Legal and Social Exam 3 (Ch. 12)

Mailbox rule

A rule providing that an acceptance of an offer becomes effective when it's sent -Ex. If the authorized mode of communication is the mail, then acceptance becomes valid when it is placed in the control of the U.S. Postal Service

A contract entered into by an intoxicated person can be either voidable or valid (and thus enforceable).

-If the person was sufficiently intoxicated to lack mental capacity, then the agreement may be voidable even if the intoxication was purely voluntary. -If, despite intoxication, the person understood the legal consequences of the agreement, the contract will be enforceable. -Generally doesn't matter if you have been drinking. Not looking at feelings, looking at facts around it. Ex. going back to the example where they debated for hours over terms for a contract

Mode and Timeliness of Acceptance

-In bilateral contracts, acceptance is timely if it is made before the offer is terminated. -When the parties involved are not dealing face to face, the offeree should use an authorized mode of communication. -In this case, acceptance takes effect, thus completing the formation of the contract, at the time the offeree sends or delivers the communication via the mode expressly or impliedly authorized by the offeror.

Although covenants not to compete restrain trade, they are commonly found in:

-Partnership agreements -Business sale agreements -Employment contracts

To be legally sufficient, consideration must be something of value in the eyes of the law and may consist of the following:

1. A promise to do something that one has no prior legal duty to do Ex. bilateral-- A promise to ship goods and a promise to pay for goods 2. The performance of an action that one is otherwise not obligated to undertake. Ex. "when you finish painting the garage, I will pay you $800" -painting is the consideration 3. Forbearance: act of refraining from exercising a legal right (choosing to take nose ring out)

Agreement is usually broken down into two events:

1. An offer by one party to form a contract 2. An acceptance of the offer by the person to whom the offer is made -Both parties must manifest to each other their mutual assent (agreement) to the same bargain. -Once an agreement is reached, if the other elements of a contract (consideration, capacity, and legality) are present, a valid contract is formed.

The following types of contracts are generally required to be in writing or evidenced by a written memorandum or electronic record.

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 (Ex. Promises by the administrator or executor of an estate to pay a debt of the estate personally—that is, out of her or his own pocket) 4. Promises made in consideration of marriage 5. Under the U C C, contracts for the sale of goods priced at $500 or more

Revocation may be accomplished by either of the following:

1. Express repudiation of the offer -Ex. "I withdraw my previous offer of October 17." 2. Performance of acts that are inconsistent with the existence of the offer and are made known to the offeree -Ex. Selling the offered property to another person in the offeree's presence

The following are situations in which the parties' intent to be bound might be questionable

1. Expression of opinion ("I think") 2. Statement of future intent ("I plan to sell my house") 3. Preliminary negotiations ("I wouldn't sell my car for less than $8k") 4. Invitations to bid 5. Advertisements and price lists (treated as invitations to negotiate) 6. Live and online auctions (invitation to bid) -Ex. "I plan to sell my apple stock" -Ex. PSU request for construction bids. Not an offer-- just inviting people to bid

2. Definiteness of Terms- Generally, a contract must include the following terms, either expressed in the contract or capable of being reasonably inferred from it:

1. The identification of the parties 2. The identification of the object or subject matter of the contract (also the quantity, when appropriate), including the work to be performed, with specific identification of such items as goods, services, and land 3. The consideration to be paid 4. The time of payment, delivery, or performance -An offer may invite an acceptance to be worded in such specific terms that the contract is made definite. (Ex: we have 5 TV's at $100 each, state desired number in acceptance) -Need to have who, what, where, when, why in your offer for it to be a contract

Under the common law, three elements are necessary for an offer to be effective:

1. The offeror must have a serious intention to become bound by the offer. 2. The terms of the offer must be reasonably certain, or definite, so that the parties and the court can ascertain the terms of the contract. 3. The offer must be communicated to the offeree. -Once an effective offer has been made, the offeree's acceptance of that offer creates a legally binding contract (providing the other essential elements for a valid and enforceable contract are present).

