Basic contracts

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Basic contracts

  1. 1. CONTRACTS<br />
  2. 2. Michael: I need a truck to get my business going. <br />
  3. 3. Michael: I need a truck to get my business going. Pete, I’ll pay you $1000 today and another $500 at the end of the month for truck.<br />
  4. 4. Michael: I need a truck to get my business going. Pete, I’ll pay you $1000 today and another $500 at the end of the month for truck.<br />Pete: Sure, sounds good to me.<br />
  5. 5. Michael: I need a truck to get my business going. Pete, I’ll pay you $1000 today and another $500 at the end of the month for truck.<br />Pete: Sure, sounds good to me.<br />Michael gives Pete $1000. Pete gives Michael the keys and signs the truck’s papers (title) over to Michael.<br />
  6. 6. Michael: I need a truck to get my business going. Pete, I’ll pay you $1000 today and another $500 at the end of the month for truck.<br />Pete: Sure, sounds good to me.<br />Michael gives Pete $1000. Pete gives Michael the keys and signs the truck’s papers (title) over to Michael.<br />At the end of the month, Michael doesn’t pay.<br />
  7. 7. Michael: I need a truck to get my business going. Pete, I’ll pay you $1000 today and another $500 at the end of the month for truck.<br />Pete: Sure, sounds good to me.<br />Michael gives Pete $1000. Pete gives Michael the keys and signs the truck’s papers (title) over to Michael.<br />At the end of the month, Michael doesn’t pay.<br />He gives excuses, not money.<br />
  8. 8. Michael: I need a truck to get my business going. Pete, I’ll pay you $1000 today and another $500 at the end of the month for truck.<br />Pete: Sure, sounds good to me.<br />Michael gives Pete $1000. Pete gives Michael the keys and signs the truck’s papers (title) over to Michael.<br />At the end of the month, Michael doesn’t pay.<br />He gives excuses, not money.<br />Can Pete sue Michael for the remaining $500?<br />Do they have a contract?<br />
  9. 9. CONTRACT:<br />Agreement between two parties that creates an obligation to perform (or not perform) a particular duty. <br />
  10. 10. Elements of a Contract<br />Offer<br />Acceptance<br />Lawful consideration<br />Genuine agreement (not fraud, duress, etc.)<br />Capacity of parties<br />Legality<br />
  11. 11. CONTRACT<br />A legally enforceable contract requires:<br />1. An Offer(I’ll sell you my watch for $10)<br />2.An Acceptance(You’ve got a deal)<br />3. Consideration(Each side must get something – for example, one side gets money, the other side gets the watch) <br />
  12. 12. Offer<br />Must be:<br />A serious offer (intent)<br />Definite and certain<br />Communicated to the offeree<br />
  13. 13. Offer<br />Must be:<br />A serious offer (intent)<br />Definite and certain<br />Communicated to the offeree<br />
  14. 14. Intent<br />Both parties must exhibit a “contractual intent” (words spoken in jest or frustration lack legal intent).<br />
  15. 15. Intent<br />Both parties must exhibit a “contractual intent” (words spoken in jest or frustration lack legal intent).<br />“I’m so thirsty I’d give $100 for a Pepsi right now!”<br />
  16. 16. Intent<br />Both parties must exhibit a “contractual intent” (words spoken in jest or frustration lack legal intent).<br />“I’m so thirsty I’d give $100 for a Pepsi right now!”<br />If you quickly hand him a Pepsi, does he have to give you $100?<br />
  17. 17. Offer<br />Must be:<br />A serious offer (intent)<br />Definite and certain<br />Communicated to the offeree<br />
  18. 18. Offer: definite and certain<br />Offers cannot be vague<br />Example: “If you lend me $10 today, I’ll pay you back later.”<br />
  19. 19. Offer: definite and certain<br />Offers cannot be vague<br />Example: “If you lend me $10 today, I’ll pay you back when I get a job.”<br />
  20. 20. Offer: definite and certain<br />Offers cannot be vague<br />Example: “If you lend me $10 today, I’ll pay you back when I get my income tax refund.”<br />
