MGMT Final

What is a contract?

it is a legally enforceable promise or agreement…IF BROKEN the law might provide remedies like damages or be recognized by the law as a duty

ultimately a contract is an agreement that is enforceable in court

what is the objective theory of Contracts?

a party’s intention to enter into a legally binding agreement, or contract can be judged on

1. What was said when entering into the contract;

2. How the party acted or appeared; and

3. The circumstances surrounding the transaction.

As judged by the reasonable person standard

Essentially, a person doesn’t have to verbally agree to enter a contract

Example of Contract: you go to a car dealership and and want to buy the cheapest car in the lot…sales person walks up to sweet talk. Puffing the car. There could be many terrible cars in the lot, but that one vehicle could be the best from those terrible ones. Is there a potential for a lawsuit?

If the car u buy ends up being horrible that there is a potential for a lawsuit but contract ends up protecting salesperson? it complicated and truly depends…

what are the requirements for valid contract?

If any of these elements is lacking, no contract will have been formed

1. Agreement (an offer and acceptance or mutual assent - both parties clearly agree to the same deal)

2. Consideration (something of value was received or promised)

3. 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.)

4. Legality

If you are under the age of 18 can you make/enter a contract?

Generally NO but there are some exceptions…for example, if you join the military as a minor, you can join a contract with them

OR if your parent/guardian signs the contract on behalf of the minor, BUT once minor turns 18, they need to legally undo the contract, or they will remain bound by the contract

What is the difference between Bilateral contracts and Unilateral contracts?

Bilateral contracts: A promise for a promise…NO performance, such as a payment of money or delivery of goods…both parties in the agreement exchange promises to perform a specific action. Essentially, each party has an obligation to perform in a bilateral contract. One party’s promise serves as consideration for the promise of the other.

Unilateral Contracts: A promise for an act. Offer is phrased so that the Offeree can accept the offer only by completing the contract performance EX: your lost dog has been returned to you by a neighbor so you pay them once they return your dog

Every contract involves at least two parties. Who is the offeror and who is the offeree?

Offeror = party making the offer

Offeree = party to whom the offer is made

What is the difference between a Formal and Informal contract?

Formal Contract: need a special form or method of formation to be enforceable examples of this include negotiable instruments such as Checks, drafts, promissory notes, letters of credit, certificates of deposit and so on…

Informal contracts: all other contracts…no special form needed

What is the difference between express vs implied contracts?

Express Contracts: the terms are fully and explicily stated…terms may be verbal or written…EX: A signed lease for an apartment or a house is an express written contract. If one classmate calls another on the phone and agrees to buy her textbooks from last semester for $200, an express oral contract has been made.

Implied Contracts: Implied from the actions of the parties

• plaintiff provided a service or gave/delivered some property!

• plaintiff expected to be paid and defendant knew or should have know that payment was expected

• defendanct had a chance to reject the services or property and did not

EX: April 14th, Taxes are due April 15th, you're lounging around April 14th, you call CPA, you call the place and they say they can file your taxes immediately. Next day you get a call at 10 o'clock to pick them up, you get charged 1200, this was an implied contract because you had the opportunity to ask for the cost but you never did.

What is the difference between an Executed or Executory Contract?

Executed: Fully performs on both sides

Executory:

1. A contract that has not been fully performed on either side;

OR

2. A contract that has been fully performed by one party only

Is the contract enforceable or Unenforceable?

Valid: an enforceable contract…has all the elements to create an enforceable contract

Voidable: is a valid contract but one that can be avoided at the option of one or both of the parties. The party having the option can elect either to avoid any duty to perform or to ratify (make valid) the contract. If the contract is avoided, both parties are released from it. If it is ratified, both parties must fully perform their respective legal obligations. ESSENTIALLY The contract is valid unless and until the protected party chooses to void it. protected parties = minors, mentally incompetent individuals, intoxicated persons, fraud, undue influence, or mistakes

Unenforceable: a valid contract rendered unenforceable Ex: the law required it to be in writing

Void: NOT a contract if one of the parties was adjudged to be mentally incompetent or the purpose of the contract is illegal

An essential element for contract formation is agreement. What is agreement and what are the requirements?

Agreement = Mutual assent (agreement) as evidenced by an offer and acceptance

Not all agreements are contracts!

A contractual agreement only arises when the terms of the agreement impose legally enforceable obligations on the parties.

Requirements of the Offer: A promise or commitment to do or refrain from

doing some specified thing in the future.

Requirements:

1. A serious intention to become bound

2. Terms that are reasonably certain

3. The offer was communicated to the offeree

Intention – as determined by the objective theory of contracts.

In what situations would intent be lacking for an offer?

• Expressions of Opinion

• Statements of future intent

• preliminary negotiations

• invitations to bids

• Advertisements and price lists (Generally ads are NOT offers to contract but Invitations to negotiate)

• Live and online auctions

All of the above are NOT offers!

How is an offer terminated?

• action of the parties

  • Termination by Action of the Offeror

    • Revocation (The offeror’s act of revoking, or withdrawing) can be verbally said (Express) or implied

  • Termination by action of the Offeree

    • Rejection

    • counteroffer

• operation of law

  • lapse of time (waited too long…contract expired)

  • Destruction of the subject matter

  • death or incompetence of the offeror/offeree

  • supervening illegality of the proposed contract (A statute or court decision that makes an offer illegal automatically terminates the offer.)

What is an acceptance? (Chap 12)

words or conduct by the offeree that show assent (agreement)

Unequivocal Acceptance (Mirror-Image Rule) = Acceptance must be clear, unconditional, and exactly match the offer. If it changes anything, it’s not acceptance — it’s a counteroffer.

If it is an online offer what provisions need to be included?

1. acceptance of terms

2. payment

3. refund and return police

4. disclaimer

5. warranty (limitation of remedies)

6. privacy policy

7. dispute resolution