Objective facts might include:

1. What a party said when entering into the contract 2. How a party acted or appeared 3. The circumstances surrounding the transaction

Void contract (enforceability of contract)

A contract having no legal force or binding effect. -A void contract is no contract at all. -Ex. 2 people agree to rob a bank together

Formal contract (formation of contract)

A contract that by law requires a specific form, such as being executed under seal, to be valid -Ex. Negotiable instruments (checks, drafts, promissory notes, bills of exchange, and certificates of deposit) are formal contracts because the U C C requires a special language to create them

Informal contract (formation of contract)

A contract that does not require a specified form or formality in order to be valid. "Simple contracts." -Informal contracts are based on their substance rather than their form -simple language

Executed contract (performance of contract)

A contract that has been completely performed by both parties

Executory contract (performance of contract)

A contract that has not yet been fully performed Ex. in the middle of driving up to KC --> not done with the act yet

Unilateral contract (formation of contract)

A contract that results when an offer can be accepted only by the offeree's performance. "Promise for an act." -formed not at the moment when promises are exchanged but at the moment when the contract is performed. (Ex: If you drive my car to Kansas City for me, I will pay you $200.)

Valid contract (enforceability of contract)

A contract that results when the elements necessary for contract formation (agreement, consideration, contractual capacity, and legality) are present. -Valid contracts may be enforceable or unenforceable.

Covenant not to compete

A contractual promise to refrain from competing with another party for a certain period of time and within a certain geographic area. -If they are ancillary to such agreements, covenants not to compete will normally be enforced by the courts unless the time period or geographic area is deemed unreasonable. -laws varies from state to state -Ex. Jamie can't be another general counsel/attorney for another university in Kanas. Can't say all universities in the US-- too restrictive

Reformation

A court-ordered correction of a written contract so that it reflects the true intentions of the parties. -If a covenant is found to be unreasonable in time or geographic area, the court may convert the terms into reasonable ones and then enforce the reformed covenant. -Because the judge implicitly becomes a party to the contract, courts usually resort to contract reformation only when necessary to prevent undue burdens or hardships. -Ex. can change part of the contract to become more reasonable. Change it from not being able to get a job at any universities in the US to just Kansas

Offer

A promise or commitment to perform or refrain from performing some specified act in the future.

Rescission

A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made, unmaking the contract -Sometimes, parties rescind a contract and make a new contract at the same time (difficult to determine whether there was a consideration for the new contract, or whether the parties had a preexisting duty under the previous contract) -court finds there was a preexisting duty, then the new contract will be invalid because there was no consideration -Both parties agree to cancel the contract

Statute of Frauds

A state statute under which certain types of contracts must be in writing to be enforceable -want it in writing so they don't get accused of fraud

Bilateral contract (formation of contract)

A type of contract that arises when a promise is given in exchange for a promise. "Promise for a promise." (Ex: a real estate sale.) -No performance, such as payment of funds or delivery of goods, needs to take place for a bilateral contract to be formed. The contract comes into existence at the moment the promises are exchanged. -2 or more people Ex. car deal-- I'm giving you my car and you are giving me money for it

Unenforceable contract (enforceability of contract)

A valid contract rendered unenforceable by some statute or law -E.x. Certain contracts must be in writing, and if they are not, they will not be enforceable except in certain exceptional circumstances.

Voidable contract (enforceability of contract)

AVOIDABLE A contract that may be legally avoided (canceled) at the option of one of the parties. The party having the option can elect to do either of the following: -Avoid any duty to perform (If the contract is avoided, both parties are released from it) -Ratify (make valid) the contract (If the contract is ratified, both parties must fully perform their respective legal obligations) Ex. contracts can be voidable by minors but not the other party. You could ratify the contract or avoid it while the landlord had to uphold their side of it

There are four requirements that must be met before a valid contract exists.

Agreement. consideration, contractual capacity, legality

Accord and satisfaction

An agreement for payment (or other performance) between two parties, one of whom has a right of action against the other. -The accord is the agreement (In the accord, one party undertakes to give or perform, and the other to accept, in satisfaction of a claim, something other than that on which the parties originally agreed) -Satisfaction is the performance (usually payment) that takes place after the accord is executed. -After the payment has been accepted or other performance has been made, the "accord and satisfaction" is complete, and the obligation is discharged. -Ex. Supposed to get $1,000 now with the new agreement, you get $700.