  21. 21. Offer<br />Must be:<br />A serious offer (intent)<br />Definite and certain<br />Communicated to the offeree<br />
  22. 22. Offer: communicated<br />Offeree has to know about the offer to have a contract.<br />
  23. 23. Offer: communicated<br />Offeree has to know about the offer to have a contract.<br />Example: Angie, a travel agent, sells a travel package to Hawaii for $900 to Nancy even though the travel agency has a poster on the window advertizing the exact same package for $500. Nancy buys the package for $900. Later Zoe tells Nancy about the poster. If Nancy sues Angie for the $400 difference, will she win?<br />
  24. 24. Offer: communicated<br />Offeree has to know about the offer to have a contract.<br />
  25. 25. Offer: communicated<br />Offeree has to know about the offer to have a contract.<br />Example: Tony finds his neighbor’s dog wandering the street several blocks from his home. He takes the dog to its owner. The owner thanks Tony. Tony goes home. The next day Tony sees a sign on a lightpole advertizing a $50 reward for the return of his neighbor’s dog. If Tony sues for the reward, he will not win.<br />
  26. 26. Offer<br />Must be:<br />A serious offer (intent)<br />Definite and certain<br />Communicated to the offeree<br />
  27. 27. 5 ways to end an offer:<br />Offeree makes a counteroffer<br />Offereerejects the offer<br />Offerorrevokes his offer<br />Offerordies or becomes insane<br />Too much time goes by before acceptance<br />
  28. 28. Counteroffer<br />If an offeree changes the offer in any way, they have really refused the offer and become a new offeror.<br />
  29. 29. Counteroffer<br />If an offeree changes the offer in any way, they have really refused the offer and become a new offeror.<br />Offeree<br />Offeror<br />Offer: I’ll sell the building for $350,000<br />
  30. 30. Counteroffer<br />If an offeree changes the offer in any way, they have really refused the offer and become a new offeror.<br />Offeror<br />Offeree<br />Offer: I’ll buy the building for $275,000<br />
  31. 31. Reject an offer:<br />Linda: I’m moving on Saturday. I’ll sell you my washing machine for $25.<br />Debra: No thanks, mine is working fine.<br />
  32. 32. Reject an offer:<br />Linda: I’m moving on Saturday. I’ll sell you my washing machine for $25.<br />Debra: No thanks, mine is working fine.<br />2 hours later, Debra’s washing machine breaks…<br />Debra: Um, I’ll buy your washing machine for $25.<br />Linda: I’m selling it for $50 now.<br />Debra: But you offered to sell it for $25.<br />Linda: That was then, this is now.<br />
  33. 33. Reject an offer:<br />Let’s watch a 10-minute video of an offer that is rejected…<br />
  34. 34. http://www.youtube.com/watch?v=ffyLAU4nYlY<br />
  35. 35. Revoke an offer:<br />An offeror can “take back” (revoke) an offer before it is accepted.<br />
  36. 36. Revoke an offer:<br />Let’s watch a 9-minute video where business people revoke their offer before it is accepted…<br />
  37. 37. http://www.youtube.com/watch?v=eQjR1io90Sw<br />
  38. 38. End an offer:<br />An offer goes away when the offeror dies (or becomes insane).<br />
  39. 39. End an offer:<br />If too much time goes by before acceptance, the offer has ended. <br />John: I’ll sell you my one-ounce gold coin for $500.<br />Paul: I’ll think about it.<br />5 months later the price of gold has gone up to $1500 an ounce… <br />Paul: Um, I accept your offer to sell me your one-ounce gold coin for $500 <br />
  40. 40. Elements of a Contract<br />Offer<br />Acceptance<br />Lawful consideration<br />Genuine agreement (not fraud, duress, etc.)<br />Capacity of parties<br />Legality<br />
  41. 41. Acceptance<br />
  42. 42. Acceptance<br />Must be “unconditional”<br />
  43. 43. Acceptance<br />Must be “unconditional”<br />Must accept the offer without any changes to it.<br />
