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BUS 115 Chap007 contract law essentials


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BUS 115 Chap007 contract law essentials

  1. 1. Chapter 7 The Essentials of Contract Law
  2. 2. Learning Objectives 1. Define contract. 2. Explain the origin of the law merchant. 3. Discuss the relationship between common law and the law merchant. 4. Identify the four elements of a contract. 5. Explain the objectives of contract law.
  3. 3. Learning Objectives 6. Explain the place of the UCC in contract law. 7. Distinguish contracts from other agreements. 8. Explain the role of privity and agency on contract law. 9. List the contracts that must be in writing to be enforceable. 10. List the characteristics of a contract.
  4. 4. The Basics of Contract Law • Contract – Agreement: • • • • between two or more competent parties based on mutual promises to do or refrain from doing some particular thing that is neither illegal nor impossible – Results in an obligation or a duty that can be enforced in a court of law
  5. 5. Mercantile Law, Ancient Rome, Capitalism, and the Church • Law Merchant (mercantile law) – Outlines the laws and the procedures followed by merchants in commercial transactions. • Mercantile law originated among the merchants themselves who needed a formalized way to deal with one another when disputes arose.
  6. 6. The Development of the Law Merchant • Canon Law – the Church encouraged merchants to establish guilds that followed the law of the Church • Merchants should never engage in fraud and always follow a good faith approach to contract development
  7. 7. The Characteristics of the Law Merchant Neutrality Universality Mutuality Involvement Integration Evolution
  8. 8. The Characteristics of the Law Merchant • Neutrality – characterizes any system of laws that is consistently applied in the same evenhanded way, no matter who the antagonists might be • Universal laws – those that apply to everyone regardless of their social status or their place of origin
  9. 9. The Characteristics of the Law Merchant • Mutuality (reciprocity) – notion that commercial arrangements always involve a process of evenhanded give and take between the parties. • Involvement – requires that those affected by the law to participate in its making and its execution.
  10. 10. Fair Courts and Staples Courts • Fair Courts – empowered to hear cases involving commercial disputes – since juries were inevitably made up of merchants, the law merchant was used to adjudicate the cases.
  11. 11. Fair Courts and Staples Courts • Staple Courts – heard cases that involved certain set commodities. – run by mayors who were forced to learn and apply mercantile law.
  12. 12. Admiralty Courts, Arbitration, and Statutory Law • Admiralty Courts – tribunals set up in seaport towns to handle disputes involving maritime law, shipping contracts, contests over docking rights, collisions at sea, and the like
  13. 13. 7-13
  14. 14. 7-14
  15. 15. The Objectives of Contract Law • The court’s goal in the remedy phase of a contract dispute is to place the injured party in as good a position as he or she would have been had the contract been carried out
  16. 16. The Payment of Damages • Compensatory damages – equal to the real financial loss suffered by the innocent victim • Incidental damages – paid by the breaching party to make up for any expenses paid by the victim to prevent any additional loss. 7-16
  17. 17. The Payment of Damages • Consequential damages • Punitive damages – indirect damages that result because of special circumstances that exist with a particular contract – designed to punish the wrongdoer for his or her outrageous conduct – Typically not awarded in contract cases 7-17
  18. 18. Contracts and the UCC • The Uniform Commercial Code (UCC) is a model set of laws designed to govern almost all commercial transactions • Article 2 of the UCC sets down the rules that govern sales-of-goods contracts
  19. 19. Contracts and Other Agreements • All contracts are agreements, but not all agreements are contracts. • To be enforceable, an agreement must conform to the law of contracts. • Courts normally won’t enforce: – Social agreements – Dates – Dinner engagements – Agreements to marry
  20. 20. Contracts and Privity • Privity – both parties have a legally recognized interest in the subject of the contract if they are to be bound by it – Unintended beneficiaries (third parties) have no standing to sue
  21. 21. Contracts and Agency Law • An agent is a party who has been hired or appointed by a principal to perform some sort of work, usually of a business nature, for the principal • Agents can bind the principal to a contract, even if the principal is not present.
  22. 22. Contractual Characteristics • Valid contract – one that is legally binding and fully enforceable by the court • Void contract – one that has no legal effect whatsoever • Voidable contract – one that may be avoided or canceled by one of the parties • Unenforceable contract – one that, because of some rule of law, cannot be upheld by a court of law
  23. 23. Contractual Characteristics • Unilateral contract – an agreement in which one party makes a promise to do something in return for an act of some sort • Bilateral contract – one in which both parties make promises • Breach of contract – occurs when one of the two parties fails to keep the promise
  24. 24. Contractual Characteristics • Express contract – requires some sort of written or spoken expression indicating a desire to enter the contractual relationship • Implied contract – created by the actions or gestures of the parties involved in the transaction – implied-in-law (quasi-contract) – created by court to prevent unjust enrichment
  25. 25. Contractual Characteristics • Informal contract – Any oral or written contract that is not under seal or is not a contract of record • Formal contract – has to be (1) written; (2) signed, witnessed, and placed under the seal of the parties; and (3) delivered – Contract of record – created by court for public policy reasons
  26. 26. Contractual Characteristics • Executory contract – A contract that has not yet been fully performed by the parties is called an • Executed contract – When a contract’s terms have been completely and satisfactorily carried out by both parties
  27. 27. Question? What is an agreement between two or more competent parties? A. Deal B. Bond C. Treaty D. Contract
  28. 28. Question? When both parties have a legally recognized interest in the subject of the contract it is called ________. A. Privity B. Judgment C. Contractual obligation D. Gordon defense
  29. 29. Question? What type of contract is one in which both parties make promises? A. Voided contract B. Unilateral contract C. Express contract D. Bilateral contract