Contracts - Chapter 9 Terms

Elements of A Contract

(1) Agreement; (2) Consideration; (3) Legality; (4) Capacity; Genuine Assent; and (5) Form (doesn't always apply)

Express Contract

All elements are stated in writing or orally; expressed by specific words.

Unenforceable Contract

Cannot be enforced because of defenses related to the formation of the agreement/contract

Crossing Offers

If offers containing exactly the same terms cross in the mail, no contract is created even though mutual assent -- an offer cannot be accepted until there is knowledge that it has been made.

Third Party Beneficiary Contract

The contract confers a benefit on a 3rd party

Revocation

The offeror may terminate an offer by communicating revocation directly or indirectly to the offeree before acceptance has occurred. A revocation i

Examples of things that aren't an offer

(1) Expressions of opinion, (2) statements of intention (I'm going to sell), (3) preliminary negotiations/invitations to negotiate (submitting a bid) -- EXCEPTION if a person says I will sell my book to the highest cash bid recieved witin the next 30 hour period -- this is an offer and each bid recied in the 30 hour period is an acceptance which will only be effective until a higher bid is recieved during the 30 hour time period. (4) Advertisement -- EXCEPTION/Caveat Emptor = if a store lists a specific item for a specific price on a "first come, first serve" basis then it's an offer. (5) Auction is considered a solicitation for offers (bids) -- EXCEPTION: when the auction is conducted without reserve, in which case the auctioneer cannot withdraw the goods once the bidding starts.

Unilateral Contract

(1) Promise in exchange for an action. (2) Traditional unilateral contracts occur in only 2 situations: (a) offeror clearly indicates that performance the only manner of acceptance, in which case no contract formed until it is done OR (b) an offer made to the public that clearly contemplates acceptance only by performances ex. reward for return of lost items. The easiest way to understand a unilateral contract is by analyzing the word 'unilateral.' In its simplest terms, unilateral contracts involve an action undertaken by one person or group alone. In contract law, unilateral contracts allow only one person to make a promise or agreement. A common example of a unilateral contract is with insurance contracts. The insurance company promises it will pay the insured person a specific amount of money in case a certain event happens. If the event doesn't happen, the company won't have to pay. It can be executory.

Ways to Terminate an Offer

(1) Revocation; (2) Rejection; (3) Counter offer; (4) Operation of Law (offer good for specific tie or the law changes & thus illegal); (5) Laps of time/Reasonable (reasonable time depends on specific case); (6) Destruction of Subject Matter; & (7) Death/Incompetence (in general if the offeror dies then the offer will terminate)

What are the three issues that Contract Formation boil down to when determining the formation of a valid, enforceable contract?

(1) existence of mutual assent, (2) existence of consideration; & (3) absence of defenses that would prevent enforcement of the contract terms.

Delegation

A party's duties are subsequently delegated to a 3rd party (ex proxy voting ?)

Assignment

A party's rights are subsequently transferred to a 3rd party (ex: if bylaws or articles all rights to be transferred & the rights are transferred the way it is spelled out in the business contract??)

Voidable Contract

A valid contract that can be voided by a party in 3 scenarios: (1) if something is illegal or becomes illegal then a contract can be voided; (2) Minors can enter into a contract and can void it (exceptions to this though); & (3) Incompetents. Exceptions: A "voidable contract" may not be voided if the contract is made for the necessities of life such as room & board or medical care. Note: book def states: " one that one or both parties may choose to avoid or may ratify."

Executed Contract

All parties have fully performed their obligations & duties under the terms of the contract. aka both sides did what they were supposed to do under contract

Mailbox Rule

As soon as put acceptance in mail with proper postage & address then valid. Acceptance can be effective/valid even if offeror doesn't see the acceptance til later -- HOWEVER if the contract states that the acceptance can't be mailed then not bound or that the accept is not effective until received. Ex: a contract is formed if the acceptance is sent BEFORE the revocation is received by the offeree. This is true even though the acceptance is sent (by the offeree) after the revocation is sent by the offeror and the acceptance is received by the offeror after the revocation is received by the offeree. In other words, the letter passed in the mail.

Acceptance without communication

Executory bilateral contract may be formed without communication of acceptance in two ways: (1) Express Waiver: the offer can state that your application is an offer only, pending acceptance by our home office (ex: application for insurance); (2) Silence as Acceptance. An offerree who silently receives the benefits of Services (NOT GOODS) will be held to have accepted a contract for them if the offerree had a reasonable opportunity to reject them and knew or should have known that the offeror expected to be compensated. When goods are inovled see pg. 464 & 465 & Book of the Month club statutes.