  44. 44. Acceptance<br />Must be “unconditional”<br />Must accept the offer without any changes to it.<br />Jay: “I’ll sell you this dog for $20”<br />Will: “I’ll buy this dog for $20”<br />
  45. 45. Acceptance<br />Must be “unconditional”<br />Must accept the offer without any changes to it.<br />Jay: “I’ll sell you this dog for $20”<br />Will: “I’ll buy this dog for $20”<br />Unconditional acceptance: “mirror image rule”.<br />
  46. 46. Elements of a Contract<br />Offer<br />Acceptance<br />Lawful consideration<br />Genuine agreement (not fraud, duress, etc.)<br />Capacity of parties<br />Legality<br />
  47. 47. Consideration<br />
  48. 48. Consideration<br />Consideration must be mutual. Both parties must receive something of value.<br />Involvement of money is not required.<br />
  49. 49. Consideration<br />Consideration must be mutual. Both parties must receive something of value.<br />Involvement of money is not required.<br />“I’ll give you my snowmobile if you’ll give me your boat.”<br />
  50. 50. Is this a contract?<br />Teacher Offer: “I’ll give you $50 if you come to class on time tomorrow.”<br />Student Acceptance: “You’ve got a deal.”<br />
  51. 51. Is this a contract?<br />Teacher Offer: “I’ll give you $50 if you come to class on time tomorrow.”<br />Student Acceptance: “You’ve got a deal.”<br />No, both sides did not get something.<br />Coming to class on time is a responsibility.<br />No consideration.<br />
  52. 52. Elements of a Contract<br />Offer<br />Acceptance<br />Lawful consideration<br />Genuineagreement (not fraud, duress, etc.)<br />Capacity of parties<br />Legality<br />
  53. 53. “Meeting of the Minds”<br />
  54. 54. “Meeting of the Minds”<br />A legally recognized offer and an acceptance creates a “meeting of the minds”, or mutual assent, between the parties. <br />Your book calls this “Genuine Agreement”<br />
  55. 55. Things that can get in the way of a meeting of the minds:<br />Duress<br />Undue Influence<br />Fraud<br />Innocent Misrepresentation<br />Mistake<br />
  56. 56. Duress:<br />
  57. 57. Undue Influence:<br />
  58. 58. Fraud:<br />
  59. 59. 5 elements of fraud:<br />False representation of a material (important) fact<br />Representation known to be false<br />False representation intended to be relied upon<br />False representation actually relied upon<br />Suffer some monetary loss<br />
  60. 60. Innocent Misrepresentation:<br />I thought it was a real antique when I sold it!<br />
  61. 61. Mistake:<br />Ann: Oops! I thought I was selling a diamond ring.<br />Zoe: Oops! I thought I was buying a diamond ring.<br />Cubic Zirconium ring<br />
  62. 62. Mistake:<br />Unilateral Mistake<br />Bilateral Mistake<br />
  63. 63. Unilateral Mistake:<br />If you sell a Winslow Homer painting that your great grandmother gave you for $50 and later find out it is worth $15 million, you made a mistake—a unilateral mistake. You cannot rescind your deal.<br />
  64. 64. Bilateral Mistake:<br />Both sides agree to a contract that neither of them knows is not what they intended.<br />
  65. 65. Bilateral Mistake:<br />Jim sells his mountain cabin to Teresa on Monday.<br />
  66. 66. Bilateral Mistake:<br />Neither of them knew that the cabin burned down the day before.<br />
  67. 67. Bilateral Mistake:<br />Either Jim or Teresa can rescind their contract because of neither of them meant to buy or sell a burned cabin—bilateral mistake.<br />
  68. 68. Elements of a Contract<br />Offer<br />Acceptance<br />Lawful consideration<br />Genuine agreement (not fraud, duress, etc.)<br />Capacity of parties<br />Legality<br />
  69. 69. Capacity<br />Not everyone is legally able to enter into a contract.<br />
  70. 70. Capacity<br />Not everyone is legally able to enter into a contract.<br />Offer: I’ll give you this shiny necklace for that laptop.<br />Acceptance: Okay<br />
