mgmt exam 2 - contracts

left off on issues pertaining to the parties to a contract

contract

enforcable agreement between 2 or more parties

• can be

  • 2 corporations

  • 2 partnerships

  • 2 individuals

bilateral contracts

2 or more parties

elements of contract formation

[offer + acceptance] + consideration = contract (K)

• a contract must be for any lawful purpose - otherwise, contract is void

elements of agreement

offer + acceptance

consideration (element of contract)

• the purpose of that offer + acceptance

• money, goods, services

• the subject matter

void

there is no contract if the 3rd element (consideration) is not present

binding

forceable, no excuses

contracts are either ___ or ___

expressed or implied

• NEVER BOTH

types of contracts

• express

• implied

• valid - void - voidable

• executed vs. executory

• quasi contracts

express

a contract stated either verbally or in writing (the parties have expressed their intent verbally or in writitng)

implied

• conduct of parties

• implied by their conduct - NOT implied verbally or in writing

valid

• no one can get out of it

• perfectly lawful, enforceable

• all elements are there

• it’s binding

void

• illegal

• involved a crime

• subject matter is illegal

• the offer & acceptance component (the agreement) is illegal

voidable

• for some reason one or both of the parties can get out of it

• there is something wrong with one or more of the people (intoxication, infancy, incapacity)

every contracts begins ___ and ends ___

executory, executed

executed

• ended

• nothing left to be done

• completed

executory

• any contract that there is something left to be done

  • ex: hasn’t given the cars and keys back yet

quasi contract

• implied by law

• there is no contract but the judges create one anyway

• judge creates a contract to prevent an unfair result and the judge imposes orders

don’t confused quasi contract with implied contract!!

legality

all contracts must be for a lawful purpose

privity

the contract relationship between parties

• means they are tied together “marriage”

• when the contract is done, the privity is gone

“they are in privity” means

they are in a contract

parties to a contract

• offeror vs. offeree

• promisor vs, promisee

• privity of contract

offeror

the person making the offer

offeree

to whom the offer is directed

a contract is

1. expressed OR implied

2. executed OR executory

3. valid OR void OR voidable

offer

the PRESENT intent to enter into a contract

you demonstrate your intent to enter into a contract either

• verbally

• written

• by your conduct

what is NOT an offer?

• an expression of opinion

  • ex: “i think your house is worth…” - NOT an offer

• negotiation

• advertisements

you demonstrate your intent to enter into a contract either

• verbally

• written

• by your conduct

the difference between negotiation and a counter offer

the INTENT to enter a contract

silence

not considered acceptance

an offer comes to an end:

• when the person making the offer cancels it (the offeror) anytime prior to acceptance (REVOCATION)

• if the offeree rejects the offer (termination by action of the offeree (aka NO))

• the offeror can terminate the offer before the agreement anytime they want to

offers…

• expire

• have a time limit on when the offeree can accept an offer

intoxication, insanity, infancy

expiration of offer - paid-for-opition

option contract pg. 241

paid-for-option

the contract to buy time, not the item

termination of offer

• lapse of time (offer made on june 1, on june 2 it automatically expires

• if person dies, the offer dies with them if they die before the offer was accepted

  • if a person dies when there is already a contract, then your family is responsible for carrying out that contract

how an offer ends

an offer can be terminated/cancelled anytime prior to acceptance; aka you can change your mind but only before acceptance because once they accept, you have an agreement

acceptance

unconditional agreement to terms of offer

• YES - NO(rejection)

• counter-offer

silence

IS NOT ACCEPTANCE

counter-offer

• no & new offer

• maybe

• the offer was rejected with a counter offer

there is __ counteroffer after the time limit

NO

• you cannot use a counteroffer to revive an offer, the offer is DEAD

consideration

purpose for the contract

• must have something exchanged between the parties

  • usually money, goods, and/or services (like an employment contract)

    • ex: trading cars (it can involve money, doesn’t have to)

what causes there to be no contract?

• if the element of consideration is not present

• if the subject matter is illegal, there is no contract, it is void

illegal consideration

• past consideration

• pre-existing consideration

(NOT CONSIDERATIONS → takes out the “c” part of a contract → there is no contract)

usury

• illegal, no consideration

• loan sharking

  • loaning money with excessive illegal interest rate (ex: 50% a day)

exception (substitute) for consideration

• charities

• promissory estoppel (detrimental reliance)

promissory estoppel

• moral obligation, not legal

contract capacity

ability to form proper INTENT to enter into a contract (in order to have it binding to all parties)

• understand that a contract is being made and what it’s about

infancy (minors), intoxication, insanity

contract capacity at the time of entering a contract

infancy (minors)

• minors can enter into contracts

• minors can get out of contracts anytime before reaching the age of majority (maturity/adulthood)

• once they turn 18 (or reach the age of maturity), it affirms the contract

• the law presumes that minors can not understand the consequences of entering a contract

intoxication

• if you are intoxicated to a certain extent, the contract is voidable

• if you sober up the next day and still agree to the contract, the contract is affirmed

at the time of entering a contract you…

1. have to know its being made

2. have to know what it’s about (don’t have to understand all the fine print)

• if you don’t understand those 2 points, it is voidable, you can get out of it

• if the subject matter of the contract is illegal, there is no legal consideration & the contract is voidable

dissafermence

cancelling

simply not understanding a contract

can not get you out of it

• you should have someone explain it to you

statute of frauds

• general rule of contract law - oral and written contracts are equally enforcable - “legal”

certain types of contracts, must be in writing

• real estate (land)

• contracts with term longer than 1 year

issues pertaining to the parties to a contract

• mistake

• fraud

• undue influence

• duress

statute of frauds

contracts wether verbal or in writing are equally valid

• it has to be in writing in order to be enforcable (in order to go to court)

what is voidable

• mistake

• something wrong with their head

contract remedies for breach of contract: damages, specific performance, injunction, rescission, no punitive damages permitted

• constitutional issues

• mitigation of damages

• liquidated damages

• impossibility

remedies

something went wrong, what do you want?

recission

• end contract

• non monetary

injuction

• stop it

• court-ordered

restitution

give stuff back

compensatory damages

• compensation

• money

liquidated damages

if something goes wrong, “i’m only responsible for this, you’re only responsible for that”

punitive damages

• punish the wrongdoer

• not allowed in contract law

keyman insurance

each partner ensures each other