Chapter 11: Nature And Classes Of Contracts

Question 1

Contract

Answer 1

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

Question 2

Elements of a contract

Answer 2

1. An agreement
2. Between competent parties
3. Based on the genuine assent of the parties
4. That is supported by consideration
5. Made for a lawful objective
6. Made in the form required by law (if any)

Question 3

Parties to a contract

Answer 3

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)

Question 4

Privity

Answer 4

Succession or chain of relationship to the same thing or right, such as privity or contract, privity of estate, privity of possession

Question 5

Privity of contract

Answer 5

Relationship between a promisor and the prpmisee

Question 6

How a contract arises

Answer 6

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

Question 7

Intent in contracts

Answer 7

Parties must have intent to enter into a binding agreement

Question 8

Freedom of contract

Answer 8

Law does not require contracts to be fair, kind, reasonable or equitable

Question 9

Classes of contracts

Answer 9

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

Question 10

Formal contracts

Answer 10

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

Question 11

Contract under seal

Answer 11

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

Question 12

Recognizance

Answer 12

Obligation entered into before a court to do some act such as appear at a later date for a hearing.

Aka contract of record

Question 13

Informal contracts

Answer 13

All non-formal contracts, oral or written

Enforceable because they represent an agreement

Question 14

Express contracts

Answer 14

Type of simple contract

Agreement of the parties manifested by their words, spoken or written

Question 15

Implied contracts

Answer 15

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

Question 16

To prevail on a cause of action for breach of an implied contracts

Answer 16

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

Question 17

Valid contracts

Answer 17

An agreement that is binding and enforceable

Question 18

Voidable contract

Answer 18

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)

Question 19

Void agreements

Answer 19

An agreement that cannot be inforced

Question 20

Executed contract

Answer 20

An agreement that has been completely performed. (Fulfilled)

May be executed immediately

Question 21

Executory contracts

Answer 21

An agreement by which something remains to be done by one or both parties

Question 22

Bilateral contract

Answer 22

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)

Question 23

Unilateral contract

Answer 23

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

Question 24

Option contract

Answer 24

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

Question 25

Right of first refusal

Answer 25

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

Question 26

Cost-plus contract

Answer 26

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

Question 27

Fixed-price contract

Answer 27

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

Question 28

Goes v. Vogler

Answer 28

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

Question 29

Aon Risk services inc. vs. meadors

Answer 29

• 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

Question 30

Quasi contracts

Answer 30

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

Question 31

Quantum meruit

Answer 31

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

Question 32

PIC Realty Corp v. Southfield farms inc

Answer 32

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

Question 33

Sununu vs Philippine Airlines

Answer 33

• 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”

Question 34

Extent of recovery in quasi contract

Answer 34

Reasonable value of the benefit conferred on the defendant or fair and reasonable value of the work performed

Question 35

Alexander v. Lafayette crime stoppers inc.

Answer 35

• 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

Question 36

Lucy v. Zehmer

Answer 36

• 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