CHAPTER 7 Contracts 2 A contract is a legally enforceable ...

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  • 1. CHAPTER 7 Contracts
  • 2.
    • A contract is a legally enforceable promise or set of promises.
    • Agreement . Valid contract requires and offer and acceptance.
      • Offer has a serious intention, with definite terms that is communicated to the offeree.
      • Termination of Offer by Operation of Law or by Action of the Parties.
    Basic Requirements of a Contract
  • 3.
    • Irrevocable Offers.
      • Option Contracts.
      • Detrimental Reliance.
    • Acceptance.
      • Mirror Image Rule.
      • Intent to Be Bound.
      • Acceptance in a Timely Manner.
    Basic Requirements of a Contract
  • 4.
    • Consideration: each party must transfer something of legal value to the other.
      • Adequacy of Consideration?
    • Bilateral and Unilateral Contracts.
      • Bilateral: Promise for a Promise.
      • Unilateral: Promise for an Act/Performance.
    Basic Requirements of a Contract
  • 5.
    • Mutuality of Obligation in Bilateral Contracts.
    • Illusory Promises.
      • Case 7.1 Heye v. American (2003).
    Basic Requirements of a Contract
  • 6.
    • Conditional Promises.
      • Conditions Precedent - occurs prior to performance.
      • Conditions Concurrent - simultaneous performance.
      • Conditions Subsequent - terminates an existing duty to perform.
    Basic Requirements of a Contract
  • 7.
    • Requirements and Output Contracts.
      • Requirement contracts - buyer agrees to buy all its needs from the seller (exclusive contract).
      • Output contracts - buyer agrees to buy all the seller produces (exclusive contract).
    Basic Requirements of a Contract
  • 8. Capacity
    • A person’s ability to understand the nature and effect of an agreement.
    • Contracts with legally incompetent persons are void or voidable (at incompetent party’s option.
  • 9.
    • Other Contracts Contrary to Statute
      • Usury statutes.
      • Illegal contracts.
  • 10.
    • Promise: there must be a promise.
    • Justifiable Reliance : the promise must cause the promisee to take an action that he or she would not otherwise have taken.
    • Foreseeability: the action taken in reliance on the promise must be reasonably foreseeable by the promisor.
    Promissory Estoppel (Ethical Safety Net)
  • 11. Promissory Estoppel
    • Injustice: a promise that has been reasonably relied on will give rise to relief only if the failure to do so would cause injustice.
    • Case 7.2 Pop’s Cones, Inc. v. Resorts International Hotel, Inc. (1998).
  • 12. Precontractual Liability
    • Pre-Contractual Liability based on:
      • Misrepresentation.
      • Promissory Estoppel
      • Restitution.
      • Case 7.3 Copeland v. Baskin Robbins (2002).
  • 13. Unconscionability
    • Oppressive or fundamentally unfair.
      • Procedural Element.
      • Substantive Element.
    • Releases .
    • Case 7.4 Atkins v. Swimwest Family Fitness (2005).
  • 14.
    • Fraud.
      • Fraud in the Factum.
      • Fraud in the Inducement.
    •   Duress.
    •   Ambiguity.
    Genuineness of Assent
  • 15. Genuineness of Assent
    • Mistakes of Fact.
      • Substantiality of the Mistake.
      • Allocation of the Risks.
      • Timing.
      • Case 7.5 Honda v. Board of Trustees (2005).
    •   Mistake of Judgment (or Value).
      • Usually not a defense.
  • 16.
    • Certain oral agreements must be in writing to be enforceable:
      • Transfer of any interest in real property.
      • Promise to pay the debt of another.
      • An agreement which cannot be performed within one year.
      • Prenuptial agreements.
    Statute of Frauds
  • 17.
    • When the parties have a written agreement which the parties intended be the complete agreement, parol ( oral ) evidence of prior or contemporaneous communications will not be permitted to alter the terms of the contract, unless the language is ambiguous.
    The Parol Evidence Rule
  • 18.
    • Impossibility : an event causes obligations to be discharged.
    • Impracticality : performance is possible but commercially impractical.
    Changed Circumstances
  • 19.
    • Discharge: when both parties have fully performed their obligations toward one another.
    • Material Breach: one party fails to perform a contract according to its essential terms.
    • Anticipatory Repudiation: one party knows before performance is due that the other party will breach the contract.
    Discharge of Contract
  • 20.
    • Every contract contains an implied covenant of good faith and fair dealing in its performance. This implied covenant imposes on each party a duty not to do anything that will deprive the other party of the benefits of the agreement.
    Good Faith and Fair Dealing
  • 21.
    • Types of Damages:
      • Expectation Damages.
      • Consequential Damages.
      • Restitution and Quantum Meriut.
        • Case 7.6 Glendale Federal Bank FSB v. United States (2001).
  • 22. Remedies
    • Mitigation of Damages.
    • Liquidated Damages vs. Penalties.
    • Specific Performance and Injunctive Relief.
      • Allowed when the goods are unique, the subject matter is real property, or the amount of loss cannot be calculated fairly.
  • 23.
    • Good Faith and Fair Dealing.
      • Traditional U.S. Rule: No liability (This is changing).
      • European Rule: Actions may lead to liability.
    Precontractual Liability