BMGT380 - Chapter 9 - Important Terms

Contract

Legally enforceable promise or set of promises.

What do contracts create?

A type of private law that governs our dealings with others.

Can contracts be oral?

Yes, contracts do not have to be written to be enforceable, unless it is required in writing by law.

Basic Elements of a Contract

1. Voluntary promises (genuineness of assent) 2. Consisting of an offer and acceptance 3. With legal consideration 4. Between parties with capacity to contract 5. Made for a lawful purpose

What happens when a contract is not present, but promises were made?

An implied in law contract can be created as a result of the parties' actions.

Bilateral Contracts

Two parties make promises to one another

Unilateral Contracts

One party makes a promise

Valid Contract

Binding and enforceable agreement.

Voidable Contract

Agreement otherwise binding, but due to circumstances surrounding execution, mistake or lack of capacity, may be rejected at option of one party.

Void Contract

Agreement without legal effect because terms or subject are prohibited by law.

Express Contract

Agreement of parties manifested by specific words, written or oral.

Implied Contract

Agreement not shown by words, but by acts and conduct of parties.

What's the difference between express and implied contracts?

The difference between express and implied contracts relates to manner of proving existence of the contract, not the effect.

Executory Contract

A contract where some obligations remain to be performed by one or more parties.

Executed Contract

A contract where all parties have fully performed their obligations, meaning the terms of the agreement have been completely carried out.

What two bodies of law govern contracts?

1. Article 2 of Uniform Commercial Code

2. Common law of contracts

What does Article 2 of the UCC apply to?

Contracts for the sale of goods. It does not apply to the sale of services, intangible property (stocks, intellectual property), or real estate.

UCC 1-105

Goods are tangible, moveable, personal property.

Law Governing "Hybrid" Contracts

Many contracts involve good and services so the courts have to test to decide whether Article 2 applies is to ask which element -- goods or services -- predominates in the contract.

Differences between Article 2 and Common Law

UCC is more flexible and rewards legitimate expectations. Courts are more likely to 'find' a contract under UCC rather than common law. In some cases, courts give less weight to common law requirements like consideration, especially if 'merchants' are involved.

UCC expectations not present in common law

1. UCC imposes a requirement of 'good faith'

2. Under UCC merchants are required to observe "reasonable commercial standards of fair dealing"

3. UCC recognizes concept of 'unconscionability' between parties and gives courts broad discretion to make these contracts 'fair'

4. UCC distinguishes between merchants and non-merchants and may impose higher/different standards.

Merchant

An agent or company that regularly deals in the kind of goods being sold, or pretends to have some special knowledge about the goods.

Non-contract Obligations

Sometimes the law enforces an obligation to pay for certain losses or benefits even in the absence of mutual agreement and exchange of value.

What do the courts apply when there are "non-contract" obligations present?

1. Quasi-contract theory

2. Promissory estoppel

Quasi-Contracts

Equitable contracts created by courts (also called contracts implied in law)

How/when are quasi-contracts used?

Courts imply as a matter of law a promise by the benefited party to pay reasonable value for benefits received to prevent unjust enrichment; Plaintiff recovers either reasonable value of the benefit conferred on defendant (reasonable price) or value of labor (quantum meruit)

Promissory Estoppel

Equitable remedy created by courts to protect reliance.

When is promissory estoppel imposed?

When one party foreseeably relies upon another party's good faith promise to their detriment (detrimental reliance) which creates injustice.