BMGT 380: Chapter 9 Lecture Notes

Introductory Points: How has contract law evolved since its inception?

There has been an increased government regulation of private contracts (when two parties enter into a contract).

(i.e. a lease agreement between a tenant and a landlord to rent an apartment).

Introductory Points: What is a public contract?

A public contract is one where a public corporation enters into a contract with the government (i.e. a government contract awarded to a construction company to build a new road).

Introductory Points: Over the past decade where has there been increased government regulation in contracts?

1. Life insurance contract

2. Employment contracts

Introductory Points: What is the general rule about contracts being in writing?

Subject to some exceptions, the general rule is that contracts do not need to be in writing to be enforceable (i.e. real estate contracts have to be in writing or they are not enforceable).

Introductory Points: ...

Basic Elements of a Contract: What are the (4) basic elements that all contracts must have?

1. Voluntary agreement

2. Consideration

3. Capacity

4. Needs to be legal

Basic Elements of a Contract: What are the (2) elements of voluntary agreement?

1. Offer

2. Acceptance

Basic Elements of a Contract: What is consideration?

Consideration: anything of value

For there to be consideration, everyone who is a party to the contract must give something of value (i.e. giving cash for someone's laptop).

Basic Elements of a Contract: What is capacity? What are (3) elements that are considered for capacity?

Capacity: the legal ability of the parties to enter into a binding agreement

a. Age (if you're under 18, a minor, you do not have capacity)

b. Mental incapacity (if you have severe dementia, you do not have capacity)

c. Intoxication (if you're drunk, you do not have capacity)

Basic Elements of a Contract: What does it mean for a contract to need to be legal mean?

Needs to be legal means that the contract cannot violate any laws (i.e. hiring a hitman to get rid of someone is not legal).

Contract Classifications: What are the (4) classifications of contracts?

1. Bilateral & Unilateral contracts

2. Valid Unenforceable Voidable Void contracts

3. Express & Implied contracts

4. Executed & Executory contracts

Contract Classifications: What are bilateral & unilateral contracts?

Bilateral contract: both parties make promises

Unilateral contract: only one party makes a promise (i.e. in a frequent flyer contract, you're promised points per flight without committing to anything in return).

Contract Classifications: What are valid unenforceable voidable void contracts?

Valid contract:

i. Voluntary agreement

ii. Consideration

iii. Capacity

iv. Legal

Unenforceable contract: meets the (4) basic elements of a valid contract, but is unenforceable for some other reason

i. A contract that needs to be in writing, but it is not

ii. The statute of limitations has expired

Voidable contract: one party is eligible to cancel the contract

i. Minors can cancel a contract

ii. Entering into a contract with someone who has defrauded you

Void contract: is an illegal contract (i.e. hiring a hitman to take out someone)

Contract Classifications: What are express & implied contracts?

Express contract: the parties directly state what the terms of the contract are.

Implied contract: you figure out the terms of the contract by looking at what occurred during the transaction, not directly stated (i.e. after a dentist appointment they ask if you want to pay now or get the bill in the mail).

Contract Classifications: What are executed & executory contracts?

Executed contract: a contract that has been fully performed (every party did as they said they would).

Executory contract: a contract where not every party has fully performed their tasks or duties.

Contract Law: What are the (2) sources where contract law come from?

1. The UCC (Uniform Commercial Code)

2. Common law

Contract Law: What is the UCC?

The UCC, or the Uniform Commercial Code, is where most contract law comes from and is divided into 9 Article (however, Article 2: Sale of Goods is the only important one).

Contract Law: What is Article 2: Sale of Goods pertain to?

Article 2: Sale of Goods is applied to goods which deals with personal property (tangible, moveable, and _______)

a. Tangible goods do not include stocks, options, or futures

b. Does not include real-estate transactions

c. Does not include service contracts (i.e. an audit engagement with a client)

Contract Law: What are hybrid contracts? Are hybrid contracts covered under Article 2?

Hybrid contract: a contract that combines goods and services into a single contract (i.e. you purchase a private plane, a tangible item, and the contract specifies servicing and maintenance for the duration outlined in the agreement).

Hybrid contracts are covered under Article 2 if the dollar value of the good exceeds the dollar value of the service component.

Contract Law: Why does it matter if the UCC applies to a contract?

If the UCC applies, this means that it is more flexible than the common law (i.e. if price or quantity are not mentioned in the contract a judge can fill in the "essential terms" using the UCC.

If a judge were to decide a contract under common law they would declare there to be no contract if essential terms were missing, however, under the UCC judges can fill in missing terms by using presumptions (i.e. using the same price that was used for past agreements between the parties).

Non-Contract Obligations: What are non-contract obligations? What are the (2) situations where non-contract obligations arise?

Non-contract obligations are situations where there is no contract, but legal duties still exist.

1. Unjust enrichment

2. Promissory estoppel

Non-Contract Obligations: What is unjust enrichment?

Unjust enrichment: if Party (A) provides a benefit to Party (B), and Party (B) knowingly accepts it, then they are liable to pay (i.e. you don't want to mow your lawn, and a kid starts mowing it while you sit inside and watch. However, the kid mistakes your property for the neighbor's, and you don't stop him).

If Party (B) does not knowingly know that Party (A) is providing a benefit they are not liable to pay given a reasonable fit of the service provided.

Non-Contract Obligations: What is promissory estoppel? What are the (3) requirements that need to be meet to use this theory?

Promissory estoppel: Party (A) makes a promise to Party (B) and then Party (A) does not follow through with the promise (or prompt).

1. Promisor makes a promise to the promisee and the promisor should expect the promisee is going to rely on the prompt

2. The promisee does rely on the prompt

3. Enforcing the promise is necessary to prevent injustice or unfairness