BMGT380 Chapter 9 Contracts

law of contracts

deals with the enforcement of promises

contract

legally enforceable promise or set of promises

freedom of contract

idea that contracts should be enforced because they are the products of the free wills of their creators, who should, within broad limits be free to determine the extent of their obligations

pure contract law 

precise, clear, and technical rules - afforded the predictable and consistent results necessary to facilitate private planning 

contract standards

Good faith, injustice, reasonableness, unconscionability

offer, acceptance, consideration, capacity, legality

basic elements of a contract

offer + acceptance 

a set of promises must be made on a voluntary agreement 

consideration

to support each part’s promise

capacity

must be between parties who have capacity to contract 

legal

objective and performance of contract must be legal

unilateral contracts 

only one party makes a promise in exchange for something specific 

• Ex) frequent buyer cards, stamps card each time customer buys, when reach 10 stamps, gets free cup of coffee

bilateral contract

both parties exchange promises and the contract is formed as soon as the promises are exchanged 

Ex) cafe promises to pay mall $1000/month if Mall leases kiosk for holiday szn

valid contract

one that meets all the legal requirements for a binding contract (must be _____ to be enforceable in court) 

unenforceable contracts

meets basic legal requirements for a contract but may not be enforceable because of some other legal rule 

• Employs statute of fraud 

• Otherwise valid contract whose enforcement barred by applicable contract statute of limitations 

voidable contracts 

those in which harmed parties have the legal right to cancel their obligations under contract

Injured party (only) has right to cancel contract if he chooses

void contract

agreements that create no legal obligations and for which no remedy will be given 

• Contracts to commit crimes “hit” contracts 

express contract

parties have directly stated terms of their contract orally or in writing at the time the contract was formed 

implied contract

when surrounding facts and circumstances indicate that an agreement has in fact been reached 

executed 

when all parties have fully performed their contractual duties 

executory

until such duties have been fully performed

UCC

• Employs concepts of Good Faith Dealing and Unconscionability

• Purposes: 

  • Establish a uniform set of rules to govern commercial transactions, which often are conducted across state lines 

  • Realistically and fairly solve common problems occurring in everyday commercial transactions

  • For the SALE OF GOODS: tangible, movable personal property 

  • Does NOT apply for contracts for the sale of real estate or intangibles (stocks and bonds) those kinds of property do not constitute goods 

  • Does NOT apply for service contracts (real estate services) 

duty of good faith 

“Honesty in fact” required of all parties to sales contracts 

Merchants required to observe “reasonable commercial standards of fair dealing” 

unconscionable contract

one that is grossly unfair or one-sided, and gives courts broad discretionary powers to deal fairly with such contracts 

merchants

• held to a higher standard in some cases

• Contracting parties who regularly deal in the kind of goods being sold in a contract 

• who hold themselves out to have some special knowledge about goods being sold in a contract 

noncontract obligation 

impose duty on a person to pay for a loss or benefit despite the absence of the requirements for formation of a contract 

quasi-contract

(unjust enrichment or contract implied in law): represents obligation imposed by law to avoid injustice, not a contractual obligation created by voluntary consent 

quasi-contract liability

Imposed when one party confers a benefit on another who knowingly accepts it and retains in under circumstances that make it unjust to do so without paying for it 

promissory estoppel 

one person rely on a promise made by another even though the promise and the relevant circumstances are not sufficient to justify the conclusion that a contract exists 

• Allow promissor to argue no contract was created could work an injustice on person who relied on promisee