Title: ELEMENTS OF A CONTRACT
1ELEMENTS OF A CONTRACT
2Objective 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.
3Contractual 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.
4Objective 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.
5Contracts 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
6Special 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
7Objective 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.
8Minors 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.
9Rights 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.
10Objective 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.
11Agreements 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
12Agreements 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
13Agreements 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
14Business Law
- Chapter 5 - Consideration
15Objective 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.
16Requirements for Valid Consideration
- Each side in the agreement must give up something
and get something in exchange.
17Characteristics 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
18Characteristics 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.
19Objective 6 Define the different types of
Consideration
- Money as Consideration
- Property and Services as Consideration
- A promise not to sue
- Charitable Pledges
20Problems 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.
21Objective 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
22Agreements Without Consideration
- Illusory Promises
- Future Gifts and Legacies
- Past Consideration
- Preexisting Duties
- Promise to Attend a Social Engagement
23Objective 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.