Business Law Unit 1

Plain Meaning

When a contract is clear and unequivocal, a court will enforce it according to its plain terms, set forth on the face of the instrument, and there is no need for the court either to consider extrinsic evidence or to interpret the language of the contract

Rules of Interpretation

When a contract contains ambiguous or unclear terms, a court will resort to one or more of the following rules in order to determine and give effect to the parties’ intent: reasonable, lawful, effective, interpreted as a whole, consistent, negotiated terms, ordinary, commonly accepted meaning, technical meaning, specific terms, handwritten, typewritten, printed, against the drafting party, usage of trade, course of prior dealing, course of prior performance, express terms, words, and numbers or symbols

Offers for Goods and Services

A promise or commitment to perform or refrain from performing some specified future act made by the offeror

When Does an Offer Begin

Serious, objective intent, on the part of the offeror, to perform or refrain as offered; The terms of the offer must be reasonably certain or definite; and the offer must be communicated to the offeree

Counteroffer

A rejection by the offeree of the original offer, coupled with a new offer made by the original offeree to the original offeror

Quasi Contract

A fictional contract imposed on parties by a court in the interests of fairness and justice, typically to prevent the unjust enrichment of one party at the expense of the other

Elements of a Contract

Agreement

Consideration

Contractual Capacity

Legality

Agreement

Includes an offer and an acceptance. Once party must offer to enter into a legal agreement, and another party must accept that offer.

Consideration

Any promises made by the parties must be supported by legally sufficient and bargained for consideration (something of value received or promised to convince a person to make a deal)

Contractual capacity

Both parties entering into the contract must have the contractual capacity to do so. The law must recognize them as possessing characteristics that qualify them as competent parties.

Legality

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

Bilateral Contract (Formed by words)

A type of contract that arises when a promise is given in exchange for a return promise.

Unilateral Contract (Performance)

A type of contract that results when an offer can be accepted only by the offeree’s performance.

“If you drive my car from New York to Los Angeles, I’ll give you $1,000. Only on Kay’s completion of the act bringing the car to Los Angeles does she fully accept Reese’s offer to pay $1,000. If she chooses not to accept the offer to drive the car to Los Angeles, there are no legal consequences.

Unilateral Contracts

“Javier offers to buy Ann’s smartphone for $200. Javier tells Ann that he will give her cash for the phone on the following Friday, when he gets paid. Ann accepts Javier’s offer and promises to give him the phone when he pays her on Friday.

Bilateral Contract

Revocation

The withdrawal of a contract by the offeror. Unless an offer is irrevocable it can be revoked at any time prior to acceptance without liability.

Rejection

When you deny an offer. Its only effective when it is actually received by the offeror.

Implied Contract

A contract formed in whole or in part from the conduct (action or behavior) of the parties.

Expressed Contract

A contract in which the terms of the agreement are stated in words, oral or written.

Executed Contract

A contract that has been fully performed by both parties.

Executory Contract

A contract that has not yet been fully performed.

By law a contract dies when:

When the offeror gets injured or dies

The Mailbox Rule

An acceptance becomes effective upon being placed in the mailbox by the offeree.

A voidable contract

Otherwise valid contract that maybe be legally avoided, cancelled, or annulled at the option of one of the parties.

Void Contract

Contracting having no legal force or binding effect,

Lapse of Time

• If no time period is stated in the terms of the offer, then the offer will terminate after a reasonable period of time has expired

• Destruction of Subject Matter: An offer terminates automatically if the subject matter of the contract is destroyed prior to acceptance

Genuineness of Assent

The apparent consent of both parties must be genuine

Forum Selection Clause

Where they can sue

Acceptance by Silence

Generally speaking, silence (or inaction) cannot constitute acceptance – even when the offeror indicates that silence or inaction will be taken as acceptance.

Option Contract

Separate agreement where a seller agrees to keep an offer open for a specific period in exchange for consideration

UCC

A comprehensive set of model laws that regulates commercial and business transactions in the United States. Sale of Goods, Secured Transactions, Negotiable Instruments, and Leases

Timing Elements

The specific deadlines, durations, and chronological triggers that dictate when a legal right becomes enforceable, how long it remains valid, and when it officially expires. There is usually a 3 month maximum before a contract expires.