Contract

An agreement that can be enforced in court; formed by two parties, each of whom agrees to perform or to refrain from performing some act now or in the future. -offeror: person who makes an offer -offeree: person to whom an offer is made

Agreement

An agreement to form a contract includes an offer by one party to enter into the agreement and an acceptance of the terms of the offer by another party.

Consideration

Any promises made by the parties to the contract must be supported by legally sufficient and bargained-for consideration -make sure it's back and forth contract and not a gift. consideration = $ for people doing things a lot of the time (exchange)

Contractual capacity

Both parties entering into the contract must have the contractual capacity to do so—that is, the law must recognize them as possessing characteristics that qualify them as competent parties. -has to be yours to contract over -mental incompetence, intoxication, minors

Example of objective theory of contracts

Ex. One neighbor is trying to get the other neighbor to sell their property. They are hanging out at one of the houses and were drinking. The neighbor not wanting to sell gets drunk and gets convinced by the other guy to sell his property. They negotiate for hours and he signs the agreement. Sues because he was too drunk to sign the contract. In court, they are going to look at objective facts because you negotiated for hours -Intent to get into the contract because they set a price, etc.

Express contract & implied contract (formation of contract)

Express- agreement is fully and explicitly stated in words, oral, or written. Ex. lease for apartment Implied- someone's actions are implying they are in a contract. Ex. dropping your car off for maintenance (oil change, etc.)

The consideration, which must be present to make the contract legally binding, must be:

Generally, the value given in return for a promise or performance 1. Something of legally sufficient value must be given in exchange for the promise, and 2. There must be a bargained for exchange -without consideration, it may be considered a gift

Illusory promises

If the terms of the contract express such uncertainty of performance that the promisor has not definitely promised to do anything, the promise is said to be illusory—without consideration and unenforceable. -A promise is illusory when it fails to bind the promisor. -Ex. Boss says, "If profits continue to be high, employees will get a 10% bonus, if management agrees." -Ex. kids wanting to go to an amusement park. Parents say the may if they are good. If statements

Preexisting Duty

Under most circumstances, a promise to do what one already has a legal duty to do does not constitute legally sufficient consideration. -The preexisting legal duty may: Be imposed by law & Arise out of a previous contract (Ex- already had a construction contract but demands more money) If it was something they were going to do anyway or already did --> doesn't count as consideration. Ex. Already have a contract for the workers to work on your house. After, they ask for more money. Isn't consideration. Exception: unless there is a huge problem unforeseen with the house

Courts look at objective indications of the intoxicated person's condition to determine if he or she possessed or lacked the required capacity.

It is difficult to prove that a person's judgment was so severely impaired that he or she could not comprehend the legal consequences of entering into a contract. -Therefore, courts rarely permit contracts to be avoided due to intoxication.

3. Communication

Ordinarily, one cannot agree to a bargain without knowing that it exists. (Ex: the letter is never delivered with the offer in it)

Silence as Acceptance

Ordinarily, silence cannot constitute acceptance; however, silence can constitute an acceptance when the offeree has had prior dealings with the offeror. -Ex. Restaurant has a produce supplier. Supplier says prices are going up. If she doesn't respond she get the goods as usual, but at the higher rate

1. Intention

Serious intent is not determined by the subjective intentions, beliefs, and assumptions of the offeror; rather, it is determined by what a reasonable person in the offeree's position would conclude that the offeror's words and actions meant. -The serious-and-objective-intent test is not met by offers made in: anger, jest, undue excitement -Ex. "I would sell this to the first person that would offer me $5" saying that because their car is smoking. Saying it out of anger- not real intent

Contract law

Shows to what extent our society allows people to make promises or commitments that are legally binding -Distinguishes between promises that create only moral obligations and promises that are legally binding -Demonstrates which excuses our society accepts for breaking certain types of promises -Indicates which promises are considered to be contrary to public policy—against the interests of society as a whole—and therefore legally invalid (ex: a contract killer)

Past consideration

Something given or some act done in the past, which cannot ordinarily be consideration for a later bargain. -Promises made in return for actions or events that have already taken place are unenforceable, because the element of bargained-for exchange is missing. -Ex. Joe found Fred's lost dog. Joe returns dog. Fred says he'll give him $100, but doesn't. Fred can't do anything about it because it was a gift since he already found the dog before that offer

Consideration must provide the basis for the bargain struck between the contracting parties.

