LS 3323

Chapter 14

Elements of a Valid Offer

1. Intent to Make a Deal: The person making the offer (offeror) has to show they really want to make a deal.

2. Clear Terms: The offer must clearly explain what is being offered, so both sides know what they’re agreeing to.

3. Communication: The offer has to be shared with the person receiving it (offeree), so they know about it.

Ways an Offer Can End

1. Taking It Back: The person who made the offer can cancel it before the other person accepts it.

2. Saying No or Changing It: If the person receiving the offer says no or suggests changes, the original offer is no longer valid.

3. Death or Being Unable to Act: If the person who made the offer dies or can’t act, the offer ends.

4. Destruction or Illegal Activity: If what is being offered gets destroyed or becomes illegal, the offer is canceled.

5. Time Runs Out: If the offer has a time limit and that time passes, the offer is no longer good.

6. Conditions Not Met: If the offer had certain conditions and they aren’t met, the offer ends.

The Acceptance

• Agreeing to the Offer: The person receiving the offer must clearly agree to the deal and its terms.

• Telling the Other Person: They have to let the person who made the offer know they accept, either by speaking, writing, or taking action.

Mirror Image Rule

• When someone accepts an offer, their acceptance must exactly match the terms of the offer.

• If the person accepting tries to change any part of the offer, it’s not an acceptance but a counteroffer.

Example: If someone offers to sell you a bike for $100, and you say, "I’ll buy it for $90," you didn’t accept the original offer. You made a counteroffer instead.

Mailbox Rule

• When someone accepts an offer by mailing their acceptance, the acceptance is considered valid as soon as it’s sent, not when the other person receives it.

Example: If you mail a letter accepting an offer on Monday, even if the person gets the letter on Wednesday, the deal became valid when you mailed it on Monday.

Chapter 15

What is Consideration?

• Consideration is something valuable that both people in a deal give to each other. It’s like both sides trading something.

Simple Rules of Consideration

1. You need to trade something: For a promise to be real, both people need to give or promise something.

2. Exception (Promissory Estoppel): If one person makes a promise and the other person depends on it, the promise might still count, even if nothing was traded, to prevent unfairness.

3. Courts don’t care if it’s a good deal: As long as something is traded on both sides, it doesn’t matter if one person gives more or less.

4. Fake promises don’t work: If the promise doesn’t really commit anyone to do anything, it doesn’t count.

5. Past actions don’t count: Promising something because of something that already happened doesn’t count. The promise has to be for something in the future.

6. Doing something you already have to do doesn’t count: If you’re already required to do something, promising to do it again doesn’t count.

Paying Part of a Debt

• No argument about debt (Liquidated Debt): Everyone agrees money is owed and how much.

• Argument about debt (Unliquidated Debt): There’s a disagreement about whether money is owed or how much.

Settling a Debt Disagreement (Accord and Satisfaction)

To fix a debt disagreement:

1. There’s a disagreement: The people don’t agree on the amount or if the debt is real.

2. They make a deal: The person owed money agrees to take less.

3. Payment happens: The person paying gives the agreed amount, and the problem is solved.

o prove promissory estoppel (when consideration is not present), the following elements are usually required:

1. A Clear Promise: One person makes a definite promise to another.

2. Reliance on the Promise: The person who receives the promise must rely on it. This means they take action or make decisions because they believe the promise will be kept.

3. Reasonable Reliance: It has to be reasonable for the person to rely on the promise. In other words, it makes sense that they trusted the promise.

4. Detriment or Harm: The person relying on the promise must have suffered some kind of loss, harm, or disadvantage because of it.

5. Avoiding Injustice: The court needs to believe that it would be unfair or unjust not to enforce the promise, even though there wasn’t a formal exchange of consideration.

These elements protect someone who relied on a promise, even if a normal contract wasn’t made.

The three elements of accord and satisfaction are:

Disputed Debt or Claim: There must be a disagreement about the debt (either how much is owed or whether any debt is owed).

Agreement (Accord): The parties agree to settle the dispute by accepting a different performance (usually a smaller payment) than originally claimed.

Payment (Satisfaction): The debtor pays the agreed amount, and this resolves or satisfies the debt.

These elements work together to settle a disagreement about what’s owed.

Here are three exceptions to the preexisting duty rule:

1. Unforeseen Circumstances: If something unexpected happens that makes the original duty much harder or more expensive to perform, a new promise to pay more can be enforced, even if it involves doing the same thing. This exception allows adjustments when the situation has changed in a way no one could have predicted.

2. Mutual Agreement to Change the Contract: If both parties agree to change the terms of the original contract, and each side agrees to give something new or different, the preexisting duty rule doesn’t apply. This creates a new contract with new obligations.

3. Additional Work or Promise: If one party agrees to do something extra or beyond what was in the original agreement, the new promise is valid, and the preexisting duty rule doesn’t apply. This exception recognizes extra effort or additional services.

These exceptions allow for flexibility when the original contract needs to change or when more effort is required.

