contract law Flashcards
purpose of contract law
to make businesses matters more predictable
elements of a contract
- agreement
- consideration
- lawful purpose
- capacity
what is an agreement?
requires an offer by the offerer and acceptance by the offeree
what is consideration?
a bargain where both parties exchange something of value (item for money)
what is lawful purpose
the contract must be for a legal activity
what is capacity
both parties must be adults (+18) of sound mind
what is an offer?
a statement proposing specific terms or specific steps to be taken to create a contract upon acceptance. the offeree must do something in return
case for offer/contract
carlill vs. carbolic smokeball
explain carlill vs. carbolic smokeball
- carbolic smoke advertised that they would pay 100 dollars to anyone who used it’s smokeball meds for one week and still got influenza
- mrs Carlill purchased the medicine and used it as instructed and still caught the influenza
- she sued the company to win the $100.
the issue: was it a binding offer or invitation to treat
decision: the court ruled in favor of Mrs Carlill, stating that the ad constituted a unilateral offer that became binding when the conditions were met
what is invitation to treat
the steps taken right before making an offer
case for invitation to treat
Fisher vs bell
explain fisher vs bell
- shopkeeper bell displayed a flick knife in his shop window with a sale tag
- under the “restiction of offensive weapon,” it was illegal to “offer for sale offensive weapons
3.the shopkeeper bell was charged with offering the knife for sale
issue: was displaying the knife an offer for sale or invitation to treat
decision: the court ruled that the display was just an invitation to treat
what is acceptance?
the offeree must say or do something to accept
what is the mirror image rule? (common law)
- requires acceptance to be on exact terms of the offer
- if offeror demands acceptance in a specific way, the offeree must follow precisely
what is the mailbox rule (time of acceptance)?
- acceptance is effective upon dispatch
- once email, message, or call is sent, that means the acceptance is affective.
the agreement is done once email is sent, not when it’s recieved
what makes a contract binding?
if it’s for a lawful purpose
illegal contracts
- wagers
- licensing statutes
- usury
what are wagers?
when 2 parties bet on the outcome of an uncertain event, this is illegal unless authorized by the law
what are licensing statutes?
any contract made by an unlicensed worker is unenforceable.
what is usury?
charging an interest rate on a loan that exceeds the legal maximum set by law.
what is an unconscionable contract?
a contract that court refuses to enforce because of unfairness to prevent injustice
factors of unconscionable contract
- oppression
- surprise
what is oppression?
when one party uses it’s power to force a contract on the weaker party
example of oppression
your boss forces you to sell them your car at a low price. The boss used their power on you to create a contract, which makes it valid in court
what is surprise?
the weaker party did not fully understand the consequences of an agreement
example of surprise
you rent an apartment and sign the agreement. the landlord doesn’t mention any extra fees, but you receive a bill for 1000 dollars for using the gym. this was not mentioned when signing the agreement
what is misrepresentation?
when one party makes a false statement, that makes the other party enter the agreement/contract
types of misrepresentation
- innocent misrepresentation
- fraudulent misrepresentation
what is innocent misrepresentation?
a false statement is made honestly, without intention to decieve
example of innocent misrepresentation
a seller sells a used car, and while believing that it has never been in an accident, the buyer finds out it has been repaired after a crash. the seller didn’t know as the previous owner hadn’t mentioned it
what is fraudulent misrepresentation?
the owner knew the statement was false and lied to get the buyer to enter the contract
how to prove misrepresentation
- prove a false statement was made
- prove how the false statement is fraudulent
- prove the injured person relied on the false statement
case for misrepresentation
bisset vs wilkinson
explain bisset vs wilkinson
- landowner bisset sold land in new zealand to a buyer, wilkinson
- during negotiation, bisset mentioned that, in his opinion, the land could support 2000 sheep
- wilkinson later discovered that the land wasn’t big enough for all his sheep, so he wanted to rescind the contract
issue: Was bisset’s estimate about the land capacity a misrep? or just his opinion
decision: the court decided that bisset estimate was an opinion, not fraudulent misrepresentation, since he didn’t have actual expertise or factual information to make this estimate.
what is mistake?
when one or both parties enter into a contract under a misunderstanding
types of mistakes
- bilateral mistake
- unilateral mistake
what is a bilateral mistake?
both parties share the same mistake about a fact in the contract
example of bilateral mistake
a buyer and seller agree on the sale of a painting, thinking it’s an original later they discover it’s a replica. the contract may be voidable
what is a unilateral mistake?
only one party is mistaken about a fact. the contract may be voidable if the non-mistaken party knew and took advantage
example of unilateral mistake
If a contractor submits a bid with a pricing error, the client knew it was unusually low and took advantage
example of case for mistake
Lewis V Avery
explain the case Lewis V Avery
- Lewis was selling his car
- A fraud claimed to be a famous actor and presented a studio pass as identification
- lewis accepted a check for the car
- the check was later denied; the fraud sold the car and sold it to Averay, an innocent third party
issue: was the contract between lewis and the fraud void for mistaken identity, meaning avery could not take ownership of the car?
decision: the court ruled the contract as voidable. since lewis willingly handed over the car, the fraud had authority and ownership to pass the car to avery. so Avery retained ownership of the car
