BUSFIN 3500 Irvine Final OSU

contract

a promise or set of promises for the breach of which the law gives remedy of the performance of which the law in some way recognizes as a duty

-set of legally enforceable promises

covenant not to compete

restrict what an employee may do after leaving a co, often dictate where, when and whom an employee may work

Elements of a Contract

have to have all 4:

Agreement

Consideration

Capacity

Legality

agreement

element of a contract

mutual understanding

consists of an offer by offeror to enter into a contract and acceptance of the terms by the offeree

consideration

required in every contract the bargained for exchange or what each party gets in exchange for his or her promise under the contract ex car for $

capacity

the legal ability to enter into a binding agreement minors don't have it

legality

to be enforceable, contract CANNOT be illegal or against public policy

lack of genuine assent

defense to the enforcement of a contract

supposed to be entered freely by both parties but sometimes the offeror secures acceptance through improper means such as fraud, duress, undue influence, or misrepresentation

Defenses to a contract

fraud, duress, undue influence, mistake, misrepresentation, lack of writing

objective theory of contracts

in determining whether parties intended to enter a contract, courts look at their objective words and behavior and do not try to figure out what they might have been secretly intending

Sources of Contract Law

Uniform Commercial Code (UCC)

Case Law

Convention on Contracts for International Sales of Goods (CISG) good-movable tangible not services

Common law -> easier to look at restatements

Uniform Commercial Code (UCC)

became law in states when adopted fully or pieces

sale of a good falls under it, if not common law

includes real property and of the shelf software

bilateral contract

A PROMISE + A PROMISE

if the offeror wants a promise from the offeree to form a binding contract

unilateral contract

the offeror wants the offeree to do something, not to promise to do something most common a reward

Purpose of Contracts

create record

structure relationship between parties

allocate risk between parties

create consequences if a party fails to keep their promise

express contracts

clearly set forth in either written or spoken words

implied contracts

arise not from words from the conduct of the parties

implied in fact conditions:

1.) plaintiff provided some property or service to defendant

2.) plaintiff expected to be paid for such property or service and a reasonable person would have expected to pay for it

quasi contracts

aka implied in law contracts but they are not actually contracts rather in order to prevent one party from being unjustly enriched at the expense of another, the courts impose contractual obligations on one of the parties as if that party had entered into a contract

Recovery in quasi contracts may be obtained when:

1.) benefit is conferred by the plaintiff upon the defendant

2.) defendant has knowledge of the benefit that is being bestowed upon her

3.) defendant retains the benefit under circumstances in which it would be unjust to do without payment

valid contract

one that contains all legal elements, general rule valid contract is one that will be enforced

void contract

in effect not a contract at all, either its object is illegal or it has some defect so serious that it is not a contract

voidable

if 1 or both parties has the ability to either withdraw from the contract or enforce it

executed

once all the terms of the contract have been fully formed

executory

as long as some of the terms have not yet been performed

formal contracts

have a special form or must be created in a specific manner

1.) contracts under seal

2.) Recognizances

3.) Letters of credit

4.) Negotiable instruments

recognizance

when a person acknowledges in court that they will perform some specified act or pay a price for failure to do so

letter of credit

an agreement by the issuer to pay another party a sum of $ on the receipt of an invoice or other docs

negotiable instruments

unconditional written promises to pay the holder a specific sum of $ on demand or at a certain time checks, notes, drafts, certificates of deposit

plain meaning rule

appears to be plain and unambiguous on its face, must determine its meaning from just the doc without resorting to outside evidence and give the words their ordinary meaning

Elements of an Offer

-agreement formed when offeror makes an offer to the offeree

1.) Serious intent by the offeror to be bound to an agreement

2.) Reasonably definite terms

3.) Communication to the offeree

Preliminary Negotiations

an invitation to negotiate or an expression of possible interest in an exchange is NOT an offer bc it does not express any willingness to be bound by acceptance

Letter of Intent (LOI)- letter of intent negotiating but don't want to enter a contract

ads

another illustration of an offer to make an offer

auctions

if auction is without reserve, the auctioneer must accept the highest bid; if with reserve, the auctioneer may refuse to sell the item if they are not satisfied with highest bid

