Ch. 4 Contract Law

What are two important rules that govern revocation?

1) An offer can be revoked any time before it is accepted 2) A revocation becomes effective when it is received by or communicated to the offeree

What ways can a contract be described as?

1) Valid, void, voidable, or unenforceable 2) Express or implied 3) Bilateral or unilateral 4) Oral or written

Can minors have a voidable contract?

A contract between two minors could be voidable by either of them because minors have the right to get out of contracts.

Express Contract

A contract statement that may be oral or written.

Implied Contract

A contract that comes about from the actions of the parties.

Unilateral Contract

A contract that contains a promise by only person to do something, if and when the other party performs some act.

Bilateral Contract

A contract that contains two promises. One party promises to do something in exchange for the other's promise to do something else. Most contracts are created this way.

Offer

A proposal by one party to another intended to create a legally binding agreement.

Rejection

A refusal of an offer by the offeree that brings the offer to an end.

Counteroffer

A response to an offer in which the terms of the original offer are changed.

The Uniform Commercial Code (UCC)

A set of statutes that covers the law of sales as well as other areas of commercial law. It was drafted to make trade among the states easier and has been adopted with minor variations by 49 states. Only Louisiana has not adopted all of its provisions.

Definiteness and Certainty

An offer must be definite and certain to be enforceable .

Serious Intent

An offer must be made with the intention of entering into a legal obligation.

Unenforceable

An unenforceable contract is one the court will not uphold, generally because of some rule of law, like the statutes of limitations. If you wait too long to bring a lawsuit for breach of contract, the statute of limitation will run its course, making the contract unenforceable.

Contract

Any agreement enforceable by law

Invitations to negotiate

Are invitations to deal, trade, or make an offer.

Written Contract

Assures that both parties know the exact terms of the contract and also provides proof that the agreement was made.

What can destroy the genuineness of an agreement?

Circumstances like fraud, misrepresentation, mistake, under influence, and economic duress.

Oral Contract

Created by word of mouth and comes into existence when two or more people form a contract by speaking to each other. One person usually offers to do something, and the other party agrees to do something else in return

Death or Insanity

If the offeror dies or becomes insane before the offer is accepted , the offer comes to an end. Although death ends an offer, it does not end a contract, except for contracts related to personal services.

What contracts are exceptions to the mirror image rule?

Includes contracts for personal property

What are the three basic requirements for offer?

Made seriously, definite and certain, and communicated to the offeree

Genuine Agreement

Mean that an agreement is true and genuine: a valid offer is met by a valid acceptance.

Valid

Means legally good, thus a valid contract is one that is legally binding.

The Mirror Image Rule

Means that the terms stated in the acceptance must exactly mirror or match the terms of the offer.

What does a contact need to be legally complete?

Must include all 6 of the elements.

What are the 6 elements of a contract?

Offer, acceptance, genuine agreement, consideration, capacity, and legality.

Communication to the Offeree

Offers may be made by telephone, letter, telegram, fax, e-mail, or by any other method that communicates the offer to the offeree.

Legality

Parties are not allowed to enforce contracts that involve illegal acts. Some illegal contracts involve agreements to commit a crime or a tort. Others involve activities made illegal by statutory law.

What are 5 ways a termination may occur?

Revocation, rejection, counteroffer, expiration of time, and death or insanity.

What law requires certain contracts must be in writing to be enforceable?

The Statute of Frauds

Where are the primary exceptions created?

The Uniform Commercial Code (UCC)

Requirements of an Acceptance

The acceptance must be unconditional and must follow the rules regarding the method of acceptance.

Unconditional acceptance

The acceptance must not change the terms of the original offer in any way according to the mirror image rule

The Will Theory of Contract Law

The courts focus on the exercise of each party's will: they asked whether the parties really had agreed to the terms of an agreement.

Formalist Theory of Contract Law

The courts tried to determine if the parties had reached a meeting of the minds and, gradually, this led to a search for elements that consistently appeared in genuine agreements. The courts focused on the form of agreements.

Capacity

The law presumes that anyone entering a contract has the legal capacity to do so. Minors are generally excused from contractual responsibility, as are mentally impaired people and individuals under the influence of drugs or alcohol.

Equity Theory of Contract Law

The legal responsibilities associated with contracts are based on what the parties involved do and say to one another. In the past, courts asked whether the parties to a contract exchanged things of equal value.

Offeror

The person making the offer

Offeree

The person who receives the offer

Acceptance

The second party's unqualified willingness to go along with the first party's proposal.

Revocation

The taking back of an offer by the offeror

Consideration

The thing of value promised to one party in a contract in exchange for something else of value promised by the other party. The mutual exchange binds the parties together.

Voidable

When a party to a contract is able to void or cancel a contract for some legal reason, it is a voidable contract. It is not void in itself but may be voided by one or more of the parties.

Expiration of Time

When the offeror sets a time limit for the acceptance of the offer, it must be honored.

Void

a contract that is void has no legal effect. If the contract is missing any of the elements then it is void