Business Law: Nature of Contracts

Freedom of Contract

-Parties can make any agreement they choose. -law does not require parties to be fair, kind, or reasonable, or to share gains or losses equitably.

Extent Of Recovery

-when recovery allowed in Quasi contract, the plaintiff recovers the reasonable value of the benefit awarded on the defendant, or value of the work performed, depending on jurisdiction and circumstances.

Parties to Contract

1) Promisor/Obligor- person who makes promise and binds other party to it. 2) Promisee/Obligee- Person to whom promise is made to and who claim the benefit of the obligation

Subject matter of contracts

May relate to the performance of personal services. -May provide transfer of ownership of property from one person to another.

How it arises: Offeror and Offeree

Offeror: person who makes an offer -Offeree: person to whom an offer is made. -There must be both an offer and an acceptance. Without any of these two, there is no contract.

Bilateral Contract

One promise is given in exchange for another, and each party is bound by the obligation.

Privity contract

Privity: succession or chain of relationship to the same thing or right, such as Privity of contract. The parties to contract are said to stand in Privity with each other. -Privity Contract: relationship between a Promisor and the promisee. -In written contracts parties may be referred to by name: tenant and landlord. -A party to a contract may be an individual, a partnership, a limited liability company, a corporation, or a government.

Express Contracts

Simple contracts are classified as express contracts or implied contracts by the way it was created. -Express Contracts: agreement of the parties manifested by their words, whether spoken or written.

Informal Contracts

Simple contracts those are written or oral and enforceable because they represent agreement of the parties.

Contracting On the Internet

Website terms become the contract of the parties and are legally enforceable. -Sellers intending to collect personal info must get consent of customer, exclude all children, and have info stored in secure environment. -

Quantum Meruit

an action brought for the value of the services rendered the defendant when there was no express contract as to the purchase price. -no enforceable contract exists because of a lack of definite and certain times. -A situation may arise over the mistaken award of a benefit; if person did not have knowledge that work was being done and payment expected then quasi contractual liability wouldn't impose. The mistake that benefits the defendant may be the mistake of a third party.

Executed Contract

completely performed, nothing remains to be done by either party.

Implied Contracts

contract expressed by conduct or implied or deduced from the facts. (1) A person renders services under circumstances indicating that payment for them is expected. (2) The other person knowing such circumstances accepts the benefit of those services. -An implied contract can't arise when there is an existing express contract on the same subject. -The existence of a written contract does not prevent recovery on an implied contract for extra work that was not covered by the contract.

Prevention of Unjust Enrichment

court does not seek to enforce the intentions in the agreement. -When someone receives a benefit from another without a contract to require payment for benefit, the court may impose an obligation to pay for the reasonable value of that benefit. -apply the law "outside the box" and fill in the cracks where common civil law and statutes fail to achieve justice. -A successful claim for unjust enrichment requires: (a) A benefit granted on the defendant (b) The defendant's knowledge of the benefit (c.) A finding that it would be unjust for the defendant to retain the benefit without payment. The burden of proof falls on the plaintiff.

Quasi Contracts

court imposed obligation to prevent unjust enrichment in the absence of contract.

Bilateral Contract: Option Contract

grants a person the legal right but no obligation to accept an existing offer. Contract to hold offer to make a second contract later. (Bilateral contract) If option is never exercised, no second contract arises and offer expires.

Contract

is a legally binding agreement by mutual agreement or assent, made for a lawful object in the form required by law, creating an obligation generally supported by consideration. A contract binds only the parties to the contract. Only a party has any rights against another party to the contract. -It cannot impose a duty on a person who is not a party to it, contract can't bind a nonparty.

Valid Contract

is an agreement that is binding and enforceable

Void Agreement

is without legal effect and can't be enforced and not binding. Usually an agreement that contemplates the performance of an act prohibited by law is incapable of enforcement.

Unilateral Contract

only one party makes a promise. Accept the offer by performance.

formal Contract

parties intend to be bound to their terms. (1) Contracts under Seal where a person's/corporation's signature/name is followed by a scroll, the word seal or L.S, or wax attached to document. (2)Contract of record, which are obligations that have been entered before a court of record called recognizance (3) Negotiable instruments.

Intent to make a binding agreement

parties must have intent to enter into an agreement that is binding. -Preliminary Agreement: an agreement as to future plans or intentions without any contractual obligation to carry out those plans or intentions.

Statute of Frauds

requires certain types of contracts to be in writing. Contract can't be enforced unless a written agreement exists that is signed by people bound to it. Used by defendant in a breach of contract action.

Bilateral Contract Right of First REfusal

right of a party to meet the terms of a proposed contract before it is executed like real estate purchase agreement. This imposes only the duty to make the first offer to the party having the right of first refusal.

Executory Contract

something remains to be done by either parties or both.

Voidable contract

still enforceable and binding but may be rejected at the option of one of the parties as the result of specific circumstances. Ex- didn't voluntarily sign, or a minor.

Elements of a Contract

(1) An agreement (2) Between competent parties (3) Based on the genuine assent of the parties that is (4) Supported by consideration (5) Made for a lawful objective (6) in the form required by law, if any

Preclusion by an Express contract

-where an express contract exists, it prevents an unjust enrichment claim.