CHAPTER 7 Contracts
<ul><li>A contract is a legally enforceable promise or set of promises. </li></ul><ul><li>Agreement .  Valid contract requ...
<ul><li>Irrevocable Offers. </li></ul><ul><ul><li>Option Contracts. </li></ul></ul><ul><ul><li>Detrimental Reliance. </li>...
<ul><li>Consideration:  each party must transfer something of legal value to the other. </li></ul><ul><ul><li>Adequacy of ...
<ul><li>Mutuality of Obligation in Bilateral Contracts. </li></ul><ul><li>Illusory Promises. </li></ul><ul><ul><li>Case 7....
<ul><li>Conditional Promises. </li></ul><ul><ul><li>Conditions Precedent - occurs prior to performance. </li></ul></ul><ul...
<ul><li>Requirements and Output Contracts. </li></ul><ul><ul><li>Requirement contracts - buyer agrees to buy all its needs...
Capacity   <ul><li>A person’s ability to understand the nature and effect of an agreement. </li></ul><ul><li>Contracts wit...
<ul><li>Other Contracts Contrary to Statute </li></ul><ul><ul><li>Usury statutes. </li></ul></ul><ul><ul><li>Illegal contr...
<ul><li>Promise:  there must be a promise. </li></ul><ul><li>Justifiable Reliance : the promise must cause the promisee to...
Promissory Estoppel <ul><li>Injustice:  a promise that has been reasonably relied on will give rise to relief only if the ...
Precontractual Liability <ul><li>Pre-Contractual Liability based on: </li></ul><ul><ul><li>Misrepresentation. </li></ul></...
Unconscionability <ul><li>Oppressive or fundamentally unfair.   </li></ul><ul><ul><li>Procedural Element. </li></ul></ul><...
<ul><li>Fraud. </li></ul><ul><ul><li>Fraud in the Factum. </li></ul></ul><ul><ul><li>Fraud in the Inducement. </li></ul></...
Genuineness of Assent <ul><li>Mistakes of Fact. </li></ul><ul><ul><li>Substantiality of the Mistake. </li></ul></ul><ul><u...
<ul><li>Certain oral agreements must be in writing  to be enforceable:  </li></ul><ul><ul><li>Transfer of any interest in ...
<ul><li>When the parties have a written agreement which the parties intended be the complete agreement, parol ( oral ) evi...
<ul><li>Impossibility : an event causes obligations to be discharged. </li></ul><ul><li>Impracticality : performance is po...
<ul><li>Discharge:  when both parties have fully performed their obligations toward one another. </li></ul><ul><li>Materia...
<ul><li>Every contract contains an implied covenant of good faith and fair dealing in its performance.  This implied coven...
<ul><li>Types of Damages: </li></ul><ul><ul><li>Expectation Damages. </li></ul></ul><ul><ul><li>Consequential Damages. </l...
Remedies <ul><li>Mitigation of Damages. </li></ul><ul><li>Liquidated Damages vs. Penalties. </li></ul><ul><li>Specific Per...
<ul><li>Good Faith and Fair Dealing. </li></ul><ul><ul><li>Traditional U.S. Rule:  No  liability (This is changing). </li>...
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CHAPTER 7 Contracts 2 A contract is a legally enforceable ...

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

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

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