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ELEMENTS OF A CONTRACT

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Title: ELEMENTS OF A CONTRACT


1
ELEMENTS OF A CONTRACT
  • BUSINESS LAW
  • CHAPTER 5

2
Objective 1 Assess Contractual Capacity
  • Capacity - the legal ability to enter into a
    contract.
  • Rebuttal Presumption With the assumption that
    another person has the capacity to contract,
    this law allows some people to say after the fact
    that they did not have the capacity to enter into
    a contract.

3
Contractual Capacity Rules and Limitations
  • According to the law, several types of people may
    have the right to disaffirm a contract
  • People with mental impairments
  • Minors
  • Intoxicated Persons
  • Other Limits on Capacity
  • Convicts
  • Aliens
  • Citizens of other countries living in the U.S.

4
Objective 2 Explain the Statute of Frauds
the Parole Evidence Rule
  • Statute of Frauds a state law that requires
    that certain contracts be in writing.
  • A contract can be a letter, a sales slip, an
    invoice, or several words placed on a check.
  • A contract must identify the place, date,
    parties, subject matter, price and terms, and
    intent of the parties.

5
Contracts That Must Be In Writing
  • Statute of Requirements - Adds a requirement to
    the six elements, some contracts must be in
    writing to be enforceable.
  • Contracts to Pay Somebody Elses Debt
  • Contracts to Pay Debts of a Person Who Has Died
  • Contracts Requiring More Than a Year to Perform
  • Contracts in Consideration of Marriage
  • Contracts for the Sale of Goods
  • Contracts to Sell Real Property

6
Special Rules for the Interpretation of Contracts
  • The Parole Evidence Rule Says that evidence of
    oral statements made before signing a written
    agreement cannot be presented in court to change
    or add to the terms of that written agreement.
  • The Best Evidence Rule Requires that the
    original written agreement be used as evidence in
    court.
  • Real World Rules Read the Fine Print

7
Objective 3 List Minors Contractual Rights
and Responsibilities
  • Minors can disaffirm contracts even when they
    have used poor judgment.
  • To Disaffirm a Contract to show the intent not
    to live up to the contract.
  • Ratification the agreement to go along with a
    contract that could have been avoided.

8
Minors Contractual Rights and Responsibilities
  • Exceptions to the General Rule Minors are held
    to contracts for things required by law, such as
    car insurance.
  • Minors as Drivers Minors must meet certain
    requirements before earning a license.
  • Minors as Students Students may be searched in
    a school setting, students may not print certain
    matters in a school sponsored newspaper.

9
Rights and Duties of Parents Guardians
  • The law protects children from abusive parents,
    the state can act as a childs parents when
    natural or adoptive parents cannot or will not
    perform their parental duties.
  • The law also states that both natural and
    adoptive parents must provide children with
    necessaries.

10
Objective 4 Define Legality Illegality
  • Effect of Illegality a court will not help any
    party to an illegal contract.
  • Illegality in Entire Agreement if a contract
    cannot be divided, then anything illegal makes
    the entire contract illegal.
  • In Pari Delicto and Divisible Contracts If the
    contract is divisible, the court may enforce
    parts of the agreement that are legal and cancel
    the parts that are not.

11
Agreements That Break Statutes
  • Laws that make some agreements illegal because
    they violate the states civil or criminal
    statutes.
  • Civil Criminal Statutes
  • Usury Statutes
  • Gambling Statutes
  • Sunday Statutes
  • Licensing Statutes

12
Agreements Contrary to Public Policy
  • Public Policy a legal principle that holds that
    nobody should be allowed to do something that
    harms the public.
  • Agreements that Unreasonably Restrain Trade
  • Agreements Not to Compete
  • Agreements for Price Fixing
  • Agreements to Defeat Competitive Bidding

13
Agreements Contrary to Public Policy
  • Agreements to Obstruct Justice
  • Agreements Inducing Breach of Duty or Fraud
  • Agreements to Gve Up the Right to Litigate or
    Arbitrate
  • Agreements Interfering with Marriage

14
Business Law
  • Chapter 5 - Consideration

15
Objective 5 Analyze the Requirements for Valid
Consideration
  • Consideration the exchange of benefits and
    detriments by the parties to a contract.
  • A benefit is something a party receives in the
    agreement.
  • A detriment is something a party gives up in the
    agreement.
  • Forbearance not doing what you have the right
    to do.

16
Requirements for Valid Consideration
  • Each side in the agreement must give up something
    and get something in exchange.

17
Characteristics of Consideration
  • Bargained-for Exchange when a promise is made
    in return for another promise, or when an act is
    exchanged for an act or a promise not to act.
  • Something of Value The law does not set value
    in a contract, all that matters is that both
    parties agree freely on the value and the price

18
Characteristics of Consideration cont.
  • Something of Value cont.
  • Unconscionable contract an agreement in which
    the consideration is so out of line with the
    actual value of the subject matter and so unfair
    it shocks the courts conscience.
  • Adhesion Contract a take-it-or-leave-it offer
    made by a party who holds most of the power in a
    bargaining session.
  • Legality Unconscionability the law requires
    that the consideration that passes from one party
    to another be legal.

19
Objective 6 Define the different types of
Consideration
  • Money as Consideration
  • Property and Services as Consideration
  • A promise not to sue
  • Charitable Pledges

20
Problems with Consideration
  • Disputed Amounts When the parties disagree on
    how much money is due Accord and Satisfaction is
    a legal way to settle contractual disputes by
    which one party agrees to accept less than the
    amount due as full payment.
  • Undisputed Amounts If the parties have agreed
    to a set amount, then accord and satisfaction
    does not apply.

21
Objective 7 List Exceptions to the
Requirements of Consideration
  • Promises Under Seal
  • Promises After Discharge in Bankruptcy
  • Debts Ended by the Statute of Limitations
  • Promises Enforced by Promissory Estoppel
  • Promissory Estoppel the principle that a
    promise made witouth consideration may
    nonetheless be enforced to prevent injustice.
  • Option

22
Agreements Without Consideration
  • Illusory Promises
  • Future Gifts and Legacies
  • Past Consideration
  • Preexisting Duties
  • Promise to Attend a Social Engagement

23
Objective 8 Compare Unconscionability
Illegality
  • Illegality - If consideration is illegal, the
    contract is void.
  • Unconscionability consideration may be legal
    but unconscionable because the amount paid is so
    unfair that it shocks the conscience of the
    court.
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