NEW Exam 2 Flashcards
Contract
A binding agreement based on the genuine assent of parties made for lawful object. When you form a contract you have to have intent to be bound. It has to be objective intent, which is based on ordinary prudent man. A promise that has consequences if you leave contract.
Objective:
Subjective:
Objective- what is
Subjective- based on personal impression.
Elements To A Contract
¥ *Agreement - made ¥ *Between Competent Parties - with ¥ *Genuine assent (consent) - supported by ¥ *Consideration - for ¥ *Legal Purpose (lawful objective) - in ¥ *Legal form (form required by law)
Privity
the governing relationship between people in a contract “privity on contract”
Formal Contracts
written contracts or agreements whose formality signifies the parties’ intention to abide by the terms
¥ Contracts Under Seal- Stamped wax.
¥ Recognizance Bond- promise or obligation entered into before court to do an act such as come to trial.
¥ Negotiable Instruments – drafts, promissory notes, checks and certificates, that in proper form give special rights as “negotiable commercial paper”
Informal Contracts
can be oral or written. Are enforceable because they represent an agreement between parties
Types of Contracts
¥ *Expressed- 99% of all contracts. It is governed by law (Lex). Contract - law
¥ *Implied in Fact- Not shown by words, written or spoken, but by acts and conducts of parties. Happens when one renders services and indicates payment and other person accepts the benefit of services. Contract - law
¥ *Implied By Law- This is governed by equity. Includes Remedies. Law imposes in where it looked like a contract but was not. Restores parties to the status quo. A part of a contrat is missing but law steps in. Quasi Contract - equity
- Quasi Contract- Court imposed obligation to prevent unjust enrichment in absence of a contract. - Unjust Enrichment- Receive a benefit from another even in absence or promise to pay, court may impose obligation to pay for reasonable value of the benefit. - Quantum Meruit- As much as deserved- an action brought for the value of services rendered even when there was no expressed contract
¥ *Contracts gives rise to damages non breeching party benefit of the bargain
¥ *Equity gives rise to remedies restores the injured parties to status quo ante.
Classifying Validity/Enforceability of a Contract
Valid- everybody has rights, binding and enforceable
Voidable- one person can get out or not get out at option- personalized (not given enough information or the right information) EX: Bought a car whose seller lied about mileage but you got a great deal. You can get your money back, or just keep it.
Void- contract is unenforceable from the beginning (made with elderly person not in mental state to make a contract)
Valid but unenforceable- contracts that are supposed to be in writing but are not
Unilateral Contracts
Promise for an act. Example- 100 dollar reward for finding lost puppy.
Bilateral Contracts
Promise for a promise (most contracts). This is conditioned by the word “if”.
Executory Contract
One party still has something to do. Duties of performance remaining
Executed Contract
All terms of contract have been completed
Option
a big contract supported by a little contract. This is the right to hold a bigger contract.
Right of First Refusal
Found in real estate transactions. Right of a party to meet the terms of a proposed contract before it is executed. If selling a building, seller has to give tenant right to buy the building first.
Agreement
consists of two parts
¥ *Offer
¥ *Acceptance
Offer
Consist of 4 parts condensed into 2 ¥ * Legal 1. Legal Terms (A,B,C) ¥ *Intent (contractual) or ¥ *Definite Terms ¥ *Communicated 2. Communicated
Empowers- “Power of Acceptance” May only be accepted to whom the offer was directed at. Silence generally doesn’t constitute acceptance.
Intent:
Rely on objective intent
To Power to Terminate:
An offer can be revoked at any time before acceptance. The offeror can revoke it even if he promised it would remain open for an amount of time.
Exceptions to Power to Terminate
¥ Option- Promise to keep an offer open for a stated period of time. Contract to refrain from revoking an offer for sum of money.
¥ *Firm Offer- As outlined in Uniform Commercial Code. Applies to merchant’s signed or written offer to buy or sell goods with a maximum of three months on its period of irrevocability.
¥ Merchant’s - someone who usually sells that product
What Terminates a Offer:
¥ Revocation- taking back an offer
¥ Time expires - given a week and not terminated but week has passed
¥ Counter Offer- offering lower amount kills original offer
¥ Rejection- saying no to the offer first, cant go back on offer
¥ Lapse of Time- reasonable range of time for based. Based on products. For example, perishables have a shorter lapse of time.
¥ Destruction of Subject Matter - what is offered changes somehow
¥ Death and Disability -
¥ Subsequent illegality- if the act becomes illegal
¥ War
¥ Bankruptcy
Acceptance
this changes an offer to an agreement.
Terms of acceptance set by offeror, can be anything. Ex. Wearing a pink tutu to the cog.
Acceptance continued
The assent (agreeing to) of the offeree to the terms of the offer
You can specify manner and time of acceptance in your offer.
If not specified- generally common sense dictates.
Acceptance creates a contract! (assuming all other elements are present)
Acceptance cannot change or alter the terms of the offer
Offers are directed toward a person or class of persons
Only the person that it is offered to can accept
If group- one of the people
Must be absolute and unconditional
If offeree changes terms, there is no acceptance
Must mirror the offer
If agree, you are agreeing to the price
Must be clear expression that the offeror agrees to be bound by the terms of the offer
Reward- offer is made to universal person
Is silence acceptance? Sometimes…
History of Performance - milkman, membership/club fees
You have to tell the milkman you are going out of town or you still have to pay for it!
Unordered Goods -
use goods sent to you, agree to buy them
Now– Can always send goods back for free- just write “Return to sender”, do not have to pay for it
The Mailbox Rule
If the offer is in the mail and has been sent, you are still able to change your mind and revoke the offer.
However, an acceptance to the offer becomes official on postage (when it is initially mailed) while revocation of an offer has to be received. If the two cross while in the mail, the offer is still valid. Acceptance wins
Silence as acceptance
Oferee’s silence and failure to act cannot be regarded as an acceptance.
Only have affirmative duty to say no in certain situations where you are contractually agreed to it or have a long pattern and you don’t inform people of change
Capacity and Genuine Assent
Everyone is assumed to have capacity unless it is proven that capacity is lacking or that there is status in capacity.
-Capacity can exist even though a party doesn’t understand every provision of the contract
Capacity
Ability to understand that a contract is being made and to understand its general meaning. Factual and temporary incapacity can make contracts void.