Chapter 16

Understanding Contracts

1. Capacity to Enter Contracts

• Full Capacity: People who are over the age of majority (usually 18 years old) can make binding contracts. This means they can create agreements that the law will enforce.

• Limited Capacity: Some people have a limited ability to enter contracts, which means they can make agreements but can cancel them later (these are called voidable contracts). This includes:

  • Minors: People under 18 years old.

  • Mentally Incapacitated: Someone who cannot understand what a contract means because of a mental health issue.

  • Intoxicated Persons: Someone who is drunk or under the influence of drugs at the time of the agreement.

• No Capacity: Certain people cannot enter contracts at all. This includes:

  • Insane Persons: Those who have been legally declared insane.

  • Habitual Drunkards: Those who have been declared as habitual drinkers by a court.

  • People with Legal Guardians: If someone has a guardian assigned by the court to handle their affairs, they cannot enter contracts on their own.

2. Legality of Contracts

• Necessaries: If a person with limited capacity makes a contract for things they need, like food, clothing, or shelter, they can't completely cancel that contract. They have to pay for what they got at a fair price.

• Valid Contracts: A contract must have a legal purpose. If it involves illegal activities or goes against public policy, it is not valid and cannot be enforced.

• Partly Legal Contracts: If a contract has both legal and illegal parts:

  • If the illegal part can be separated from the legal part, the legal part will still be enforceable.

  • If the illegal part is essential to the contract, the whole contract is void (not valid).

Key Terms to Remember

• Binding Contract: An agreement that is legally enforceable.

• Voidable Contract: An agreement that can be canceled by one party.

• Necessaries: Essential items like food and clothing.

• Legal Object: The purpose of a contract must be lawful.

1. Age of Majority: Great Britain vs. United States

Answer: In the United States, the age of majority is usually 18 years old. This means that when someone turns 18, they are legally considered an adult and can make their own decisions, like signing contracts, voting, and drinking alcohol (though the drinking age is 21 in the U.S.).

In Great Britain, the age of majority is also 18. So, both countries have the same age when a person is legally considered an adult. However, there might be different laws about specific activities. For example, the age at which you can buy certain things, like alcohol or tobacco, can differ.

2. Obligations of a Minor Who Disaffirms a Contract

Answer: When a minor (someone under the age of 18) decides to disaffirm (cancel) a contract, they must usually return any items or money they received from that contract if they still have them. For example, if a minor bought a bike using a contract and then decided to cancel it, they would need to give the bike back. However, if the minor has already used or damaged the item, they might not have to return it in perfect condition.

3. Contracts That Cannot Be Disaffirmed by Minors

Answer: Some contracts cannot be disaffirmed by minors, such as those for:

• Necessaries: Items like food and clothing.

• Educational Loans: Money borrowed for school.

• Employment Contracts: Agreements for jobs that the minor is qualified for.

Policy Reasons for These Exceptions:

• Necessaries: Minors need basic items to live, so they should be responsible for paying for them to ensure they can get what they need.

• Educational Loans: Education is important for the future, so it’s fair to expect minors to honor loans for their education.

• Employment Contracts: If minors work, they should follow through with their agreements so they can gain experience and earn money.

Argument for Additional Contracts: You could argue that contracts for things like sports or extracurricular activities should also not be disaffirmed. These experiences can be important for a minor’s development, and it’s essential for them to follow through on those commitments.

4. Validity of Contracts with a "Crazy" Person

Answer: If all you know about a man is that his neighbors think he is crazy, you can’t tell if the contract he made was valid (enforceable), voidable (can be canceled), or void (not enforceable at all). This is because just thinking someone is crazy doesn’t mean they are legally declared insane.

• A valid contract means the person understood what they were agreeing to.

• A void contract means the person couldn’t understand it at all.

• A voidable contract means the person might have been confused but can still cancel it.

You need more information about the man’s mental state at the time he signed the contract to determine its validity.

5. Factors for Legal or Illegal Covenants Not to Compete

Answer: A covenant not to compete (also called a non-compete agreement) is a promise not to work for a competitor or start a similar business after leaving a job. The legality of these agreements can depend on several factors:

• Reasonableness: It must not be too long in time or too broad in area. For example, saying someone can’t work in the whole country for ten years is usually not fair.

• Protection of Business Interests: It must protect the legitimate interests of the business, like trade secrets or special training.

• Impact on the Employee: It shouldn’t unfairly prevent someone from earning a living.

6. Relationship Between Restraint of Trade and Unconscionable Contracts

Answer: Contracts in restraint of trade are agreements that limit someone’s ability to do business or work in their field. These can be illegal if they are too restrictive.

Unconscionable Contracts are agreements that are so unfair or one-sided that they shock the conscience. Both concepts deal with fairness. If a contract restricts someone’s ability to work in an unfair way, it can be both a restraint of trade and unconscionable. For example, if a company makes an employee sign a contract that prevents them from working anywhere in their industry for many years, it might be both illegal and unfair.

