4) Contracts

Question 1

Contracts definition

Answer 1

• A contract is a legally enforceable agreement
  Serves to provide one or more of the parties with a legal remedy if another does not perform on a legal obligation pursuant to the terms of that agreement

Question 2

Express contract

Answer 2

• One in which the parties have expressed the terms in a written or oral agreement

Question 3

Implied contract

Answer 3

• One that is implied by law or the facts and circumstances

Question 4

Voidable contract

Answer 4

• One that can be voided by one of the parties, but not the other

Question 5

Essential elements of a contract

Answer 5

1. Offer/communication
2. Acceptance
3. Consideration

Question 6

Offer/communication

Answer 6

• Was the offer communicated?
• Can only include what was communicated to the offeree
• A party can’t add/change terms after accepted
• Offers can only be accepted by those whom it was directed to

Question 7

Acceptance

Answer 7

• A meeting of the minds – both parties agreeing to same terms: The acceptance must “mirror” the offer – no new terms (counter offer)
• Is the offer and acceptance sufficient so as to be enforceable? Must cover all the essential terms
• Is the offer definite enough? Must be clear enough to understand the time, place and/or subject of the agreement

Question 8

Acceptance (continued)

Answer 8

• Generally, an offeror can revoke an offer any time before acceptance: A revocation is not effective until received
• An offer can expire according to it’s own terms (“This offer is open until…”)
• An offer can expire by operation of law (E.g., the subject of the offer is no longer available, the terms could no longer be applied to the subject)

Question 9

Consideration

Answer 9

• There must be some exchange of value and (usually) detriment
• Differentiates a contract from a mere gift or favor
• Courts generally look for the presence of consideration, not at the adequacy of it (people are free to enter into a bad deal)

Question 10

Defenses

Answer 10

1. Fraud/misrepresentation
2. Illegality (ie. contract violates the AKS would be void)
3. Lack of legal authority
4. Mutual mistake

Question 11

Lack of legal authority (defenses)

Answer 11

• Authority is based on the law of agency
• Express Authority: power of agent expressed to contracting parties by principal
• Implied Authority: Implied by actions or position within principal/organization

Question 12

Oral contracts

Answer 12

• Oral contracts are legally enforceable unless a “Statute of Frauds” applies
• Oral contracts enforceable legally, but difficult to prove

Question 13

Statute of Frauds (oral contracts) requires written agreements, examples include

Answer 13

• Contracts to buy or sell real estate;
• Consumer contracts to purchase goods that cost greater than $500
• Contracts in consideration of marriage (pre-nuptial)

Question 14

Parole with evidence rule

Answer 14

• Written contracts that are unambiguous cannot be modified by outside (parole) testimony to amend modify or even clarify a contract, must be modified by a written amendment signed by the party against whom contract is being enforced

Question 15

A rule of evidence

Answer 15

• Can show modification of a contract by the conduct of the parties
• Does not apply to ambiguous provisions where the intent of the parties is not clear from the face of the contract