Business Law: CHAPTER 10

In what situations would a court be likely to award a quasi-contract? Choose 2 answer choices.

-If the defendant was unjustly enriched and played a part in deceiving the plaintiff -When the unjust enrichment is a relatively insignificant amount of money

In general, certain terms must be included in contracts to satisfy the requirement of definiteness. What are the exceptions to this rule? Choose 2 answer choices.

-Sales contracts under the UCC -Courts can complete a contract to supply some missing items.

What are the elements of consideration? Choose 2 answer choices.

-an exchange to which the parties agree -something of value from each party

Which act or statement is a valid offer?

A detailed advertisement

In general, which of these contract terms is NOT required to meet the requirement of definiteness?

Acceptance

What must a plaintiff show to be awarded a quasi-contract in a lawsuit?

The defendant was unjustly enriched.

What type of acceptance requires an affirmative action for the offeree to accept that offer?

Unilateral contracts

Which situation would be considered sufficient consideration for a contract to exist?

Pam agrees to pay Derek $500 if he does not sit next to her in class anymore.

Which of the following is a valid offer?

Eric offers to buy Arun's house for $775,000 with no contingencies because Eric's lease ends in two months. Arun wants to think about it and six days later has not yet responded.

Lilly hired Harris Lawn Service to cut her grass one summer, and paid through automatic charges to her credit card. After taking three months off for winter weather, Harris staff cut Lilly's grass for four weeks in a row before charging the fees on Lilly's credit card. Lilly protested the charges, stating she did not hire the company to cut grass for the second summer. Harris sues Lilly. What law applies? Choose 2 answer choices.

-Lilly's silence is acceptance because of the parties' past dealings. -Lilly's silence is acceptance because the offeree accepted the benefit offered.

Quasi Contract Theory

A quasi-contract is not an actual contract created by two parties, but one imposed by law. Courts impose these to address situations in which there is no contract, but a party received a benefit from another and retaining that benefit is considered to be unfair. A court can use the legal theory of quasi-contracts to prevent unjust enrichment by one of the parties. When a plaintiff requests the remedy of quasi-contracts from a court, the party must show three elements: The plaintiff provided the defendant with some benefit. The plaintiff reasonably expected to be paid for that benefit and the defendant knew about that expectation. The defendant would be unjustly enriched if he or she did not pay. Once the court creates a quasi-contract, the court will award damages to the plaintiff in the amount of the fair value of the defendant's benefit.

Sufficiency of Consideration

Consideration is what each party gives up under the contract. Each party must give something and must get something for the contract to be enforceable. The two elements of consideration are: Value - A legal benefit or detriment of sufficient, measurable value promised by each party. A promise to do something that one has no prior duty to do. The performance of an action that one is otherwise not obligated to do. Forbearance is the refraining from an action that one has a legal right to do. If a parent pays his adult child to quit smoking, that is forbearance and is consideration. The adult child has a right to smoke, and giving up that right is valid consideration for the contract. Bargained-For Exchange - Each party negotiates and agrees to give and take something of comparable value. Preexisting Duty: In most cases, a promise to do something one must do is not consideration such as requirements imposed by laws or previous contracts. For example, a neighbor could not say to you he will agree to keep his violent dog in the house or otherwise restrained if you give him $1,000 if local ordinances require that anyway. Past Consideration: An offer for something given in the past as the basis for a future contract is not valid consideration. Pat is a contractor who sometimes hires Sophie to do excavation work. Pat is having trouble selling some old equipment and decides to give it to Sophie. A few months later, Pat needs some excavation work and asks Sophie to do the work. Sophie asks for money, but Pat says, "I gave you some old equipment so you should do this work for no charge." The equipment Pat had given to Sophie would be past consideration and would not be consideration for the new deal. Adequacy of Consideration: In general, courts do not question the value of the consideration exchanged. In most cases, courts will let the parties decide what the property or services are worth, and will even allow some parties to make an imprudent deal. Suppose Anna's father had a Volkswagen Beetle when she was a little girl. Anna happens to see a Beetle that is the same style and color in a parking lot and waits for the owner, Julie, to return to ask Julie if she will sell the car. Julie is not interested in selling the car, but Anna offers double the market price and Julie agrees to the deal. Later, Anna decides she is getting a bad deal and wants to walk away from the contract. Julie sues Anna. The court can rule that the consideration was adequate because of the sentimental aspect. The parties decided what that car was worth and are now bound by their contract.

Contract Definiteness

The main requirements for a valid contract are: Offer - made by the offeror Acceptance - made by the offeree Consideration - what each party gives up under the contract An offer is a statement or act by the offeror to the offeree promising to perform or refrain from performing some act. The three required elements for a valid offer include: Intention - The offeror must have a serious intention to enter into the agreement. Definiteness of Terms Communication - The offeror must communicate the terms of the agreement to the offeree. Definiteness of Terms: The terms of the offer must be sufficiently definite so the parties and a court can understand the terms. The specific terms required depend on the type of contract, however. In general, the terms of the contract must include: The parties The subject matter of the contract The quantity, time of payment, and delivery, if applicable The terms of the performance In some cases, the court can supply missing terms if the parties' intent is clear, especially in the case of a sales contract under the Uniform Commercial Code. If the intent is vague, the court will not rewrite or complete a contract. For example, the contract between Dini Produce Co. and Magnolia Bed & Breakfast includes all relevant information, but does not include the delivery terms. In the past, Dini delivered to Magnolia on Mondays, Wednesdays, and Fridays. Even though the contract did not include all terms, the court could complete the contract, stating the parties reasonably believed the deliveries would occur as they had in the past.

