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Contracts: Nature, Classification, Agreement and Consideration

Contracts: Nature, Classification, Agreement and Consideration

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Chapter 7 Chapter 7 Presentation Transcript

  • CHAPTER 7 Contracts: Nature, Classification, Agreement and Consideration
    • What is a contract? What are the four basic elements necessary to the formation of a valid, contract?
    • What are the various types of contracts?
    • What are the requirements of an offer?
    • How can an offer be accepted?
    • What are the elements of consideration?
    Learning Objectives
  • Contracts
    • Function of Contracts
      • Fundamental to business.
      • Creates rights and duties between parties.
      • Provides stability and predictability.
    • Parties: Promisor (makes the promise) and Promisee (accepts the promise).
      • Good faith in commercial agreements.
  • Contracts
    • Definition of a Contract
      • Agreement that can be enforced in court.
      • Formed by two or more parties.
      • Failure to perform results in breach and damages.
    • Objective Theory.
      • Reasonable person standard.
      • Circumstances surrounding contract formation.
  • Requirements of a Contract
    • A valid, enforceable contract includes:
      • Agreement.
      • Consideration.
      • Capacity.
      • Legality.
    • Defenses to formation include:
      • Genuineness of Assent.
      • Form.
  • Types of Contracts
    • Every contract has at least 2 parties: the Offeror (Promisor) and the Offeree (Promisee).
    • Bilateral Contracts.
      • Offeror and Offeree exchange promises to each other.
      • A contract is formed when Offeree promises to perform.
  • Types of Contracts
    • Unilateral Contracts.
      • Offeror wants performance in exchange for his promise.
      • Contract is formed when Offeree performs .
      • Contests and lotteries are examples.
      • Revocation of Offer: modern view is that offer is irrevocable once the Offeree substantially performs.
      • Ardito v. City of Providence (2003).
  • Types of Contracts
    • Express vs. Implied Contracts
      • Express: terms of contract are set forth either in writing or orally.
      • Implied-in-Fact : based on conduct .
        • Plaintiff furnished service or product.
        • Plaintiff expects to be compensated.
        • Defendant had a chance to reject and did not.
      • Implied-in-Law (Quasi Contract).
        • Fictional, created by court to avoid unjust enrichment.
  • Types of Contracts
    • Formal vs. Informal Contracts
      • Formal: require special form or method to be enforceable, e.g., under seal.
      • Informal: all other contracts.
    • Executed vs. Executory Contracts
      • Executed: fully performed by both sides.
      • Executory: at least one of the parties has not performed.
  • Contract Enforceability
    • Valid Contract.
      • Four Elements: Agreement, Consideration, Legal Purposes, Parties have legal capacity.
    • Voidable Contract.
      • Valid contract that is legally defective and can be avoided (rescinded) by one of the parties.
    • Void Contract.
      • No contract at all.
  • Quasi Contracts
    • Implied-in-Law Contracts (Quasi Contract).
      • Fictional, created by court to avoid unjust enrichment.
      • Limitations on Quasi-Contractual Recovery.
  • Agreement: Offer
    • Agreement = Offer and Acceptance.
    • An offer is the Offeror’s promise to perform. An offer requires:
      • Serious, objection intention.
        • Opinions are not offers.
        • Good Intentions are not offers.
        • Preliminary Negotiations are not offers.
        • Agreements to Agree are not offers.
        • Lucy v. Zehmer (1954).
  • Offer
    • An offer requires (continued):
      • Reasonably definite terms.
      • Communication to Offeree.
    • Termination of Offer.
      • By Act of the Parties.
      • Revocation by Offeror (unless irrevocable).
      • Rejection by Offeree (or counteroffer).
      • Operation of Law (destruction, death).
  • Agreement: Acceptance
    • Voluntary act by Offeree that shows assent to terms of original offer.
    • Unequivocal Acceptance: “Mirror Image” Rule.
      • Offeree must unequivocally accept offer.
      • Additional terms may be considered a counteroffer.
    • Acceptance by Silence.
  • Acceptance
    • Communication of Acceptance.
      • Authorized Means of Communication is either express or implied by form of offer (e.g., U.S. mail, fax, email).
      • “Mailbox Rule”: Offeree accepts offer when the acceptance is dispatched to Offeror in the form it was received, unless offer requires a different method (e.g., Fed-Ex, or receipt by Offeror).
  • Termination of Offer
    • Termination of Offer.
      • By Act of the Parties.
      • Revocation by Offeror (unless irrevocable).
      • Rejection by Offeree (or counteroffer).
      • Operation of Law: lapse of time, destruction, death or incompetence, supervening illegality.
  • Acceptance
    • Voluntary act by Offeree that shows assent to terms of original offer.
    • Mirror Image Rule.
      • Offeree must unequivocally accept offer.
      • Additional terms may be considered a counteroffer.
    • Acceptance by Silence.
  • Acceptance
    • Communication of Acceptance.
      • Authorized Means of Communication is either express or implied by form of offer (e.g., U.S. mail, fax, email).
      • “Mailbox Rule”: Offeree accepts offer when the acceptance is dispatched to Offeror in the form it was received, unless offer requires a different method (e.g., Fed-Ex, or receipt by Offeror).
  • Consideration
    • Consideration is value given in return for a promise.
    • Elements:
      • Something of legally sufficient value given in exchange for a promise and
      • That is bargained for between the parties.
    • Seaview Orthopedics v. National Healthcare Resources, Inc. (2004).
  • Consideration
    • Contracts that Lack Consideration:
      • Pre-Existing Duty.
      • Unforeseen Difficulties.
      • Past Consideration.
      • Illusory Promises.
    • Settlement of Claims:
      • Accord and Satisfaction.
      • Release.
      • Covenant Not to Sue.
  • Promissory Estoppel
    • Promissory Estoppel (“detrimental reliance”) doctrine applies when a person relies on the promise of another to her legal detriment.
    • Promisor is “estopped” (precluded) from revoking the promise. There must be:
      • Clear and definite promise with substantial reliance.
      • Justice is served by enforcement of the promise.