value of services or goods imposed by law in a transaction where one would otherwise by unjustly enriched by not being required to pay because element of valid contract is missing.

Promissory Estoppel

Promissory estoppel is an equitable concept and can be thought of as rather a "substitute" for consideration that sometimes can be used where actual consideration is not present and injustice would otherwise result. Example: Birthday party where girl put down deposits.

Seasonable

Seasonable means the offer was accepted within the time set out by the offeror, or if none is given, then a reasonable time based upon the circumstances.

Counter Offer

Terminates the original offer and creates as new offer by the old offeree who now becomes the offeror. Under the Restatement's mirror image rule, the offeree's acceptance of an offer must be unequivocal and be a mirror image of the offer. If it is not, and any terms are changed by the offeree, it is considered to be a counteroffer which terminates the offer.

What is the difference between the Statute of Frauds and the Parol Evidence Rule?

The Statute of Frauds requires that certain types of contracts be in writing. The parole evidence rule provides if there is a valid, written, integrated contract between the parties, then evidence of prior or contemporaneous agreements will not be permitted to vary or alter the terms.

Valid Contract

The contract must have 1) legal subject matter 2) capacity of the parties to enter into contracts 3) the exchange of consideration or something of agreed value between them 4) mutual assent between the parties, i.e., true agreement between the parties as to the contract's terms As stated above, a valid contract is one which meets each of the four requirements discussed above, i.e., mutual assent, consideration, legality and capacity. If all of these things are present, the contract is said to be valid. If a contract meets these requirements, but is required to be in writing and is not, or part of an agreement reached orally before or at the time of contracting is not included in the final written agreement (whether or not the agreement was required to be in writing), then the contract will be unenforceable. If a contract meets the requirements, except one or both of the parties was not of legal age, or there was fraud in the inducement as the basis for a party to enter the contract, then the contract is voidable. If the contract does not have legal subject matter or there was fraud in the execution, in entering into the agreement, then the contract does not actually exist at all. This is called a void contract. Void contracts have no legal force and effect and therefore cannot be enforced when the non-breaching party sues for breach of contract.

Proposals for Addition to the Contract

The varied terms that were different from the original offer will be considered as proposals for addition to the contract that must be negotiated into the contract in order to become a part of it.

What elements does an offer require to set up the right to create a contract by saying yes?

The offer must contain 1) definiteness of terms, 2) intent and 3) communication

Acceptance

Under the Restatement's mirror image rule, the offeree's acceptance of an offer must be unequivocal and be a mirror image of the offer. If it is not, and any terms are changed by the offeree, it is considered to be a counteroffer which terminates the offer. The offeror has complete control over the offer and how it is to be accepted. Note: UCC Art. 2: any means of acceptance reasonable under the circumstances is effective as an acceptance and creates a contract Genuineness of Assent -Voluntary and legitimate Types of Acceptance -Direct Occurs when the offeree communicates to the offeror his wish to enter into the contract. -Indirect Occurs when the offeror does some act consistent with acceptance, such as sending a check for the amount of the offer within the time specified. When is Acceptance effective? Mailbox Rule

Mailbox Rule or the Deposited Acceptance Rule

Unless otherwise agreed, an acceptance is effective when it is sent if it is sent correctly. A contract is still created because the contract was created when the acceptance was sent. The acceptance is effective when sent the correct way.

Requirements for Valid and Enforceable Contract

Validity -Mutual assent (offer and acceptance) -Consideration -Legality -Capacity Enforceability -Compliance with the Statute of Frauds when necessary -Compliance with the Parol Evidence Rule when necessary

What is the impact of someone lacking capacity entering into a contract?

Void or voidable.

What are the classifications of contracts?

Void, voidable, valid, or unenforceable.