Offer

The main requirements for a valid contract are: Offer - made by the offeror Acceptance - made by the offeree Consideration - what each party gives up under the contract An offer is a statement or act by the offeror to the offeree promising to perform or refrain from performing some act. The three required elements for a valid offer include: Intention - The offeror must have a serious intention to enter into the agreement. If Lorenzo says, "I am thinking about selling my car for $10,000," he is not displaying sufficient intent to make an offer. Definiteness - The terms of the offer must be sufficiently definite so the parties and a court could understand the terms. This includes who the parties are, the subject matter of the contract, and, if applicable, quantity, time of payment, and delivery, as well as terms regarding performance. If Lorenzo says he will sell his car for $10,000, Lindsay cannot interrupt Lorenzo and say, "I accept your offer to sell your car for $10,000. Now give me the keys to your Maserati!" Lorenzo has ten cars and he actually planned to sell his old Ford Escort, not his Maserati. Thus, a very important piece of information was missing when Lindsay interrupted Lorenzo. Communication - The offeror must communicate the terms of the offer to the offeree. Some types of acts or statements are usually not offers: An Invitation to Bargain or Negotiate Price Quotes Letter of Intent - This letter states what the parties are considering, and does not create a legal obligation. Advertisements - Ads are generally not offers, but instead are requests for someone to make an offer. A very detailed advertisement is an exception, and could be considered an offer. Auctions - Auctions are considered requests for offers. In some auctions, the bidding must meet or exceed a certain bid price to complete the sale. Termination of an Offer: By Action of the Parties: Revocation - The offeror can revoke the offer before the offeree accepts. Rejection - The offer is terminated when the offeree rejects the offer. This includes counteroffers. Suppose Lindsay states she will buy Lorenzo's Maserati for $10,000, and Lorenzo responds by saying, "No, you can buy my Maserati for $95,000." Lorenzo has rejected Lindsay's offer, and he has made a new offer to Lindsay. Termination by Law - An offer is terminated by law due to lapse of time, destruction of the subject matter of the contract, death or incompetence of the parties, and illegality of the contract (i.e., if the basis of the contract has become illegal). If Lorenzo offers to sell his Maserati for $95,000 to Lindsay, she cannot return to Lorenzo five years later and try to force Lorenzo to sell his Maserati five years later. It has been too long for that offer to be enforceable. Also, if the car is destroyed in a wreck, the law terminates that offer. Finally, if instead of a car the item for sale is an animal and the law changes to protect that animal from private ownership, the offer is terminated by law.

Alternatives to Acceptance

The requirement of acceptance involves the offeree agreeing to the terms of the offer made by the offeror. In general, the offeree must affirmatively accept the terms of the offer in full and communicate that acceptance to the offeror. In some situations, the law provides for alternatives to the general requirements for acceptance. 1. Silence as Acceptance In general, silence is not considered acceptance because society believes no party should be required to speak or to act in order to avoid contractual obligations. Additionally, if the offeree has not spoken or acted to accept, the offeree has not agreed to provide consideration in such a case. Yet in some cases silence can be considered to be acceptance and the offeree has a duty to speak to reject the offer and to deny acceptance. Silence can be acceptance when: the offeree takes the benefits of offered goods or services and should have known payment is expected. the parties have had prior dealings. Suppose Dini Produce Co. has delivered food to the Magnolia Bed & Breakfast for years. The owners of Magnolia tell Dini management they will be closing for the month of January for vacation. If Dini begins delivering food again in February, after the vacation closure ends and Magnolia staff take the food and use it, Magnolia has accepted the obligation to pay for the goods received from those deliveries based on prior dealings and also because the business benefited from the goods. 2. Unilateral Contracts With a unilateral contract, one party makes an offer for which the other party must accept by action, not words. As a result, the required action is the method of acceptance. For example, Barry tells Olivia, his neighbor's daughter, that he will pay her $50 if she pulls weeds and trims the bushes in his yard. When Olivia comes to Barry's house and begins the work, she has accepted his offer with her actions. 3. Clickwrap and Browsewrap Agreements Clicking on an "I agree" button is the method of acceptance for a clickwrap agreement. The user has accepted the terms and is bound by them, even if he or she has not read the information. Browsewrap terms exists when a party posts terms on a website or includes a hyperlink in other information without requiring users to click on a button or complete any other action. Courts can choose to enforce these terms when the party gives users reasonable notice and reasonable access to those terms.

You haven't used your professional camera in a while, so you offer to sell it to your friend who just started photography classes at the local college. Later in the day, youterm-3 start having second thoughts. You call your friend and tell her that you changed your mind, and the camera is not for sale after all. What do you think would happen if your friend tried to enforce your offer and make you sell her the camera?

Your friend cannot force you to sell her the camera because you let her know you changed your mind before she accepted the offer.