Chapter 17

Understanding Legal Assent in Contracts

1. What is Legal Assent?

• Legal Assent means that both parties in a contract genuinely agree to the terms. If this assent is not genuine or legal, the contract can be voidable, which means it can be canceled by one of the parties.

2. Types of Issues Affecting Legal Assent

Several things can affect whether legal assent is genuine. Here are the main ones:

• Mistake

  • A mistake is when one or both parties have an incorrect belief about something important in the contract. There are two types:

    • Unilateral Mistake: Only one party is mistaken about a key fact. Usually, this does not allow that party to cancel the contract unless the other party knew about the mistake.

    • Mutual Mistake: Both parties are mistaken about an important fact. In this case, either party can cancel the contract because there wasn’t a real agreement on what the contract was about.

• Misrepresentation

  • This happens when one party intentionally lies about an important fact in the contract.

  • There are two types:

    • Innocent Misrepresentation: The person making the false statement believes it is true. The other party can cancel the contract.

    • Fraudulent Misrepresentation: The person knows they are lying and tries to trick the other party. If the misled party can show they relied on this false information, they can cancel the contract too.

• Undue Influence

  • This occurs when one person takes advantage of a special relationship (like a parent and child or a lawyer and client) to persuade the other person to agree to the contract. The dominant party might pressure the other into making a choice that isn’t truly free.

• Duress

  • Duress happens when one party threatens the other to force them into agreeing to a contract. For example, if someone says, “Sign this contract or else I’ll hurt you,” that’s duress. Since the person is being coerced, their agreement isn’t considered legal assent. To cancel the contract, the threatened party must prove they had no other choice but to agree.

Summary of Key Terms

• Voidable Contract: A contract that can be canceled by one of the parties.

• Unilateral Mistake: One party is mistaken.

• Mutual Mistake: Both parties are mistaken.

• Misrepresentation: A false statement made to deceive someone.

• Innocent Misrepresentation: A false statement made without knowing it’s false.

• Fraudulent Misrepresentation: A false statement made knowingly to deceive.

• Undue Influence: Taking advantage of a special relationship to influence someone’s decision.

• Duress: Forcing someone to agree to a contract through threats.

 Understanding Mistakes, Misrepresentation, Duress, and Undue Influence in Contracts

1. Unilateral Mistake vs. Mutual Mistake

• Unilateral Mistake: This is when only one person in a contract is mistaken about an important fact. For example, if you think you are buying a red car but the seller knows it’s actually blue, that's a unilateral mistake.

• Mutual Mistake: This is when both parties are mistaken about the same important fact in the contract. For example, if both you and the seller think the car is red when it’s actually blue, that’s a mutual mistake.

2. When Can a Unilateral Mistake Make a Contract Voidable?

A unilateral mistake can lead to a contract being voidable in specific situations:

• If the person who is mistaken can prove that the other party knew about the mistake and didn’t tell them, the mistaken party may cancel the contract.

• If the mistake is very obvious (like buying a car for $1 when it should cost $1,000), the contract can also be canceled because the other party should have known it was a mistake.

3. Innocent Misrepresentation vs. Fraudulent Misrepresentation

• Innocent Misrepresentation: This occurs when someone makes a false statement but believes it to be true. For instance, if a seller says, “This car has never been in an accident” because they genuinely think it hasn’t, but it actually has, that’s innocent misrepresentation. The buyer can cancel the contract because they were misled.

• Fraudulent Misrepresentation: This happens when someone makes a false statement knowing it’s false or with reckless disregard for whether it’s true or false. For example, if a seller knows the car has been in an accident but lies to the buyer to sell it for more money, that’s fraudulent misrepresentation. The buyer can cancel the contract because they were deceived.

4. Nondisclosure as Misrepresentation

• Nondisclosure: This is when someone fails to tell the other party important information that they should have shared. For example, if the seller knows the car has a serious problem but doesn’t mention it, that could be treated as misrepresentation. The buyer could argue they were misled because they didn’t have all the facts needed to make an informed decision.

5. Differences Between Duress and Undue Influence

• Duress: This involves threats or force. If someone is threatened with harm or pressure to get them to agree to a contract, that’s duress. The agreement made under duress is not considered legal because the person was forced into it. For example, “Sign this contract or I will hurt you” is duress.

• Undue Influence: This happens when one person takes advantage of a special relationship to persuade another person to agree to a contract. It’s about using trust and power rather than direct threats. For instance, a parent convincing their child to sign over their inheritance to them could be seen as undue influence because of the trusting relationship. The person influenced might not be making a truly free choice.

Summary of Key Terms

• Unilateral Mistake: Only one person is mistaken about a fact.

• Mutual Mistake: Both parties are mistaken about a fact.

• Voidable Contract: A contract that can be canceled.

• Innocent Misrepresentation: A false statement made without knowing it’s false.

• Fraudulent Misrepresentation: A false statement made knowingly to deceive.

• Nondisclosure: Not telling someone important information.

• Duress: Forcing someone to agree through threats.

• Undue Influence: Persuading someone unfairly through a special relationship.