lesson 2: intention, certainty, and privity Flashcards
5 contract essentials
consensus, consideration, intent , legality, capacity
consensus is
offer + acceptance
and objectively
consideration
each party must receive something of value
intent
Parties must intend to create a legally binding contract
legality
contract myst be for a legal purpose
capacity
parties must have legal capacity to enter into a contract
letter of intent
Works as a framework with some binding/not binding components
3 elements of lack of certainty
Essential term missing (e.g., price).
Agreement to agree (future negotiation required).
Essential term too vague.
intention
people shouldn’t be legally bound if that wasn’t what they were intended
witnessed and legally signed document is a clear indication of
intention to be legally boudn
privity of contract
only parties to a contract have rights/ obligations under it
third parties generally …
cannot enforce a contract
in a business intent is bound or not bound?
intent to be bound is presumed unless explicitly excluded
in family and social agreements, intention is …
not assumed
courts interpret agreements to avoid …
uncertainty
3 scenarios when certainty becomes an issue
- essential term is missing
- it is an agreement to agree
- essential term is too vague
agreement to agree is not a
contract
courts seem more likely to enforce a case where one party has acted in
bad faith
when the mechanism fails, courts hold that
there is no contract for lack of certainty or hold for a fair/ reasonable price
courts will not make agreements for people but …
arbitrators can make agreements for parties
2nd kind of uncertainty
vagueness
a signed contract…
binds a party even if unread
parol evidence rule
no external evidence can contradict written terms
written contracts supersede..,
prior discussions
some exceptions to the parol evidence rule:
fruad
misrepresentation
mistake
lack of intent
ambiguity
rectification
collateral agreements
equitable remedy
entire agreement clause
to increase certainty and eliminate most of the exception to the parol evidence rule
privity of contract
third parties cannot sue or be sued on a contract
in order to be a party to the contract,
a promise must have been made to that person and that person must have provided consideration
6 exceptions to privity
agency – agency may bind a principal
trusts – beneficiaries may enforce trust obligations
specific performance – exception in equity
tort law – third parties may sue under negligence
statutory exceptions – insurance and consumer laws may override privity
principled expectation – like limitiation clause, allow third parties to enforce contract
employees can claim protection under ran employers limitation of liability clause if 2 circumstances are met even though they are not parties to the contract:
1.contract must extend benefits to the third party
- third party must act within scope of employment when the loss occurred
2 part test for third party enforcement
- did the contracting parties intend to benefit the third party
- were third party activities contemplated under the contract
third party enforcement only can be used …
defensively not offensively
contracts for the benefit of third parties may be enforceable in…
equity