That is, the item of value must be given or promised by the promisor (offeror) in return for the promisee's promise, performance, or promise of performance. -Distinguishes contracts from gifts. (Ex- I will give you my bicycle if I don't sell it at my garage sale- not a contract, no consideration).

Voluntary consent (defense to the enforceability of a contract)

The consent of both parties must be voluntary. •If a contract was formed as a result of fraud, undue influence, mistake, or duress, the contract may not be enforceable. -Ex. blackmail

Form (defense to the enforceability of a contract)

The contract must be in whatever form the law requires. -Ex. Some contracts must be in writing to be enforceable. Land contracts.

Legality

The contract's purpose must be to accomplish some goal that is legal and not against public policy.

If, during performance of a contract, extraordinary difficulties arise that were totally unforeseen at the time the contract was formed, a court may allow an exception to the rule.

The key is whether the court finds that the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made -Ex- already had a contract, demands more money because found out that there is a rock formation no one knew existed

Revocation

The withdrawal of an offer by an offeror -Unless an offer is irrevocable, the offeror usually can revoke the offer, as long as the revocation is communicated to the offeree before they accept. -can be a way to get out of a contract by showing they did something wrong -Ex. contract to sell it for 7500 instead of 9500 but after contract found someone who is willing to pay the 9500- they would try to get a revocation

Unequivocal Acceptance

To exercise the power of acceptance effectively, the offeree must accept unequivocally (in a way that leaves no doubt). (mirror image rule-- requires that the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer; both on same page) -An acceptance may be unequivocal even though the offeree expresses dissatisfaction with the contract. ("I accept the offer, but can you give me a better price?" -An acceptance cannot impose new conditions or change the terms of the original offer; otherwise, it becomes a counteroffer, which is a rejection of the original offer. ("I accept the offer but only if I can pay on ninety days' credit.")

A means of communicating acceptance can be expressly authorized by the offeror or impliedly authorized by the facts and circumstances of the situation.

When an offeror specifies how acceptance should be made (for instance, by overnight delivery), express authorization is said to exist. -Usually, the offeror's choice of a particular means in making the offer implies that the offeree can use the same or a faster means of acceptance. If the offeror does not expressly authorize a certain mode of acceptance, then acceptance can be made by any reasonable means. -Courts look at the prevailing business usages and the surrounding circumstances to determine whether the mode of acceptance used was reasonable. An acceptance sent by means not expressly or impliedly authorized normally is not effective until it is received by the offeror.

Communication of Acceptance

Whether the offeror must be notified of the acceptance depends on the nature of the contract. -In a unilateral contract, the full performance of some act is called for; thus, acceptance is usually evident and notification is unnecessary. -In a bilateral contract, communication of acceptance is necessary, because acceptance is in the form of a promise. The contract is formed when the promise is made, rather than when the act is performed.

Agreements to agree

agreements to agree to the material terms of a contract at some future date—may be enforceable agreements (contracts) if it is clear that the parties intended to be bound by the agreements. Attempt to enforce a future arrangement between parties -A preliminary agreement can constitute a binding contract if the parties have agreed on all essential terms and no disputed issues remain to be resolved.

objective theory of contracts

intenet is determined by this -A theory under which the intent to form a contract will be judged by outward, objective facts as interpreted by a reasonable person, rather than by the party's own secret, subjective intentions -doesn't matter what the intent is (what they are thinking/feeling inside), has to be objective facts

In a situation where the offeror authorizes a particular method of acceptance, but the offeree accepts by a different means...

the acceptance may still be effective if the substituted method serves the same purpose as the authorized means -Acceptance by a substitute method is not effective on dispatch, however. -No contract will be formed until the acceptance is recieved by the offeror -Ex. The offer said to send acceptance by FedEx, but the person used UPS instead