contracts
mental incompetence
Void: court has previously determined that a person is mentally incompetent Voidable: not previously judged as incompetent but was incompetent at the time the contract was formed Valid: person had capacity at the time the contract was formed
expressions of opinions
not an offer, it does not indicate intention to enter into a binding agreement
disaffirmance
the setting aside of a contractual obligation, must be expressed through words or conduct, must disaffirm the entire contract
objective theory of contracts
theory that a party's intention to enter into a legally binding agreement, or contract is judged by outward, objective facts. The facts are interpreted by a reasonable person, rather than by the party's own secret, subjective intentions
advertisements
treated as invitations to negotiate, not as offers to a contract
unconscionable contracts or clauses
typically court doesn't look at fairness of contract, they assume all persons are reasonably intelligent. But if the bargains are so grossly unfair the court can relieve the innocent parties of part or all of their duties.
contracts for sale of goods
$500 or more needs written evidence due to UCC statute. only needs to have a number units written
function of contract law
provides stability and predictability for an agreement between promisor and promisee allows an enforceable private agreement
detrimental reliance
1. A promise was made 2. Relying on the promise was reasonable or foreseeable 3. There was actual and reasonable reliance on the promise 4. The reliance was detrimental (i.e. some sort of harm was suffered) 5. Injustice can only be prevented by enforcing the promise differs from quasi because you are giving consideration not for actual work done but for the promise of something
Fraudulent misrepresentation
1. a misrepresentation of a material fact must occur 2. there must be an intent to deceive 3. the innocent party must justifiably rely on the misrepresentation 4. to collect damages, a party must have been harmed as a result of the misrepresentation
requirements of a valid contract
1. agreement; offer and acceptance of contract 2. consideration; something of value must be offered 3. contractual capacity; both parties must be competent 4. legality; contract must have a legal goal
types of contract damages
1. compensatory ( cover direct losses/costs) 2. consequential ) cover inderect and foreseeable losses) 3. punitive ( punish and deter wrongdoing) 4. nominal ( to recognize wrongdoing when no monetary loss is shown)
contracts that require writing
1. contracts involving interests in land 2. contracts that cannot by their terms be performed within one year from the day after the date of formation 3. collateral, or secondary, contracts, such as promises to answer for the debt or duty of another and promises by the executor of an estate to pay a debt of the estate personally 4. promises made in consideration of marriage 5. under the UCC, contracts for sale of goods priced at $500 or more
exceptions to parol evidence rule
1. contracts subsequently modified 2. voidable or void contracts 3. contracts containing ambiguous terms-submit evidence to make meaning more clear 4. incomplete contracts- submit evidence to fill in the gaps
definiteness of terms, which?
1. identification of the parties 2. identification of the subject matter of the contract 3. consideration to be paid 4. time of payment, delivery, or performance
termination by operation of law
1. lapse of time 2. destruction of the specific subject matter 3. death or incompetence 4. supervening illegality of the proposed contract
exceptions to a minor's right to disaffirm
1. misrepresentation of age 2. contracts for necessaries (basic needs) only enforceable to the level of value needed to maintain the minor's standard of living 3. ratification, when they become of age of majority a person can ratify a contract that they formed as a minor
exceptions to the consideration requirement
1. promises that induce detrimental reliance, under the doctrine of promissory estoppel 2. promises to pay debts that are barred by a statute of limitations 3. promises to make charitable contributions
elements of consideration
1. something of legally sufficient value must be given in exchange for the promise 2. there must be a bargained-for exhange
exceptions to the writing requirement
1.partial performance- when a contract has been partially performed and the two parties cannot be returned to their positions prior to the contract's formation. court grants specific performance; equitable remedy that requires performance of the contract according to its precise terms 2. admissions- if a party admits there was an oral contract under oath, the contract is enforceable 3. promissory estoppel- someone relies on another's promise to his or her detriment, court can enforce 4. special exceptions under UCC- oral contracts for customized goods, oral contracts between merchants that have been confirmed in a written memorandum
implied in fact contract
An implied in-fact contract creates an obligation between the parties based on the facts of the situation. If the parties' conduct or the circumstances suggests they had an agreement or understanding that created an obligation, then the law will find that they had an implied in-fact contract.
Hamer v Sidway
Facts: A man promised his nephew that if he stopped drinking, smoking, and gambling until he was 21 that he would pay him $5000. When the nephew completed this agreement the uncle told him that he would hold onto the money and let it collect interest. When the uncle died Sidway, the executor to the uncles estate would not pay the money to Hamer, who now own the claim to the money, under the fact that he did not have consideration. Issue: did the original agreement show any consideration. in a agreement one must give up something. Decision: the court ruled in favor of Hamer because the legal rights given up by the nephew are enough to satisfy consideration.