  71. 71. Capacity<br />People under 18 cannot enter into legally binding contacts.<br />Offer: I’ll give you this shiny necklace for that laptop.<br />Acceptance: Okay<br />
  72. 72. Capacity<br />They don’t have “capacity”<br />Offer: I’ll give you this shiny necklace for that laptop.<br />Acceptance: Okay<br />
  73. 73. Capacity<br />Under the age of 18 (for non essentials).<br />Under the influence of substances such as illegal drugs, alcohol or medicines.<br />Limited mental capacity.<br />
  74. 74. When do you turn 18?<br />
  75. 75. When do you turn 18?<br />You turn 18 the day before your 18th birthday.<br />Here’s why…<br />
  76. 76. When do you turn 1?<br />Say you were born on January 1 at noon.<br />At the end of the day, you are considered one day old (a part of a day counts as a day in the law).<br />On December 31 you have been alive for 365 days.<br />You are a year old on December 31.<br />
  77. 77. Elements of a Contract<br />Offer<br />Acceptance<br />Lawful consideration<br />Genuine agreement (not fraud, duress, etc.)<br />Capacity of parties<br />Legality<br />
  78. 78. Legality<br />Contract agreements cannot violate the law.<br />
  79. 79. Legality<br />You cannot win a lawsuit if you sue someone for not delivering your marijuana on time.<br />
  80. 80. Legality<br />You cannot win a lawsuit if you sue someone for not paying after hiring you to kill his ex-wife.<br />
  81. 81. Legality<br />You cannot win a lawsuit if you sue someone for not paying your winnings at a home poker game.<br />
  82. 82. Legality<br />You cannot win a lawsuit if you sue someone for not paying your fee for fixing their electrical wiring if you don’t have an electrician's license.<br />
  83. 83. Legality<br />You cannot win a lawsuit if you bribe a witness to lie for you, give them money, and then they don’t lie like they promised they would.<br />
  84. 84. Legality<br />You cannot win a lawsuit if you pay someone not to get married and they get married anyway.<br />
  85. 85. Legality: contracts not to compete<br />If you buy a pizza parlor, you can have in your sales contract a “do not compete” promise if the promise is limited in time and geographic area.<br />
  86. 86. Elements of a Contract<br />Offer<br />Acceptance<br />Lawful consideration<br />Genuine agreement (not fraud, duress, etc.)<br />Capacity of parties<br />Legality<br />
  87. 87. Four categories of contracts<br />Valid<br />Void<br />Voidable<br />Unenforceable<br />
  88. 88. Four categories of contracts<br />Valid<br />Void<br />Voidable<br />Unenforceable<br />
  89. 89. Valid contract<br />Has all the elements of a legal contract.<br />
  90. 90. Valid contract<br />Has all the elements of a legal contract.<br />Written<br />or<br />Oral<br />
  91. 91. Valid contract<br />Has all the elements of a legal contract.<br />Written<br />or<br />Oral<br />Doesn’t matter(except in specific cases)<br />
  92. 92. Valid contract<br />Only needs to be in writing for things like:<br />Real estate contracts<br />Contracts that take more than a year to perform<br />Contracts to pay the debt of another<br />(California Civil Code Section 1624)<br />
  93. 93. Valid contract<br />Has all the elements of a legal contract.<br />Jane, an ordinary 24-year-old woman, offers to lend Gil, an ordinary 21-year-old man, $400 to bail him out of jail. Gil accepts the $400, promises to pay by the end of the month, and gets out of jail. Does Gil have to pay by the end of the month?<br />
  94. 94. Valid contract<br />Has all the elements of a legal contract.<br />Jane, an ordinary 24-year-old woman, offers to lend Gil, an ordinary 21-year-old man, $400 to bail him out of jail. Gil accepts the $400, promises to pay by the end of the month, and gets out of jail. Does Gil have to pay by the end of the month? Yes, it was a valid contract.<br />
