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Basic Elements of a Contract
offer, acceptance, consideration, capacity, legal
both parties make a promise
a promise for an act
agreement which includes all the essential elements to be an enforceable contract
meets basic legal requirements, but cannot be enforced in court
one of the parties has the legal right to cancel their contract
no legal obligations and no remedy
contract whose terms are stated orally and/or in written form
contract that comes about from the actions of the parties; often without exchanging of words
all parties have performed their contractual duties
some duties under the contract still need to be performed
statute that represents modern contract law;
contract that is unjust or extremely one sided, in favor of the person who has superior bargaining power
a person that regularly deals in the kind of goods being sold, or pretends to have some special knowledge about the goods, or employed an agent in the sale who fits either of those two descriptions
Used to prevent unjust enrichment of persons who have not contracted for, but nonetheless received a benefit. It is only imposed where that benefit was knowingly received or retained by the other party.
promise is enforced even though no consideration is given for it
Offer, Offeror, and Offeree
Offer: "if you agree to these terms, we have a contract"
present intent to contract, definiteness, communicated to the offeree
Under common law: "contract enforcers, not contract makers", all essential terms must be stated in the contract
Are advertisements offers?
no, advertisements are invitations to offer or negotiate UNLESS the ad was very specific and there was nothing to negotiate
considered to be an offer for a unilateral contract
What terminates an offer?
Revocation, Rejection, Counteroffer, Death or Insanity of the Offeror, Lapse of time.
Lapse of Time
The amount of time that the offer will remain open to the offeree.
General Rule for Revocation
Must be communicated to the offeree prior to the offeree's acceptance.
When Offers Cannot be Revoked
Options, Firm Offers, Unilateral Contract Offers, and Promissory Estoppel
A separate contract in which an offeror agrees not to revoke his offer for a stated time in exchange for some valuable consideration
MERCHANT offeror makes WRITTEN offer to buy or sell GOODS, giving assurances that the offer will be held open
Offers for Unilateral Contract
Offeree has started to perform requested act before offeror revokes
Common Law: Traditional "Mirror Image" Rule
must be exactly the same; changes in terms are considered to be counteroffers
Communication of Acceptance
-If the offeror stipulates a particular manner of acceptance, the offeree must respond in this way to form a valid acceptance; the offeror can accept anyway, but it is his choice
the acceptance usually binds the parties when the offeree dispatches it, the acceptance becomes binding when its deposited with the postal service
Who can accept an offer?
the ONLY person with the legal power to Accept an offer and create a contract is the original offeree; an attempt to Accept by Anyone other than the offeree is treated as an offer
that which is given or received in a contract
does not really bind the promisee to do or refrain from doing anything, no consideration, not enforceable
occur when the parties to an existing contract agree to modify the contract; the common law rule holds that an agreement to modify an existing contract requires some new consideration to be binding
Forbearance to Sue
an agreement by a promisee to refrain, or forbear, from pursuing a legal claim against a promisor (considered to be valid consideration)
value given or an act performed before a contract is made
the right to cancel a contract without legal penalty
terminate the contract as to future transactions or to annul the contract from the beginning
acting toward the contract as though one intends to be bound by it; approval of a voidable contract
a tort involving intentional misrepresentation or cheating by means of some device
important; information that is sufficiently significant to influence an individual into acting in a certain way, such as entering into a contract
an erroneous belief about some fact that exists at the time the contract was formed (knowing you are ignorant or have limited knowledge is NOT a mistake)
important contractual mistake made by only one of the parties
mistake made by both parties
one party to a contract is in a position of trust and wrongfully dominates and takes unfair advantage of the other party
Unusually harsh, grossly unfair, or "shocks the conscience of the court"; when something is judged unconscionable, a court will refuse to allow the perpetrator of the conduct to benefit
an assertion about a fact material to a contract that is not in accordance with the truth and upon which the party actually and justifiably relies
A contractual remedy that cancels the agreement and returns the consideration exchanged to each party.
intentional misrepresentation of an existing, important fact
Remedy for fraud (negligent misrepresentation)
Rescission or damages (California law and the UCC allow the injured party to select both)
Modern Law on Innocent and Negligent Misrepresentation
One has no duty to investigate the truth of a fact represented to him/her and will not prevent rescission unless he/she failed to comply with duty of good faith and reasonable standards of commercial dealing (GROSSLY negligent)
exertion of wrongful coercion that induces another person to enter a contract (the threat must be one that law considers improper)
refusal to carry out a voidable contract
What are some contracts that a minor CANNOT disaffirm?
Marriage contracts, alimony agreements, student loans, medical insurance contracts, entertainment contracts, etc.
How can a minor disaffirm a contract?
Through words (oral or written), conduct, or a combination of both
General common law rule regarding the period during which a minor can disaffirm a contract:
A minor can disaffirm a contract before age of majority and up until a reasonable time after reaching the age of majority, although some states specify this period of time (i.e. 6 months) in statutes
goods and services essential to maintain one's life and lifestyle
the minor is liable for the reasonable value of what he has actually received
If the disaffirming minor has purchased something from the other party that is considered to be a necessary:
the minor gets a full refund
If the disaffirming minor has purchased something from the other party that is considered to be a non-necessary:
Ratification by minors
Minors can ratify contracts only after he/she reaches age of majority, through any way that shows his intent to be bound by the contract (cannot later be disaffirmed)
a parent's waiver of his rights to control and receive the services of his minor child; same laws apply to unemancipated minors
When a minor lies about their age...
