Contract law

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  • Contract law

    1. 1. PowerPoint Slides to Accompany ESSENTIALS OF BUSINESS AND ONLINE COMMERCE LAW 1st Edition by Henry R. Cheeseman Chapter 7 Chapter 7 Contracts: Classification, Contracts: Classification, Agreement, and Consideration Agreement, and ConsiderationSlides developed byLes Wiletzky Copyright © 2006 by Pearson Prentice-Hall. All rights reserved
    2. 2. Introduction Contracts are the basis of many of our daily activities They provide the means for individuals and businesses to sell and otherwise transfer property, services, and other rights Without enforceable contracts, commerce would collapseCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 2
    3. 3. Definition of a Contract A contract is an agreement that is enforceable by a court of law or equity If one party fails to perform as promised, the other party can use the court system to enforce the contract and recover damages or other remedyCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 3
    4. 4. Parties to a Contract Offeror – The party who makes an offer to enter into a Offeror – The party who makes an offer to enter into a contract contract Offeree – The party to whom an offer to enter into a contract is Offeree – The party to whom an offer to enter into a contract is made made Offer Offeror Offeree Acceptance Offeror makes an Offeree has the power offer to the offeree to accept the offer and create a contractCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 4
    5. 5. Elements of a Contract 1. Agreement 2. Consideration 3. Contractual 4. Lawful Object CapacityCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 5
    6. 6. Sources of Contract Law1. The Common Law of Contracts2. The Uniform Commercial Code3. The Restatement of the Law of Contracts4. Uniform Computer Information Transactions Act (UCITA)Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 6
    7. 7. Classifications of Contracts:Formation (1 of 2)1. Bilateral contract – a promise for a promise2. Unilateral contract – A promise for an act3. Express contract – A contract expressed in oral or written words4. Implied-in-fact contract – A contract inferred from the conduct of the partiesCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 7
    8. 8. Classifications of Contracts:Formation (2 of 2)5. Quasi-contract – A contract implied by law to prevent unjust enrichment6. Formal contract – A contract that requires a special form or method of creation7. Informal contract – A contract that requires no special form or mode of creationCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 8
    9. 9. Classifications of Contracts:Enforceability1. Valid contract – A contract that meets all of the essential elements to establish a contract2. Void contract – No contract exists3. Voidable contract – A party has the option of voiding or enforcing the contract4. Unenforceable contract – A contract that cannot be enforced because of a legal defenseCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 9
    10. 10. Classifications of Contracts:Performance1. Executed contract – A contract that is fully performed on both sides2. Executory contract – A contract that is not fully performed by one or both partiesCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 10
    11. 11. Agreement Agreement – the manifestation by two or more persons of the substance of a contract It requires an offer and an acceptanceCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 11
    12. 12. Offer The manifestation of willingness to enter into a bargain, so as to justify another person in understanding that his assent to that bargain is invited and will conclude it [Section 24 of the Restatement (Second) of Contracts]Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 12
    13. 13. Termination of an Offer1.1. Revocation of the offer by the offeror Revocation of the offer by the offeror2.2. Rejection of the offer by the offeree Rejection of the offer by the offeree3.3. Counteroffer by the offeree Counteroffer by the offeree4.4. Destruction of the subject matter Destruction of the subject matter5.5. Death or incompetence of the offeror or Death or incompetence of the offeror or offeree offeree6.6. Supervening illegality Supervening illegality7.7. Lapse of time Lapse of timeCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 13
    14. 14. Option Contracts An offeree can prevent the offeror from revoking his or her offer by paying the offeror compensation to keep the offer open for an agreed-upon period of time This payment is called an option contract The offeror agrees not to sell the property to anyone but the offeree during the option periodCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 14
    15. 15. Acceptance A manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts [Section 50 of the Restatement (Second) of Contracts] The oferee’s acceptance must be unequivocal  The mirror image ruleCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 15
    16. 16. Time and Mode of Acceptance (1 of 2) Mailbox Rule (Acceptance-Upon-Dispatch Rule)  An acceptance is effective when it is dispatched Proper Dispatch  An acceptance must be properly addressed, packaged, and posted to fall within the mailbox ruleCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 16
    17. 17. Time and Mode of Acceptance (2 of 2) Express Authorization  A stipulation in the offer that says the acceptance must be by a specified means of communication  e.g., registered mail, telegramCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 17
    18. 18. Offer and Acceptance - SummaryCommunication by Offeror Effective WhenOffer Received by offereeRevocation of offer Received by offereeCommunication by Offeree Effective WhenRejection of offer Received by offerorCounteroffer Received by offerorAcceptance of offer Sent by offereeCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 18
    19. 19. Consideration Consideration – something of legal value given in exchange for a promise Consideration must be given before a contract can exist Most common types of consideration:  Tangible payment (e.g., money or property)  Performance of an act (e.g., providing legal services)Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 19
    20. 20. Gift Promise Gift promises (gratuitous promises) are unenforceable because they lack consideration A “completed gift promise” becomes a true gift, which by definition is irrevocableCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 20
    21. 21. Contracts Lacking Consideration (1 of 2) Illegal Consideration  A contract cannot be supported by a promise to refrain from doing an illegal act because that is illegal consideration  Contracts based on illegal consideration are void Moral Obligations  Promises made out of a sense of moral obligation or honor are generally not enforceable on the ground that they lack considerationCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 21
    22. 22. Contracts Lacking Consideration (2 of 2) Preexisting Duty  A promise lacks consideration if a person promises to perform an act or do something he or she is already under an obligation to do  The promise is unenforceable because no new consideration has been given Past Consideration  Past consideration (e.g., prior acts) will not support a new contract  New consideration must be givenCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 22
    23. 23. The United Nations Convention on Contractsfor the International Sale of Goods (CISG) Applies to contracts for the international sale of goods  i.e., the buyer and seller must have their places of business in different countries Additionally, either  both of the nations must be parties to the convention, or  the contract specifies that the CISG controlsCopyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 23

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