Business Law 3375 - Midterm 2: Contracts

Why are contracts important in business?

Insures predictability and stability in business operations

Do contracts require a written agreement?

No

Contract

Promises that can be legally upheld by the court. It requires an offer, adequate acceptance, and consideration of its terms to be considered a legally-enforceable contract.

What aspects of a contract will courts look at to determine if the contract is enforceable?

What was said at the time the alleged contract was agreed to, how the parties acted, and the circumstances surrounding the alleged entry of the contract.

Sales and Lease contracts

A contract transferring the ownership of goods and services from a seller to a buyer for a price, or the transferring of the right to possess or use an asset for a specified amount of time for a rent price.

Uniform Commercial Code (UCC)

Comprehensive set of laws overseeing all commercial transactions across the United States regardless of state lines. Its purpose was the modernize and simplify the court processes of sales and lease contracts.

Which of the following is NOT covered by sales and lease contracts?

Real estate

Merchant

A person or entity with special rights and obligations that deals with a type of goods in question and holds himself out as having special knowledge about those goods.

Entrustment Doctrine

Provides that if an owner entrusts goods to a merchant who deals in goods of that kind, the merchant has the power to transfer all rights to a buyer in the ordinary course of business. This rule protects innocent buyers who believes the merchant has good title to the goods in his possession and gives the entruster a better position to protect against a dishonest merchant than the original buyer.

Quasi Contracts

Form of equitable relief imposed by the court in situations necessary to avoid unjust enrichment to one party at the expense of another.

Three elements of quasi contracts

Services were rendered as requested; services were knowingly and voluntarily accepted; services were not provided gratuitously

Quantum Meruit

An equitable, quasi-contractual legal remedy that allows a person to the reasonable value of services rendered or materials supplied, even in the absence of an enforceable contract.

Offer

An intention to be bound with reasonable certain terms that is communicated to the other side of the transaction.

Lucy v. Zhemer

Issue: Whether a contract made in jest was legally enforceable.
Facts: Two members signed a contract during a night of drinking stating that Zehmer would sell a farm to Lucy for $50,000. They made edits to the contract and had the wife come in to be a signatory to ensure the transfer of the property, demonstrating that they had coherence in making that contract
Ruling: “Whether the writing was signed by the defendant..was a result of a serious offer by Lucy and a serious acceptance by the defendant or was a serious offer by Lucy and an acceptance in secret jest by the defendants, in either event it constituted a binding contract of sale between the parties.”

Which of the following are NOT serious offers?

All of the above

Rule 56

A court would grant summary judgment to one of the parties when it is clear that the other party has no case but are entitled to judgment as a matter of law

Texaco vs. Pennzoil

Issue: Whether there was a binding contract between Pennzoil and Getty, and if TexaCo knowingly interfered.

Facts: Pennzoil made an agreement to buy a significant portion of Getty Oil. Shortly after, TexaCo stepped in with a higher bid and caused Getty Oil to break the agreement
Ruling: TexaCo was ordered by Houston courts to pay $10 billion in damages, causing them to file for Chapter 11 bankruptcy.

Intentional Interference with a Contractual Agreement

A legal tort where a defendant knowingly and intentionally interfered with a legally-valid contract that caused a breach in said contract and damaged a plaintiff as a result.

Type 1 Preliminary Agreement

A legally binding contract created when parties agree on all essential, material terms of a deal, even if they contemplate signing a more formal document later. It is "preliminary" only in form, binding both parties to the deal's core requirements

Type 2 Preliminary Agreement

A binding contract, often in letters of intent, where parties agree on certain major terms but leave others open for future negotiation, creating a binding duty to negotiate in good faith that does not guarantee a final deal.

Copeland vs. Baskin Robbins

Issue: Whether Baskin Robbins breached its contract with Copeland even though not all elements of the terms were agreed upon

Facts: Baskin Robbins was trying to negotiate with Copeland. They had agreed on certain terms, but Baskin Robbins did not want to sign an agreement about co-packing

Reasonably certain terms: Who are the parties, what is the subject matter, what is the consideration, and time for payment, delivery

Promissory Estoppel

A legal doctrine that enforces a promise even without a formal contract when one party reasonably and detrimentally relies on that promise, causing them to suffer a loss. It prevents a promisor from reneging on a promise if injustice can only be avoided by enforcing it. 

Consideration

Something of legally sufficient value given in return for a promise, performance, or forbearance.

Clear promise

An unambiguous, explicit commitment that binds parties to specific terms, enabling legal enforcement. It must lack the vague, conditional nature of "illusory promises," which do not obligate the promisor to any action. Such promises form the basis of a contract and are essential to proving breach or establishing promissory estoppel.