  95. 95. Valid contract?<br />Maleek promises to supply Ben’s copier company with up to 5000 reams of paper every month for the next year for $3.00 a ream. After the 9th month, Maleek tells Ben that he is very sorry but he has to raise the price to $3.25 a ream. Ben begins buying paper from Paula for $3.10 a ream and sues Maleek for the extra 10¢ a ream. Is Ben likely to win his lawsuit?<br />
  96. 96. Valid contract?<br />Maleek promises to supply Ben’s copier company with up to 5000 reams of paper every month for the next year for $3.00 a ream. After the 9th month, Maleek tells Ben that he is very sorry but he has to raise the price to $3.25 a ream. Ben begins buying paper from Paula for $3.10 a ream and sues Maleek for the extra 10¢ a ream. Is Ben likely to win his lawsuit? Yes, but why?<br />
  97. 97. Valid contract?<br />Opal offers to supply Victoria with one kilo of cocaine each month by the first Friday of the month for $5,000. Victoria agrees. After the third month, Opal is in prison and does not supply Victoria that month or the next. Is Victoria likely to win if she decides to sue for breach of contract?<br />
  98. 98. Four categories of contracts<br />Valid<br />Void<br />Voidable<br />Unenforceable<br />
  99. 99. Void contract<br />Never was a legal contract in the first place.<br />
  100. 100. Void contract<br />Tom’s Offer: If you kill my ex-wife on Saturday, I’ll give you $5,000 on Sunday.<br />Jim’s Acceptance: I’ll do it.<br />Jim kills Tom’s ex-wife on Saturday.<br />Tom doesn’t pay Jim on Sunday.<br />Can Jim sue Tom to get his money?<br />
  101. 101. Four categories of contracts<br />Valid<br />Void<br />Voidable<br />Unenforceable<br />
  102. 102. Voidable contract<br />One party can cancel the contract.<br />
  103. 103. Voidable contract<br />One party can cancel the contract.<br />Agnes lives in a nursing home and takes prescription medication that makes her sleepy. Tim, a pet shop owner, convinces Agnes to buy a 4-year-old pit bull. Agnes pays $4,000 for the pit bull. Agnes claims she can void the contract and rescind the deal because she agreed to it while under the influence of prescription medication. Do you agree?<br />
  104. 104. Voidable contract<br />Voidable contracts arise from questions of capacity and from actions which invalidate mutual assent--duress, undue influence, fraud. <br />
  105. 105. Voidable contract<br />A contract entered into by a minor (under the age of 18) for non essentials. <br />A contract signed by a person under the influence of substances such as illegal drugs, alcohol or medicines.<br />A contract involving fraud <br />A contract involving material misrepresentation<br />A contract entered into by a person with limited mental capacity.<br />
  106. 106. Four categories of contracts<br />Valid<br />Void<br />Voidable<br />Unenforceable<br />
  107. 107. Unenforceable contract<br />A legal contract for which the courts cannot help the injured party. <br />
  108. 108. Unenforceable contract<br />A legal contract for which the courts cannot help the injured party. <br />Ruth sold Jennifer her iPod for $240. Jennifer paid $100 and promised to pay the rest when she received her income tax refund check. Jennifer received her income tax refund check but never paid Ruth because, she said, the iPod was stolen and she didn’t think she had to pay anymore. Six years later, Ruth sued Jennifer for the remaining $140. By then, the contract was unenforceable because the law requires you to sue within 5 years.<br />
  109. 109. Unenforceable contract<br />A legal contract for which the courts cannot help the injured party. <br />Tom talks with Ann and promises to sell his house for $200,000 today and another $100,000 at the end of the year. Ann agrees, pays $200,000 and moves in. At the end of the year Ann doesn’t pay. Tom sues Ann. In court, the judge says, “I can’t help you, Tom. To enforce a contract for the sale of a house in California, you need a written agreement. Your contract is unenforceable. ”<br />
