Chapter 12 LGLS

Contract law deals with what

The formation of keeping promises

Promise

A declaration by a person to do or not do to a certain act

Contract

An agreement that can be enforced in court

Promisee

The person to whom the promise is made

Promisor 

The person who actually promises something 

Common law governs all contracts except when it

Has been modified or replaced by statutory law, such as the Uniform Commercial Code, or by administrative agency regulations

What are governed by the common law of contracts

Contracts relating to services, real estate, employment, and insurance

What contracts are governed by the UCC

Contracts for the sale and lease of goods 

Objective theory of contracts

The intention to form a contract is judged by the outward actions and words of the parties, not their private, subjective thoughts

Objective facts may include

What the party said when entering into the contract

How the party acted or appeared

Circumstances surrounding the transaction

Requirements needed before a contract exsits

Agreement

Consideration

Contractual capacity

Legality

Agreement

One party must offer to enter into a legal agreement, and another party must accept the terms of the offer

Consideration

Any promises made by the parties to the contract must be supported by legally sufficient and bargained-for consideration

Contractual Capacity

Both parties entering into the contract must have the contractual capacity to do so.

Legality

The purpose of the contract must be to accomplish some goal that is legal and not against public policy

Offeror

Party making an offer

Offeree 

Party receiving the offer

Bilateral contract

Offeree accepts by promising to perform

“Promise for a promise”

Unilateral contract

Offeree accepts only by completing the contract performance

“Promise for an act”

Formal contracts

A type of contract that requires a special form or method of creation to be enforceable

Are negotiable instruments formal contracts

YES, YES, YES, YAAAAA

Negotiable instruments include

Checks, drafts, promissory notes, bills of exchange, and certificates of deposit

Informal contracts

Simple contracts

Express contract

The terms of the agreement are fully and explicitly stated in words, oral or written

EX: Calling classmate to buy a book for $200

Implied contract

A contract that is implied from the conduct of the parties

Requirements for implied contracts

The plaintiff furnished some service or property

The plaintiff expected to be paid for that service or property, and the defendant should have known that the payment was expected

The defendant had a chance to reject the services and did not

Executed contract

A contract that has been fully performed on both sides

Executory contract

A contract that has not been fully performed by the parties

Valid contract

A contract that has the elements necessary for contract formation

What are the elements of contract formation

Agreement

Consideration

Legal capacity

Legal purpose

Void contract

No contract at all

Unenforceable contract

Contract exists, but it cannot be enforced because of a legal defense

Option contract

A from of an irrevocable offer that gives someone a specific time to accept the offer

Termination by operation of law

Lapse of time

Destruction of the specific subject matter of the offer

Death or incompetence

Illegality of the contract

Is communication of acceptance necessary for a bilateral contract

YES YES YES YES YES YES YES

Mailbox rule

Acceptance is effective as soon as you put in the mailbox

Shrink wrap agreement

Terms and conditions are expressed in the box

Two parts of consideration

Something of value must be given in exchange for the promise

Must be a bargained-for exchange

Legally sufficient value includes

A promise to do something when you don’t have to do it legally

Doing something you are not obligated to do

Not doing something you are legally bound to do

Recission

When a contract is canceled and both sides go back to how things were before the contract even existed

Ilusory

A promise with no real obligation - non enforceable

Accord and satisfaction

A debtor offers to pay, and creditor accepts, but on a lesser amount than the creditor originally claimed was owed

Liquidated debt

A debt where the amount owed is certain and agreed on by both sides

Unliquidated debt

A debt where the amount is not certain and both sides are disputing with one another

Release

A contract in which one party forfeits the right to keep a legal claim against the other party

Binding release requirements

Honest agreement

Release contract is required in many states

Accompanied by consideration

Promissory estoppel

When you rely on a promise, and it is broken so you suffer a loss

Disaffirmance

Setting aside a contractual obligation

Usury

Charging an illegal rate of interest

Contract contrary to public policy

Unenforceable contracts due to the negative impacts they would have on society

Substantive unconscionability

When contracts are overly harsh

Reformation

A court ordered correction of a written contract so that it reflects the true intentions of the parties2

exculpatory clauses

A clause that releases someone bound by contractual obligations from liability in the event of monetary or physical injury, no matter who is at fault

Types of contracts that need be in writing or memorandum

Involving interests in land

Cannot be performed within one year

Contracts to pay someone else’s debts

Contracts made in consideration of marriage

Under the UCC, Contracts for the sale of goods priced at $500

Duties that cannot be delegated

Contracts prohibit delegation

Requirements of a specific person’s skills or talents

Delegation makes things more risky