BUL3310 Exam 2 Adkins concepts

contract

legally enforceable promise or set of promises

why are contracts fundamental to business and a well functioning market economy?

they protect the expectations of parties who exchange value in commercial dealings

what do businesses rely on to protect expectations and facilitate planning

contracts

contracts are primarily governed by

state law

what do courts refer to for guidance when governing contract law?

-Restatement (Second) of Contracts
-Uniform Commercial Code (UCC)

what is the Restatement (Second) of Contracts?

legal guide that summarizes general contract law principles.

What is the Uniform Commercial Code (UCC)?

governs contracts involving the sale of goods and ensures fairness in business transactions

Freedom of Contract

individuals and businesses have the freedom to enter into contracts with terms they agree upon, without government interference—so long as the contract is legal and fair

What kind of contracts does the Restatement (Second) of Contracts primarily apply to?

contracts not involving the sale of goods

arm's length bargaining

both parties in a contract act independently and in their own self-interest, without pressure, coercion, or special relationships affecting the negotiation

What is a limitation of freedom of contract

cannot violate ethics or public policy

what notion is every contract premised on?

good faith

why is good faith important in contract law

ensures that neither party deceives, manipulates, or unfairly takes advantage of the other.

How does the Uniform Commerical Code (UCC) define good faith?

Honesty in fact and the observance of reasonable commercial standards of fair dealing

Types of Contracts

Bilateral, Unilateral, Explicit, Implied

bilateral contract

-Most common type of contract
-BOTH parties exchange promises

unilateral contract

Only ONE party makes a promise

explicit contract

terms clearly stated (written or oral)

implied contracts

terms not explicity stated, but inferred by behavior

example of a bilateral contract

Jane sells her car to Joe for $10,000

example of a unilateral contract

reward for finding a lost dog

example of explicit contract

You hire a plumber to fix a leak, and the plumber provides a quote. You agree, and the plumber performs the service.

example of an implied contract

You get into a taxi, and the driver takes you to your destination.

The Statute of Frauds

requires certain contracts to be in writing to be enforcable

what kinds of contracts does Common Law require to be in writing?

MYLEGS

what kind of contracts does the UCC require to be in writing?

-Sale of goods over $500
-Lease of goods over $1,000

what is a valid contract

-has all required elements: Mutual Assent, Consideration, Legality of Purpose, Capacity
-be legally enforceable

Mutual Assent

offer + acceptance = meeting of the minds

an offer:

A promise to do (or not do) something in exchange for something else.

requirements for a valid offer

-objective intent
-definiteness
-communication

objective intent

The offeror must intend to create a binding agreement.

Definiteness

The terms must be clear enough for a court to enforce.

communication

The offer must be communicated to the offeree

exceptions to an offer

-advertisements are not offers, just an invitation to make an offer
-if an advertisement is spcific and leaves nothing open for negotiation, it can be a valid unilateral offer.

Termination of an offer by the parties

-revocation
-rejection
-counteroffer

revocation

offeror withdraws the offer before acceptance.

rejection

offeree refuses the offer

counteroffer

offeree proposes new terms (which cancels the original offer)

termination of an offer by law

-Lapse of time
-Death or incapacity of either party
-Destruction of subject matter
-Supervening illegality

lapse of time

offer expires after a reasonable period

supervening illegality

offer becomes illegal before acceptance.

Destruction of subject matter

subject matter becomes destroyed and cannot fulfill

acceptance

offeree's agreement to terms

mailbox rule

acceptance is effective when sent (not when recieved)

what does the mailbox rule protect the offeree from

last-minute revocation by the offeror

mistakes in mutual assent

-mutual mistake
-unilateral mistake

mutual mistake

If both parties are mistaken about a key fact, the contract may be canceled

Unilateral Mistake

If only one party is mistaken, the contract is still enforceable.

Consideration

something of value exchanged by both parties

Forms of Consideration

-bargained for exchange
-forbearance
-nominal consideration

bargained for exchange

promise in exchange for something else.

forbearance

a promise not to do something

nominal consideration

a symbolic amount to make an agreement binding

agreements that lack consideration

preexisting duty
illusionary promise
past consideration
promissory estoppel

preexisting duty

A promise to do something you are already legally obligated to do is not consideration.

illusionary promises

A vague or optional promise is not legally binding.

past consideration

A past action cannot be used as consideration for a new promise.

Promissory Estoppel

Even if there is no consideration, a promise may be enforced if one party relied on it to their detriment.

what is a void contract

A contract that lacks one or more required elements and is not in conformance with the law from the beginning.

What is a voidable contract?

When one or more parties have the legal right to cancel under special circumstances

What are some reasons a contract may be voidable?

-Minors
-Fraud
-Duress
-Undue Influence

What is an unenforceable contract?

When one party asserts a legal defense to performing the contract

an example of an unenforceable contract.

A verbal agreement to sell a house

an example of a voidable contract

A 17-year-old buys a car under a contract

an example of a void contract

A contract to sell illegal drugs

legality of purpose

Contracts must be for a legal purpose—both the subject matter and performance of a contract must be lawful.

types of illegality in contracts

-Barred by Statute
-violates Public Policy

example of illegality barred by statute

a person without a medical license performing surgery

what does it mean if a contract violates public policy?

goes against common sense or harms society

when can an NDA be found unenforcable?

they suppress illegal activity or violate public interest

when can a Non-compete agreement be illegal?

they are too broad in restricting a person's right to work

General rule of enforceability

Contracts with an illegal purpose are void and cannot be enforced

Executory (Unperformed) Contracts

If neither party has performed yet, the contract is void

Partially Performed Contracts

-If the contract is partially valid and separable, courts may enforce the legal part.
-If not separable, courts may allow restitution

capacity

a person's ability to understand and appreciate the terms of an agreement.

If someone lacks capacity, their contract is _____.

voidable

who lacks capacity?

-minors
-mentally incompetent persons
-intoxicated persons

what is the general rule when it comes to contracts with minors?

Contracts with minors are voidable at the minor's option