  110. 110. Express contractvs.Implied contract<br />
  111. 111. Express contract<br />A legal contract agreed to in words—oral OR written. <br />
  112. 112. Express contract<br />A legal contract agreed to in words—oral OR written. <br />“I’d like to rent one of your jumping castles on Saturday.”<br />“Sure, I’ll bring it over at 9:00”<br />OR<br />
  113. 113. Implied contract<br />A legal contract agreed to without any words.<br />
  114. 114. Implied contract<br />A legal contract agreed to without any words.<br />?<br />
  115. 115. Implied contract<br />A legal contract agreed to without any words.<br />You walk into the AM/PM, pick up a bag of chips, take it to the counter, give the cashier money, receive your change, and walk out without saying a word…<br />
  116. 116. Implied contract<br />A legal contract agreed to without any words.<br />You open the bag. It’s full of popcorn. If the clerk refuses to give you your money back, will a lawsuit for breach of contract likely succeed?<br />
  117. 117. Implied contract<br />A legal contract agreed to without any words.<br />You open the bag. It’s full of popcorn. If the clerk refuses to give you your money back, will a lawsuit for breach of contract likely succeed?<br />Was there a contract?<br />
  118. 118. Implied contract<br />A legal contract agreed to without any words.<br />An unconscious person is brought into a doctor’s office. The doctor mends the man’s wounds. The wounded person will have to pay the reasonable fee of the doctor.<br />
  119. 119. Bilateral contractvs.Unilateral contract<br />
  120. 120. Bilateral contract<br />The offerer makes a promise and the offeree makes a promise.<br />Unilateral contract<br />The offerer makes a promise and the offereedoes something the offerer asked for.<br />
  121. 121. Bilateral contract<br />The offerer makes a promise and the offeree makes a promise.<br />Most contracts are bilateral.<br />
  122. 122. Bilateral contract<br />The offerer makes a promise and the offeree makes a promise.<br />Most contracts are bilateral.<br />“I promise give you $1000 for your car.”<br />“I promise to give you the title to the car when I get the $1000.”<br />
  123. 123. Unilateral contract<br />
  124. 124. Unilateral contract<br />The offerer makes a promise.<br />The offereedoes something.<br />Most contracts are NOTunilateral.<br />
  125. 125. Unilateral contract<br />The offerer makes a promise and the offereedoes something the offerer asked for.<br />Pete: “I’ll promise to give you a $50 reward if you find my lost dog and return it safely.”<br />
  126. 126. Unilateral contract<br />The offerer makes a promise and the offereedoes something the offerer asked for.<br />Pete: “I’ll promise to give you a $50 reward if you find my lost dog and return it safely.”<br />You do not promise to find the dog.<br />You are not required to find the dog.<br />If you do find and return the dog safely, Pete must pay you the $50 reward.<br />
  127. 127. Unilateral contract<br />The offerer makes a promise.<br />The offereedoes something.<br />Most contracts are NOTunilateral.<br />
  128. 128. Bilateral or Unilateral?<br />Kay: “Tim, I’m going to a big party tonight. If you’ll wash my car by 4:00, I’ll pay you $7.00.”<br />
  129. 129. Bilateral or Unilateral?<br />Kay: “Tim, I’m going to a big party tonight. If you’ll wash my car by 4:00, I’ll pay you $7.00.”<br />Unilateral, only Kay made a promise.<br />
  130. 130. Bilateral or Unilateral?<br />Kay: “Tim, I’m going to a big party tonight. If you’ll wash my car by 4:00, I’ll pay you $7.00.”<br />Tim: “I’ll do it!”<br />
  131. 131. Bilateral or Unilateral?<br />Kay: “Tim, I’m going to a big party tonight. If you’ll wash my car by 4:00, I’ll pay you $7.00.”<br />Tim: “I’ll do it!”<br />Bilateral, both made promises.<br />
  132. 132. ---end of presentation---<br />

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