Contract Law

Contract

legally binding promise

• Set of promises or mutual promises

• between parties

• are enforceable under the law

provide legal framework for business to function, stability, a solid plan

Sources of Contract Law

1. Common Law (basically contract law)

2. Uniform Commercial Code Article 2 (for sale of goods)

Components of Enforceable Contract

1. Offer

2. Acceptance

3. Consideration

4. Legal Capacity

5. Legal purpose

6. Statute of Frauds (must be written)

Mirror image rule

terms of OFFER = terms of ACCEPTANCE

• parties must agree to the same terms

Components of a Valid Offer (3)

• Offeror must have a willingness to bind to the agreement

• Definite and certain terms must be stated (clear what is being exchanged)

• Communicated directly to offeree

Definiteness of Terms

• identity of parties

• identification of the object/subject matter of the contract (what is being exchanged?)

• Quantity (for sale of goods)

Components of a Valid Acceptance

• acceptance must show intent to be bound

• acceptance must be clearly stated with no doubt (unequivocal)

• acceptance = offer

Freedom of Contract

Freedom to draft, create, and negotiate contract terms without interference from the government

Objective Theory of Contracts

Intent of parties is determined objectively

• what was SAID

• overall CIRCUMSTANCES

• ACTIONS of the parties

Termination of an offer by the offeror

Can be revoked before the offeree accepts—> the moment offeree accepts, it is an automatic binding contract that you can’t get out of

Termination by the offeree

Rejection is allowed by words or by performance—> immediately kills the offer (cannot go back)

NON- offers

• terms that lack definiteness (i’ll sell u “some”)

• future intentions (i plan to sell…)

• opinions (i think this is worth…)

• advertisements (sale at only $5!)

• preliminary negotiations (would you consider selling…)

• invitations to bid (seeking bids for…)

Counteroffers

offeree proposes new terms—> original offer is immediately void/rejected (offeror + offeree now switch roles)

Mailbox Rule

Acceptance is effective when dispatched

Legality

Contract w/ illegal purpose—> VOID

Legal Capacity

Minors—> lack legal capacity (have choice to disaffirm)

lack of capacity—> VOIDABLE

Void vs. Voidable

VOID—> no contract, neither party can enforce

VOIDABLE—> Contract is valid, but one party has option to avoid the contract