Chapter 11: Nature And Classes Of Contracts Flashcards
Contract
A binding agreement based on the genuine assent of the parties, made for a lawful object, between competent parties, in the form required by law, and generally supported by consideration.
Creates an obligation / duty
Cannot impose a duty on anyone who is not party to it
Enforceable obligations that have been voluntarily assumed
Elements of a contract
- An agreement
- Between competent parties
- Based on the genuine assent of the parties
- That is supported by consideration
- Made for a lawful objective
- Made in the form required by law (if any)
Parties to a contract
Promisor (person who makes a promise) &
Promisee (person to whom a promise is made)
Or: if promise is binding (imposes a duty/ obligation)
Obligor (promisor) &
Obligee (promisee who can claim the benefit of the obligation)
Parties “stand in privity with each other”
May be more than two sides to a contract (credit cards contract between card company, card holder and sellers)
Privity
Succession or chain of relationship to the same thing or right, such as privity or contract, privity of estate, privity of possession
Privity of contract
Relationship between a promisor and the prpmisee
How a contract arises
When one person (the offeror) makes an offer and the person to whom the offer was made (the offeree) accepts
If either side is lacking there is no contract
Intent in contracts
Parties must have intent to enter into a binding agreement
Freedom of contract
Law does not require contracts to be fair, kind, reasonable or equitable
Classes of contracts
Formal vs informal Express vs implied Valid contracts, voidable contracts and void agreements Executed and executory contracts Bilateral and unilateral Fixed cost vs cost plus Quasi contracts
Formal contracts
Written contracts or agreements whose formality signifies the parties intention to abide by the terms
Include:
Contracts under seal
Contracts of record (have been entered before a court of record)
Negotiable instruments
Contract under seal
Contract executed by affixing a seal or making an impression on the paper or on some adhering substance such as wax attached to the document
Recognizance
Obligation entered into before a court to do some act such as appear at a later date for a hearing.
Aka contract of record
Informal contracts
All non-formal contracts, oral or written
Enforceable because they represent an agreement
Express contracts
Type of simple contract
Agreement of the parties manifested by their words, spoken or written
Implied contracts
Aka contract implied in fact
Type of simple contract expressed by conduct or deduced from the facts
(Offer and acceptance still occur)
Cannot arise when there is an existing contract on the same subject
To prevail on a cause of action for breach of an implied contracts
Plaintiff must show
- they conditioned the submission of their offering on an obligation to pay for said offering
- defendant’s accepted offering
- defendant’s made use of offering
Valid contracts
An agreement that is binding and enforceable
Voidable contract
An agreement that is otherwise biding and enforceable but may be rejected at the option of one of the parties as a result of specific circumstances
(Someone forced to sign an agreement)
Void agreements
An agreement that cannot be inforced
Executed contract
An agreement that has been completely performed. (Fulfilled)
May be executed immediately
Executory contracts
An agreement by which something remains to be done by one or both parties
Bilateral contract
Agreement under which one promise is given in exchange for another
(Offeror extends a promise and asks for a promise in return and offeree accepts by making that promise)
Unilateral contract
Contract under which only one party makes a promise
(Offeror promises to do/pay something only when offeree does an act)
Rewards, contests, employee manuals.
Offeree accepts by performing the act or task
Option contract
Contract to hold an offer to make a contract open for a fixed period of time
One party has an absolute right to enter into the later contract, if option is exercised second party is obliged to comply
Eventually expires
Right of first refusal
Right of a party to meet the terms of a proposed contracted before it is executed, such as a real estate purchase agreement
Imposes the duty to make the first offer to the party with the right of first refusal
Cost-plus contract
Contractor due payment for all costs actually spent on a project plus a stayed percentage as contractor’s profit
More common for home building projects
Fixed-price contract
The contractor is due payment of the total amount stated in the contract which reflects all costs and profit (or loss) for the project
Based on contractors estimates
Goes v. Vogler
Contract drawn up as both cost plus and fixed price
- homeowners failed to make timely payments b/c they say it was fixed price contract requiring written change orders
- contractor says it’s a cost plus contract and mutual conduct waived change orders
Original judgement for contractor (Shelton), homeowners (Vogler) appealed
Final judgement for contractor- contract stated it was cost plus and the language was consistent with a cost plus not a fixed price contract
Aon Risk services inc. vs. meadors
- risk services company sent out a memo describing a bonus plan for employees who fulfill certain requirements
- employee (Meadors) does requirement and doesn’t recive bonus
- company says memo was not an offer
- court decides for Meadors
“Unilateral contract is composted of an offer that invites acceptance in the form of actual performance.”
