The Law of Contractual Relations

Contract:

Promise that the law will enforce.

Promisee:

a person to whom a promise is made.

Promisor:

a person who makes a promise.

Law of contractual relations is common law meaning it is:

Judge made law

Companies often sign __________ letters of intent, expressing their expectations after negotiations, agreements will be reached, but provided that neither party will be obligated until an agreement is reached.

nonbinding

If parties do not intend to be legally bound,

their promises are not legally enforceable.

Intent to contract does not refer to a party’s subjective stand of mind,

rather it is determined by examining the parties behavior (Sell the property even though you thought it was a joke)

Elements of a bargained-for-exchange consists of:

Offer, acceptance, consideration.

Offer is made by the:

Offeror

There are exceptions to the rule that an advertisement does not constitute an offer, such as:

Person finding a dog that had a $100 reward advertised.

An offer is not effective unless:

It is communicated to the offeree. (Person returns lost watch prior to learning about reward, NOT entitled)

Offers do ___ last forever

NOT

It the offer does not clarify an expiration date,

the offer terminates after passage of reasonable time

_____ of the offeror also terminates an offer.

Death

______ by the offeree terminates the offer.

Rejection

Counteroffer is both:

A rejection and a new offer, terminating the original offer.

Most common method of termination of an offer is:

Revocation

Direct revocation occurs when:

Offeror advises the offeree that the offer is revoked.

Indirect revocation example:

Someone selling a house offered two people, accepted the sale to one person, indicating that the offer was revoked to the other potential buyer.

In the case of irrevocable offers, an offer can always be revoked as long as:

The offeree gave money or value for the promise, making it part of an option contract.

Under the UCC, a merchant’s firm offer is:

Irrevocable. (Merchant is a party who regularly deals with sale of goods)

Acceptance:

Consists of words or actions by which an offeree signifies his or her intention to bound the offer.

Offer may only be accepted by the

offeree

An acceptance must signify:

Clear intent to be bound (not “sounds like a good deal”)

Silence by the offeree is ___ acceptance

NOT

Silence plus acceptance of the benefits can serve as

acceptance.

At common law, acceptance must

mirror the offer, if it adds new terms or changes any, it is a counteroffer.

Bilateral contract:

a contract in which both parties in the agreement exchange promises to perform a specific action (I fix the roof, you pay me cash) (making promises to eachother)

Unilateral contract:

contract created by an offer that can only be accepted by performance. (I promise to pay you 100 if you paint my fence) only one promise and can be accepted through performance.

In a unilateral contract, once the offeree begins performance, the offer:

cannot be revoked.

Mailbox rule:

If the offeror does not restrict the method of acceptance, acceptance is effective on dispatch by the offeree (acceptance is once the letter is mailed, not when it arrives)

The mailbox rule protects

the offeree from unknown revocations.

Revocation is effective on receipt, so

an offeree who has not received a revocation can dispatch an acceptance.

Consideration:

Refers to the requirement that a promise be part of a bargained for exchange in order for it to be enforceable.

_____ and ______ are the bargaining process.

Offer and acceptance

A promise to perform of the performance of a preexisting legal duty is not _________.

consideration

Restatement of contracts:

Provides that for executory contracts (not fully performed on either side), a good faith modification in response to unanticipated conditions is enforcable.

Generally, oral contracts are ________

enforcable.

Statute of frauds requires:

written evidence for promises. Does NOT require the contract be in writing. (Can be letters between parties detailing there was a contract)

Statute of frauds claims that:

Written evidence is not needed for terms that can be done within a year. (NOT needed for retirement as they can be retired within a year)

Signature:

Satisfied by any mark that is intended to authenticate a document.

Alternative theories to the bargain theory stem from an area of law known as:

Law of equity

Three alternative theories opposed to bargain theory are:

promissory estoppel, doctrine of moral obligation, and doctrine of quasi contract.

Promissory estoppel:

There must be a promise, and the promisee must have relied on the promise, and they must have received some detriment for reliance on the promise.

Moral obligation:

If you offer something but becomes unenforceable, you still may need to perform the obligation.

Quasi contract:

Where a party confers a benefit on another party with a reasonable expectation of payment and the party would be unjustly rich if not required to pay for it, a court implies a contract. (Doctor saves person without consent and makes them pay)

Courts protect particularly vulnerable parties deemed to:

lack the capacity to contract.

The overwhelming majority of capacity problems arise from

minors

Minors have the right to:

Void their contracts at any time prior to reaching the age of majority.

Minors are responsible for their contracts for:

Neccesities such as food, water, shelter, and medical bills as if they disaffirmed, it would lead to a quasi contract liability.

In the happening of misrepresentation:

The deceived party may rescind the transaction and receive restitution for any benefits conferred on the deceptive party. Does NOT need to be on purpose.

Only misrepresentation of _____ is actionable.

fact. Not opinion such as “best available on market”.

Deliberate concealment, AKA nondisclosure, is _______.

actionable

Nondisclosure and misrepresentation is actionable only if ______ on.

relied

Duress:

Occurs when one party’s wrongful act overcomes the free will of another party. (One party is threatened to sign into agreement) can be ECONOMIC duress. (Person offers to fix something but won’t give it back unless they pay more money in the future, the person needs the item back so they agree, they won’t have to pay it back under duress)

Many courts allow rescission if the:

Non-mistaken party knew or should have known of the other parties mistake.

Unconscionability:

Absence of meaningful choice and where the terms are so one sided it looks oppresive.

A contract is illegal if its formation or performance is:

Tortious, forbidden by statute, or contrary to public policy.

Not to compete covenants come from two situations:

Sale of business and employment contract.

Not to compete covenants must be ________.

reasonable

Typical non compete covenants are one to three years, 5 to 10 years is ________.

suspect

The radius for which a noncompete agreement should be is:

No greater than the radius that the company competes in.

Moral turpitude:

Serious misconduct

In pari delicto:

Both parties are equally blameworthy

Express conditions:

Conditions that are established by the parties themselves.

Constructive conditions:

Conditions implied as a matter of law from the order of performance contemplated by the parties. IMPLIED

The basic remedy for breach of contract is:

an award of money damages

Liquidated damages:

damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach

Specific performance:

Party wants the court to order the breaching party to perform the contract rather than pay damages.

Specific performance is only ordered when:

the order is not too difficult to enforce or too harsh.