Makes no difference in some states. In others, makes him liable in tort for deceit or precludes him for asserting his minority as a claim or defense
ability to understand the nature and effects of one's actions
Determining Mental Capacity
Unless there is prior adjudication, the courts will examine the individual's state of mind at the exact moment he entered the contract. If lucid, the contract is valid and enforceable. If not, the contract is voidable.
Mentally Ill Person's Duties on Disaffirmance
Upon disaffirmance, the incapacitated person must return any consideration that remains in his possession (similar to minors)
What happens to contracts for intoxicated persons?
Persons who are SO intoxicated that they do not understand the nature and consequences of a contract are treated as lacking capacity to contract. If the other party had reason to know he was un…
unlawfulness by virtue of violating some legal statute
VOID or unenforceable
Illegal agreements are generally considered:
Exceptions to hands-off policy on illegal agreements:
Exception given when it is in the public interest to do so...
Statute of Frauds
requirement that certain kinds of contracts be memorialized in a signed writing with sufficient content to evidence the contract; a contract that fails to comply is UNENFORCEABLE
Money or property subject to a security interest.
Statute of Frauds applies only to:
executory contracts. if an oral agreement is fully executed, the need for a writing becomes totally irrelevant
Statute of Frauds Exception
Main Purpose or Leading Object Rule, Full Performance by the Vendor, Part Performance (Action in Reliance) by the Vendee
Part Performance (Action in Reliance) by the Vendee
When a vendee (purchaser of land) does an act in clear reliance on an oral contract for the SALE OF LAND and enforcement of the contract is the only way to prevent injustice, the …
Decree ordering a party to perform a contractual duty
Bilateral Contracts that Cannot be Performed within One Year
A bilateral, executory contract that cannot be performed within in one year from the day on which it comes into existence, guards against faulty or willfully inaccurate recollection of long-term contracts
Sale of Goods for $500 or More
Contracts for sale of goods $500 or more must be in writing to be enforceable. Also applies to modifications of existing sales contracts if $500 or more.
If an executor, acting in her capacity as a private individual rather than in her representative capacity, promises to pay one of the descendent's debts out of her own funds, the contract must be in writing to be enforceable
Marriage as Consideration
Statute of Frauds does not apply to agreements that involve only mutual promises to marry, but can be used for business-like marriage contracts
Writing Requirements for Statute of Frauds
Most states require only a memorandum of the parties' agreement; they do not require the entire contract to be in writing
The memorandum must provide written evidence that a contract was made, but it need not have been created with the intent that the memorandum itself be binding. The memorandum need not be made at…
Rules for Memorandum: Contents under the UCC, Signature Requirement, and Several Writings
UCC: The writing must be sufficient to indicate that a contract for sale has been made b/w the parties, but can omit or incorrectly state a term agreed upon (but not enforceable for more than the quantity stated)
UCC: Alternative Means of Satisfying the Statutes of Frauds in Sale of Goods Contracts
- Confirmatory memorandum b/w merchants (if received w/ appropriate info and not objected to w/in 10 days)
Promissory Estoppel and the Statute of Frauds
When one of the parties would suffer serious losses because of her reliance on an oral contract, the other party is estopped from raising the statute of frauds as a defense
The Parol Evidence Rule
Says "now that the parties have entered into a mutually signed written contract, what kind of evidence will be allowed in front of the jury for the purpose of contradicting the terms of the that writing?"
Cannot be used:
When can the Parol Evidence Rule be used and not used?
a rule of equity that prevents someone from denying something that was previously represented to others
standard of performance that required virtually perfect compliance with the contract terms
applies to duties that are difficult to perform without some deviation from perfection if performance of those duties is not an express condition
Effect of Material Breach
injured party has the right to withhold his own performance
Effect of Nonmaterial Breach
may sue for damages caused by breach, but must also continue with contractual duties- cannot cancel contract
Consequence of Late Performance
if parties expressly state "time is of the essence" or "vital", late performance constitutes a material breach
occurs when the promisor indicates before the time for his performance that he is unwilling or unable to carry out the contract; constitutes a material breach of contract that discharges the promisee from all further obligation under the contract
Excuses for Nonperformance
Impossibility and Impractibility
examples) illness or death of promisor, supervening illegality, or destruction of the subject matter of the contract
a promisor must be able to establish that the event that makes performance impracticable occurred w/o his fault and the contract was made with the basic assumption that this event would not occur
Grounds for Discharge
mutual agreement, accord and satisfaction, waiver, alteration, statute of limitations, decree of bankruptcy
accord and satisfaction
accepting a check or amount somebody has given you when there a debt generally disputed and an agreement is made
Legal Remedy/Remedy at Law
(most common) award of money damages that will compensate the injured party for his losses
those remedies that had their origins in courts of equity rather than in courts of law (specific performance and injunction)
amount of money awarded to compensate for a plaintiff's loss
small amount of money awarded to someone who has suffered a wrong but no actual loss
amount of damages agree upon before a possible breach of contract
Extra money given to punish the defendant and to help keep a particular bad act from happening again.
equity; judicial remedies to provide more flexible responses to changing social conditions than was possible in common law
Decree ordering a party to do or refrain from doing a specified act