Lucy v. Zehmer
Facts: Lucy filed a suit against Zehmer to enforce a contract for the sale of a home that he obtained from the home owner. He obtained this while drinking heavily with the defendant. The court ruled that because Zehmer was intoxicated when the contract was made, it is not enforceable. Lucy appealed. Issue: Was Zehmer in a state of mind to make a contract enforceable. decision: The court forced Zehmer to honor the contract. It was found that it was discussed for 40 minutes and that one draft was denied and then re-written to include Zehemer's wifes signature. This was enough evidence to show that he intended in that moment to make the sale.
sufficiency of the writing
Must have evidence of an agreement and signed by the party against whom enforcement is sought.
promissory estoppel
Promissory estoppel is a legal principle that a promise is enforceable by law, even if made without formal consideration, when a promisor has made a promise to a promisee who then relies on that promise to his subsequent detriment.
implied in law contract
With an implied at-law contract, the law imposes a duty to perform a contract, and will enforce a contract even against a person's will, where circumstances are such that without this remedy one party would be unfairly enriched by another party's action. In this situation, one party is entitled to restitution for the services provided, even if there was never any intent by either party to enter into an agreement.
good faith and contracts
a general assumption of the law of contracts, that people will act in good faith and deal fairly without breaking their word, using shifty means to avoid obligations or denying what the other party obviously understood.
Usury
a lender who makes a loan at an interest rate above the lawful maximum
definition of contract
a promise or set of promises for the breach of which the law gives a remedy. or the performance of which the law in some way recognizes as a duty
preliminary agreements(negotiations)
a request or invitation to negotiate is not an offer. it only expresses a willingness to discuss the possibility of entering into a contract
what constitutes a writing?
any order confirmation, invoice, sales slip, check, fax, e-mail or their combination. written contract doesn't need to be one document to be enforceable
Minors
age of majority for contractual purposes is eighteen years.
prenuptial agreements
agreements made before marriage that define each partner's ownership rights in the other partner's property, must be in writing.
agreements to agree
agreements to agree to the material terms of a contract at a future date. they are now viewed as enforceable agreements if it is clear that the parties intended to be bound by the agreements.
Quasi contracts
aka implied in law; fictional contracts that are imposed on parties "as if" they entered into an agreement equitable rather than legal contracts
quantum meruit
amount paid for a service when no contract or agreement exists; "as much as he deserved" in latin
unconscionability
an agreement is grossly unfair, most likely to be found unconscionable if both unfair bargaining and unfair substantive terms are shown.
covenants not to compete
an enforceable covenant provided the restrictive covenant is reasonable and is part of a secondary part of a sale of an ongoing business. ex: seller sells store, buyer agrees to buy if seller doesn't open a new store nearby
effects of illegality
an illegal contract is void, like it never existed. normally neither party can sue for breach or can recover. can recover if one party has no reason to know it is illegal, members of protected class (employees), withdrawal from an illegal agreement before the illegal part has been performed, contract illegal due to fraud, duress, or undue influence
mailbox rule
an offer is considered accepted at the time that the acceptance is mailed (not received)
compensatory damages
awarded to the nonbreaching party for the loss of the bargain
bi-lateral vs unilateral
bi-lateral: offeree accepts contract by promising to perform; no action or payment necessary unilateral: offeree can only accept by completing the action
specific performance
calls for performance of the act promised in the contract
consequential damages
caused by special circumstances beyond the contract itself, paid in order to remedy foreseeable damages that result as a result from breach of contract
settlement of claims
claim may be settled through: accord and satisfaction release covenant not to sue
sources of contract law
common law governs contracts except when modified by statutory law Ex: contracts for sale/lease of goods governed by UCC ( Uniform commercial code)
contracts contrary to public policy
contracts that involve private parties but are not enforceable because of the negative impact they would have on society
parol evidence rule
court finds that a written contract represents the complete and final statement of the parties' agreement, it will not allow either party to present parol evidence (testimony or other evidence of communications between the parties that is not contained in the contract itself)
equitable remedies
court grants something other than damages, like rescission and restitution, specific performance, and reformation
contracts for personal services
court usually don't grant specific performance in contracts for personal services
punitive damages
damages designed to punish wrongdoers and set an example to deter similar conduct in the future
accord and satisfaction
debtor offers to pay, creditor accepts, a lesser amount than the creditor owed. Accord is the agreement, satisfaction is the performance (usually payment)
negligent misrepresentation
defendant carelessly makes a representation while having no reasonable basis to believe it to be true. treated like fraudulent misrepresentation
intoxication
definition: person's normal capacity to act or think is inhibited by alcohol or some other drug. voidable: person was sufficiently intoxicated to lack mental capacity, even if agreement was voluntary valid: If, despite intoxication, the person understood the legal consequences of the agreement, the contract will be enforceable
covenant not to sue
does not always bar further recovery, parties simply substitute a contractual obligation for some other type of legal action based on a valid claim
express vs implied contract
expressed: terms are fully and explicitly stated in words. implied: conduct of the parties rather than words creates and defines the terms of the contract
Legality
for contract to be valid it must be performed for a legal purpose.