Definite and Certain Terms

all material terms must be included; allow a court to determine damages if breach of contract

include: subject matter, price, quantity, and parties

Termination of the Offer

1.) Revocation

2.) Rejection

3.) Counteroffer

4.) Death or Incapacity

5.) Illegality

6.) Lapse of time

7.) destruction

8.) Condition

Revocation by the Offeror and Exceptions

can revoke it at anytime, even if the offer states it will be offered for a specific time

exceptions:

option contract: offeree gives offeror a piece of consideration in exchange for holding the offer open for a specified period of time

detrimental reliance: if offeree had reasonably relied on the offeror's promise to hold the offer open and had taken action in reliance on the offer, courts may use doctrine of promissory estoppel to estop, or prevent, the offeror from revoking his offer

Silence as a form of acceptance

silence cannot be used to form a contract

exceptions previously established relationship,accept benefits, prior to agreemnt

The mirror image rule

acceptance of definite and certain terms

terms of acceptance must mirror the terms of the offer when acceptance contract is specific if not no contract is formed instead the the attempt of acceptance is a counter offer

authorized means of acceptance

communication to the offeror when acceptance of contract is specific must be that way or there is no contract

mailbox rule

acceptance is valid when the offeree places it in the mailbox, wheres a revocation is effective only when the offeree receives it depends on jurisdiction

Promissory Estoppel

*one exception to the rule requiring consideration

NO CONTRACT

1.) 1 party makes a promise and either knows or should have known that the other party will reasonably rely on it

2.) other party does reasonably rely on it

3.) the only way to avoid injustice is to enforce the promise

- enforced without consideration

illusory promise

is not consideration, it is not a promise at all

ex shawn offers molly skis for $300 molly says i'll look at them tomorrow and if I like them ill pay you

past consideration

past is no consideration is no consideration at all

- a promise cannot be based on consideration provided before the promise was made consideration has to be apart of a bargained exchange

liquidated debt

no dispute that $ is owed or how much

unliquidated debt

parties either disagree about whether $ is owed or dispute amt

Accord and Satisfaction

they can settle for less than full amount

1.) Debt is unliquidated (amt or existence of he debt is in dispute)

2.) Creditor agrees to accept as full payments less than it claims is owed

3.) Debtor pays amt they have agreed on

capacity

element of a legal binding contract

- has the mental ability to understand their rights and obligations under a contract and therefore presumably to comply with the terms

incapacity/incompetence

possession of a mental or physical defect that prevents a natural person from being able to enter into a legally binding contract

minors

minors may enter into only voidable contracts but given full capacity if emancipated (through marriage or courts)

*as a general rule any contract entered into by a minor is voidable by the minor until they reach the age of majority or a reasonable time afterward

disaffirmance of the contract

bc their contracts are voidable, minors have the right until a reasonable time after reaching the age of majority to disaffirm or void their contracts

intoxicated persons

contracts are voidable if the other party had reason to know that intoxication rendered the person unable to understand the nature and consequences of the transaction or unable to act in a reasonable manner in relation to the transaction

Contracts that violate state or federal statues agreements

- to commit a crime or tort are illegal

- made for the purpose of protecting the public's health, saftey, or welfare by a party unlicensed to do so are typically illegal

- regarding usurious loans may be illegal in some states

- that violate Sunday or Sabbath laws are illegal in some states

when courts determine a restraint on trade is reasonable

covenants not to compete

1.) in conjunction with the sale of a bus are generally enforceable if they are for a reasonable length of time and involve a reasonable location

2.) in employment contracts (reasonable length and location)

unconscionable agreements

refers to the fact the agreement in question is so unfair that it is void of conscience

procedural unconscionabilty

describes conditions that impair 1 party;s understanding of a contract, as well as the integration of terms into a contract common in adhesion contracts

adhesion contracts

an agreement presented on a take it or leave it basis or as the only change the presented party (the adhering party) will have to enter it unconscionable

substantive unconscionabilty

occurs when an agreement is overly harsh or lopsided

exculpatory clause

releases one of the contracting parties from all liability, regardless of who is at fault or what injury is suffered

in pari delicto

both parties are equally responsible for the illegal agreement

- doesn't make sense for the courts to attempt to salvage the agreement or reward either party

exceptions

1.) when a member of a protected class is a party to an agreement that contradicts a statue intended to protect the specific class

2.) justifiable ignorance of the facts- leaves 1 party unaware of a provision of the agreement that would make it illegal

3.) occurs when a 1 of the parties withdraws from an illegal agreement, must withdraw b4 illegality occurred otherwise can't recover at all