Contractual intent & Contract Provisons Flashcards
Contractual Intent Defined
The parties to the contract must actually intend to enter into a contract for the same bargain at the same time; no contract can exist if there is no mutual assent
When determining the contractual intent of an agreement, there are 3 areas of possible concern:
- Fraud
- Duress
- Mistake
Fraud
one party to an agreement tricks a second party into entering the agreement
the 5 elements of contractual fraud are:
i. The misrepresentation
ii. Of a material fact
iii. Made with the intent to deceive and
iv. Relied on by the other party
v. To his or her detriment
misrepresentation
Occurs when the person making the statements does not intend to deceive the other party
Duress
implies some form of force or coercion exercised over one party to the contract in order to induce that party’s promise to contract
physical duress
The most obvious example of duress; it occurs when one party forces the other to enter into the contract by threatening physical harm
Economic duress
When a person is induced to contract for fear of losing some monetary benefit
Mental duress
When a person is coerced to enter into a contract by psychological threats
undue influence
When the mental duress is exercised by someone who is in a CLOSE RELATIONSHIP with the innocent party, it is known as undue influence
Contract of adhesion
- Falls under the category of duress
- It is a contract in which one side has an unfair bargaining position, a position that is so unequal that the other party’s assent is suspect
Mistakes
- occurs when one (or both) of the parties is under a misconception as to the subject matter of the contract
- With mistakes, there is no intent to deceive or misrepresent, the mistake is due to the honest and innocent belief of the parties
Contractual mistakes are divided into 2 broad categories:
- Mutual Mistake
2. Unilateral Mistake
mutual mistake
- concerns the underlying consideration of the contract itself
- the mistake has a material adverse effect on the parties, and the mistake was of the type that could not be foreseen
Unilateral Mistake
- concerns a situation in which only one party to the contract is mistaken b/c of some typewritten or computation error
differentiate between a mutual mistake and a unilateral mistake
- With a mutual mistake, both parties are intending different subject matter, and so no contract exists b/c there is no meeting of the minds
- With a unilateral mistake, only one party to the contract is mistaken, and the contract can be enforced by the innocent party (the one who did not cause the error)
The Statue of Frauds (6)
- Contracts for an interest in real estate
- Contracts in consideration of marriage
- Contracts that are not to be performed within one year
- Guarantees
- Contracts for the sale of goods valued over a specified amount
- Executor’s promises to pay a decedent’s debts
guarantee
a promise to answer for the debts of another; b/c there is , in fact, no consideration for this promise, it must be in writing to be enforceable
The Statute of Frauds is concerned with the _____ of a contractual agreement, not with the ______ of its terms.
- enforceability
- validity
Regardless of the statute, if the parties have _______ or made a ________ on the performance, the contract is taken out of the statute
Regardless of the statute, if the parties have performed or made a substantial beginning on the performance, the contract is taken out of the statute
Covenant
- an unconditional, absolute promise to perform
- if the party fails to fulfill his contractual covenant, it is deemed to be a breach, or violation, of the entire contract per se
Condition
- an agreement with respect to when the promises are to be performed
- this is a timing element for performance of the covenant
Conditions are categorized by WHEN they create, or extinguish, the duty to perform the covenant; there are 3 categories:
- Conditions precedent
- Conditions subsequent
- Conditions concurrent
Conditions are categorized not only by their timing element, but also by HOW the parties have arrived at them; there are 3 categories:
- Express conditions
- Implied-in-fact conditions
- Implied-in-law conditions
Conditions precedent:
a condition that must occur before the contractual promise becomes operative and enforceable
Conditions Subsequent:
a condition that extinguishes a previous absolute duty to perform; this type of condition relieves the parties of their contractual obligations without being in breach of contract (ex. returning a purchased shirt)
Conditions Concurrent:
the most typical type of condition; it occurs when the mutual performances of the parties are capable of simultaneous execution, and the parties expect the promise and the performance to occur at the same time
Express conditions:
a condition that has been specifically manifested in so many words by the parties themselves (written or oral)
Implied-in-Fact conditions:
comes about out of necessity; it is what the parties would, in good faith, expect from each other
Implied-in-Law Conditions:
aka a constructive condition, it is a condition that the law imposes in the interest of fairness
- this arises in situations where the parties have not specifically agreed to any definite time element, its purpose is to give each party to the agreement the same amount of time in which to perform
There are 3 general rules with respect to constructive conditions:
- When one party’s performance requires time to complete, the other side may take the same amount of time
- When a date is set for one party’s performance, the other party is expected to perform on that date as well
- When the performances can be simultaneous, they will be simultaneous
Rules of construction
guidelines that the courts use to interpret all contractual provisions; it attempts to uphold contracts as valid and to give interpretation to the presumptive intent of the contracting parties
There are 4 primary rules of construction with respect to analyzing the validity of contractual provisions
- Lengthy communications are viewed as a whole, and any inconsistent words are discarded
- Contracts are to interpreted according to business custom and usage
- Words are to be construed according to their ordinary meaning
- If there is an inconsistency with words that are printed, typed, or handwritten, handwriting prevails over typing, and typing prevails over mechanical printing
Parol evidence rule
created to prevent parties from attempting to change the provisions of a written agreement by offering oral evidence to dispute the terms of a contract
There are 4 exceptions to the parol evidence rule that permit a court to accept oral testimony in interpreting (although they are called “exceptions” to the rule, they are actually in fact NOT; oral evidence here is NOT being used to vary the terms of the writing, but to show something outside the writing that changes the meaning of the contract):
- First exception – involves showing a failure of consideration; here the contract provision is not being question, but the fact that the consideration was not what was promised in the writing
- Second exception – permits a party to show that the contract was induced by fraud, duress, or mistake
- Third exception – permits oral testimony to prove the existence of a collateral oral agreement; oral contract is being proved; the purpose of the exception is to permit both contracts to be considered
- Fourth exception – permits oral testimony to explain ambiguities in a written contract