requirements of an offer
for offer to be effective: 1. offeror has serious intention to be bound 2. terms must be reasonably certain 3. offer must be communicated to offeree once an effective offer has been made, the offeree's acceptance creates a legally binding contract
misrepresentation by silence
normally neither party has a duty to disclose facts, one party must ask and the other lie or not disclose for fraud to occur. Unless the seller knows of a serious potential problem that the buyer cannot reasonably be expected to discover (latent defects) or if the two parties are in a fiduciary relationship
formal vs informal contract
formal: contracts that require a special form of creation to be enforceable. informal: includes all other contracts, no special form of creation required. contracts are usually based on their substance rather than their form.
contracts in restraint of trade
generally contracts that restrain trade are unenforceable because they go against competition (public policy) however, an exception is recognized when the restraint is reasonable and is contained in an ancillary (secondary) clause in a contract
adequacy of consideration
how much consideration is given, aka the fairness of the bargain
E-sign act
if a state has enacted the uniform version of the UETA, that law is not preempted by the E-sign act.
collateral promises
if a third party agrees to pay an unfulfilled debt of another party, that must be in writing. but the original debt obligation does not have to be. unless the original purpose of the guarantor was to obtain a personal benefit
merger/integration clause
if the written contract is intended to be the complete and final statement of the terms and agreement it is referred to as an integrated contract and extraneous evidence is excluded.
liquidated damages vs penalties
liquidated damages- certain dollar amount is to be paid in the event of a breach ( specified in contract) penalty- similar, but it is designed to penalize the breaching party, not to make the innocent party whole.
material breach vs non material breach
material- failure to perform an essential element of the contract non-material- pertains to a minor detail of the contract
mistakes of value
mistake concerns the future market value or quality of the object of the contract, normally contract is enforceable.
contents of writing?
needs name of the parties, identify subject matter, the consideration (something of value), and essential terms with reasonable certainty. land requires price and to describe the property with sufficient clarity as well
offer
promise or commitment to do or refrain from doing some specified action in the future
unequivocal acceptance
offeree must accept unequivocally, without any doubt and is agreeing to the exact terms stated by the offeree
option contracts
offeror promises to hold an offer open for a specified period of time in return for consideration (payment) given by the offeree
release
one party forfeits the right to pursue a legal claim against another party
mistakes of fact
only form of voidable mistake bilateral: mutual mistake, either party can rescind the contract unilateral: made by only one party, normally doesn't give mistake maker right to relief from the contract
parental liability
parents are not liable for contracts made by minor children acting on their own, except contracts for necessaries, which parents are legally required to provide.
lucid interval
person has periods during which their capacity is restored, they have legal capacity to enter contracts during these periods
accidental misrepresentation
person misrepresents a fact but believed the fact to be true. normally the aggrieved party can rescind the contract but not seek damages
agreements that lack consideration
pre-existing duty: when one is already obligated to complete an action it cannot be viewed as consideration past consideration: promises made in return for actions or events that have already taken place are unenforceable illusory promises: terms of the contract uncertainty of performance that the promisor has not definitely promised to do anything.
exculpatory clauses
releases a party from liability in the event of monetary or physical injury no matter who is at fault.
Uniform Electronic Transactions Act
removes barrier to e-commerce by giving the same legal effect to electronic records and signatures as is given to paper documents and signatures
statements of opinion
representations of future facts (predictions) are generally not subject to claims of fraud. Unless the person is an expert in that field, typically due to their profession, then it could constitute fraud
termination of the offer
revocation: offerror rescinds his offer rejection: if the offerree rejects the offer by words or conduct counteroffer: rejects original offer and simultaneously makes new offer
silence
silence normally does not constitute acceptance of a contract, unless under certain circumstances. ex: restaurant receives shipments of crops, freeze causes supplier to raise prices, supplier notifies restaurant, restaurant fails to reply
condition
something that must be performed to complete the duties of a contractual obligation
substantial performance vs strict performance
substantial- substantially the same as promised performance strict- "best effort" or a perfect performance of a condition
discharge
termination of contractual obligations
forbearance
the act of refraining from an action that one has a legal right to undertake
acceptance
voluntary act by the offeree that shows agreement to the terms of an offer
mitigation of damages
when a breach of contract occurs, the injured party is held to a duty to mitigate or reduce the damage that he or she suffers.
contracts of adhesion
written exclusively by one party and presented to the other party on a take it or leave it basis, giving one party no ability to negotiate.