Acceptance by Unauthorized Method

If an acceptance is sent by an unauthorized method (or improperly sent by an authorized method), a contract still MAY BE effective if it is actually received by the offeror while the offer still remains open.

Executory Contract

Some obligation or duty remains to be done by one or more. If both or 1 side not fully performed yet. Ex: loan is an example of an executory contract or a rental agreement

Acceptance Issues

Under UCC & 2nd Restatement -- an offer may be accepted by any "medium reasonable in the circumstances". That said if the offeror limits acceptance to ap articular method it must do so clearly since any ambiguity will be construed to allow the offeree to use any reasonable means -- however see acceptance by unauthorized method as that seems to contradict this point. (1) Who can accept - offer comes to them or rewards anyone who see it; (2) Mirror Image Rule: offeree must accept offer on terms offered if don't then there is a counter offer; (3) mode and timeliness; (4) Mailbox Rule; (5) Authorized means. FYI: SILENCE IS NOT generally considered acceptance (although see battle of the forms & merchants)

Void Contract

a non-contract from the start because it was missing an element of a contract. No contract was ever created because of a defect in its formation (illegality of purpose). Ex: contract to kill someone

Implied Contract

aka Implied in Fact Contract. Assent manifested by conduct = strictly conduct of parties; based on past action of the parties. Inferred from parties acts or conduct. Doesn't have terms expressly stated. Ex: Turning on light in room = acceptance of utility service & obligation to pay for utilities used

Quasi-Contract

aka Implied in Law Contract. Legal fiction designed to prevent unjust enrichment. "assumpsit" = literally "he undertook, he promised" = (1) an express or implied promise or contract not under seal on which an action may be brought to recover damages for a breach. Basically the courts make it a contract in hindsight. It's very rare. Not really a contract since missing elements but courts can deem it one. It allows enforcement as justice warrants. Ex: Dr treats unconscious victim found in street and Dr may be able to recover $ for the services provided.

Mutual Assent

aka meeting of the minds. It requires both an offer and acceptance

What is an offer

must be an objective expression of a promise, undertaking, or commitment to enter into a contract. The terms of the offer must be definite and certain (i.e. identify of the offeree; subject matter (not every material term needs to be spelled out as long as some objective standard can bye used to supply missing terms; EX: in real estate transactions the offer must ID the land and price; in sale of goods the quantity offered must be definite or must be capable of being determined); price to be paid, time of payment or delivery or performance; quantity involved & the nature of the work or performance). EXCEPTIONS: Under UCC a reasonable price will be implied unless the parties are clear that they do not want a contract until a price is agreed upon; Under UCC if parties have not specified the time or that it is of the essence then UCC provides for performance within a reasonable time. Also, when terms are missing the UCC adn modern case law presume that the intent is to include reasonable terms -- UNLESS the parties included a term that is too vague to be enforceable -- e.g dividing profits "fairly" or stating price is $100 or less -- both are too vague. Also if the offer states that the price, quantity or other material term will be agreed upon later then the offer is too uncertain.

What is an offer (for contracts)?

the terms of an offer must be definite and certain and communicated to offeror. It is not a promise or undertaking.

Bilateral Contract

(1) Promise in exchange for a promise (mutual promises) OR start of performance. Most contracts are bilateral. Ex: (a) Max promises to pay Arnold $100 if Arnold promises to paint Max's house & Arnold promises to pant Max's house for $100. (b) Max promises to pay Arnold $100 if he will promise to paint Max's house and Arnold begins painting the house. Contract formed at front end. E.g. Promise to deliver a car and promise to pay. When most people think of contracts, bilateral agreements come to mind. In its most basic form, a bilateral contract is an agreement between at least two people or groups. Most business and personal contracts fall into this category. Examples of bilateral contracts are present in everyday life. You're entering this type of agreement every time you make a purchase at your favorite store, order a meal at a restaurant, or receive treatment from your doctor. It can be executory too.

Non-parties

General Rule = a contract confers benefits & imposes duties only ont he parties to the contract. EXCEPTIONS: (1) 3rd party beneficiary contract; (2) Assignment; (3) Delegation

Agreement aka Mutual Assent

requires both an Offer & Acceptance. There must be a meeting of the minds. The offeror must intend to create an obligation. The terms must be definite (what, when, how), it must be communicated to the offeree and then an acceptance must be made.