Contract Law Exam 2 (Part 2)

Termination By Law

1. Lapse of Time:

2. Destruction of Subject Matter

3. Death or Incompetence

4. Illegality

The Acceptance

Expression of Assent

1. Unconditional: Must be a mirror image of the offer, if conditions are added, this is a counteroffer.

2.

3. Legally Communicated

Acceptance By Silence Exceptions

- Acts consistnet with Acceptance

- Prior Dealings

- Unilateral Contract

The Mailbox Rule

address a situation between two individuals that have a time breaker involved, an offer is accepted upon dispatch. A revocation of an offer is effective upon receipt.

Marriage Contracts

a proposal is a contract.

Consideration

2 Requirements

1. Legally Sufficient

2. Bargained for: not a gift

Legally Sufficient Consideration

1. Promising or performing you have not legal obligation to do.

2. Forbearing from doing something.

Lack of Consideration

Rule 1: For a promise to be enforced by the courts, there must be consideration.

Exception: Promissory Estoppel

- Promise clear and indefinite

- Promisee justifiably relied on promise

- Reliance substantial and definite

- Enforcing in best interest of justice

Exception: Charitable Subscriptions

Adequacy of Consideration

Rule 2: Court seldom consider adequacy

Exception: Situations involving wrong doing - fraud, duress, under the influence.

Illsuroy Promise

Rule 3: illusory Promises are not consideration.

- When a contract contains a statement by the promisor that requires no actual obligation on the party of the person to fulfill, the promise is an illusory promise.

Example: If a company says, "if you keep up the work you can get a substantial bonus."

Options to Cancel: at anytime for any reason you are able to cancel this agreement.

Past Consideration

Rule 4: Past consideration is no consideration

Example: Walter was told that he would get a $1000 bonus on his last paycheck, but he never received it, can he sue?

Answer: No.

Pre-Existing Duty

Rule 5: A promise to do something (or refrain form doing), that one already has a legal duty to do is usually not legally sufficient consideration.

- Obligation under the Law

- Existing Contractual Duty

Contractual Capacity

The minimum mental capacity required by law for a party to enter into a contract to be bound by.

Certain persons are generally not considered to have sufficient capacity to be bound by their contracts. (Minors, Mentally impaired or Incompetent Persons, Intoxicated Persons)

Minors

an unmarried person under the age of 18 years old.

Infancy Doctrine: Disaffirmance

A minor can enter into any contract that an adult can, but they can disaffirm the contract.

Whatever consideration was given in the contract must be given back.

Must disaffirm before they turn 18 or a reasonable time after.

How to Disaffirm

you can inform them verbally, or with conduct (ex: not making payments)

Exceptions: Necessaries

A minor who enters into a contract to purchase food, shelter, clothing, medical attention, or other goods or services necessary to maintain his well-being will be generally liable for the reasonable value of those goods and services even if he disaffirms the contract.

Can't be Disaffirmed

- Child Support

- Military

- Life Insurance

Parental Liability

Parents are generally not liable for the contracts of their minor children, unless:

1. Co-sign

2. Wrongful act: coaches the child

Emancipation

the legal act of a minor being separated from their parents to support themselves.

Intoxication

a condition in which a persons's normal capacity to act or think is inhibited by alcohol or some drug.

Dissafirmance: within a reasonable time after sobering up.

Mental Incapacity

incapable of comprehending or understanding the nature of the transaction

Mental Incompetence

Void: no legal effect, would need to be obtained in court.

Voidable: suffer from a mental illness but have not gone to court to get out of the contract.

Valid: at the time of the contract they were competent but later became incompetent.

Ratification

accepting and given legal force to an obligation such as making a payment.

Contracts Contrary to Statute

- Usury

- Gambling

- Blue Laws

- Licensing

Usury

max allowed interest rate allowed in a state.

Gambling

any gain of chance where you pay in to get something out of it.

Blue Laws

"Sunday Laws" you can't do these things on a Sunday

Licensing

if a person is required to hold a licenses in a profession, and they don't have a license than the contract is void.

Restraint of Trade

- Restrictive Covenant in Sale of a Business

- Restrictive Covenant in Employment Contracts.

Restrictive Covenant in Sale of a Business

Must be reasonable in time and geography

Restrictive Covenant in Employment Contracts

- Reasonable in time and geography

- Anything over 6-months (making over $100,000)

- Anything over 1 year (making over $200,000)

Unconscionable Contracts

no reasonable person would agree to this agreement unless there are extenuating circumstances.

Procedural Unconsicionablity

this is regarding how you enter into the agreement, being pressured to sign it or not reading it beforehand.

Substantive Unconscionability

1. One party has an extreme advantage in bargaining power

2. And they use the bargaining power to gain outrageous or unfair terms

3. The lesser party has no unreasonable alternative.

Exculpatory Clauses

when businesses say they are not responsible for damages to your property.

5 Contracts that Must Always be in Writing

1. Sale of Goods: any contract of goods must be in writing for anything over $500 of goods.

2. Consideration of Marriage: a prenuptial agreement must be done in writing.

3. Real Estate: Any contract for the sale of real estate must be in writing.

4. Collateral Promises: any promise to guaranteed the debt of someone else must be in writing.

5. One Year Rule: Any contract, by its own terms, cannot be performed in one year.

Sufficiency of the Writing

a written contract can be on anything, i.e., napkin, paper, with a crayon.

Parole Evidence

once you enter into an agreement the deal is the only thing that will be listened to, no set of outside terms.