Memo was sufficiently definite to constitute an offer
Quasi contracts
Court-imposed obligation to prevent unjust enrichment in the absence ot a contract
Not about enforcing original intentions of the parties
When a person/enterprise receives benefit (even in absence of promise to pay) court may impose obligation to pay for the reasonable value of the benefit
About achieving justice where law does not cover
Requires:
- benefit conferred on defendant
- defendant’s knowledge of benefit
- finding that it would be unjust for the defendant to retain benefit without payment
(Burden of proof on plaintiff)
Unjust enrichment claim precluded by the existence of an express contract. It’s about implying law by contract if one existed
Quantum meruit
As much as deserved
An action brought for value of services rendered the defendant when there was no express contract as to the purchase price (when no enforceable contract exists)
Restitution damage
PIC Realty Corp v. Southfield farms inc
PIC leased farmland to Southfield who prepared in for the next year’s planting but never planted because lease expired. Sued PIC for reimbursement for reasonable vale (preparing the land increased it’s value to PIC)
Decision: Southfield entitled to recover reasonable value of benefit conferred to PIC to prevent unjust enrichment of PIC
Sununu vs Philippine Airlines
- Sununu and partner retained by Philippine Airlines to negotiate on their behalf re: aircraft lease contract
- original contract proposal from Sununu not signed but got verbal go ahead to start negotiation
- new contract proposal from airline with different fee signed by Sununu
- airline did not pay for highly successful negotiation result because it was not in line with the contract
- Sununu sued for unjust enrichment
- because there was a contract and the airline was within the terms of the contract court decided for the airline
“When in doubt, write it out”
Extent of recovery in quasi contract
Reasonable value of the benefit conferred on the defendant or fair and reasonable value of the work performed
Alexander v. Lafayette crime stoppers inc.
- dissenting opinion to grant writ: that the Alexander’s are entitled to the rewards offered by the Crime stoppers and related orgs
- reward was offered by Baton Rouge chamber of commerce, Lafayette crime stoppers and baton rouge crime stoppers for information on a serial killer
- Mrs. Alexander had been attacked by someone who was possible the same man and survived and her interview led to a sketch of her attacker
- this sketch helped lead to his arrest and eventually his conviction
- Mrs Alexander didn’t inquire about the reward until after the set expiration date
- when inquired told she was ineligible, so she filed suit
- court found that defendant’s not entitled to the rewards
- dissent based on Louisiana civil code that reward offered to the public is binding on the offeror even if the one who performed the act didn’t know of the offer
- predicated on French doctrine
Lucy v. Zehmer
- over contract for sale of land from Zehmer to Lucy
- contract was signed but Zehmer contends that they were both drunk (himself definitely) and thought it was in jest. Refused $5 to “bind the bargain” and expressed at that time that he had no intention of selling but Lucy insisted the purchase stood
- Lucy states that Zehmer expressed acceptance of the agreement and that they were not impaired by drink
- original ruling that right to specific performance not established and deal did not stand
- must look to outward expression of a person as manifesting intention, not unexpressed intention
- mental assent is not required in formation of a contract
- specific practice is not a matter of absolute or arbitrary right just is addressed to the reasonable and sound discretion of the court
- reversed and remanded for the entry of a decree requiring Zehmer to perform the contract
