Contract Law

1
Contract Law

• Organize the requirements of each element of a
  contract

2
Contract Law

• All 6 Elements are required in order to have a
  contract
• Contract
• any agreement enforceable by law
• Ex Every time you buy something

3
6 Elements

• Offer
• Proposal by one party to another with intent to
  create a legal binding agreement
• Acceptance
• an unqualified willingness to go along with the
  offer

4
6 Elements continued

• Genuine Agreement
• if a valid offer is met by a valid acceptance
  then a genuine agreement exists
• Can be destroyed by fraud, misrepresentation,dures
  s, or undue influence
• Capacity
• Legal ability to enter into a contract
• Ex Minor, mentally ill, drunk, drugs

5
6 Elements continued

• Consideration
• Must exchange something of value in order to
  create a bond
• Legality
• Must be permitted by law
• Courts will not enforce an illegal contract

6
Offer

• Offer
• Proposal
• Offeror
• Makes the offer
• Offeree
• Offer made to this person

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3 Requirements of an Offer

• Serious Intent
• Must intend to make the offer
• Advertisements?
• No serious intent
• Known as an invitation to negotiate
• Definite and Certain
• Must use definite words
• Communicate to the Offeree
• Phone, fax, Internet, letter, etc

8
Organize the Required Parts and Forms of a
Contract
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Breach of Contract

• Wrongful failure to perform one or more promises
  of a contract.

10
Writing must identify

• Date
• Parties
• Price
• Intent of parties

• Place
• Subject Matter
• Terms
• Signature of both parties

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Contradictory/Ambiguous Terms

• Contradictory
• Handwritten terms prevails over typed terms
• Handwritten numbers prevails over figures
• Ambiguous Clauses
• Can be interpreted two different ways
• Court favors the one who didnt draft the contract

12
Statute of Frauds?

• Requires that certain contracts must be in
  writing
• Relates to executory contracts

13
Must be in Writing

• Contracts to pay debts of others
• Contracts to pay debts of deceased persons
• Contracts requiring more than a year to perform
• Contracts to sell real property
• (Exception Equitable Estoppel must rely on
  promise.)
• Contracts for sale of goods over 500
• Prenuptial contract (contemplation of marriage)

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Parol Evidence Rule

• Courts assure ALL terms are written into the
  agreement.

15
Changing the Writing

• Read entire document
• If you dont agree with something, then cross it
  out and both parties initial it
• Write in promises
• Refuse to sign if you dont agree contract

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Acceptance

• Unqualified willingness to go along with the
  offer

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Requirements of Acceptance

• Unconditional Acceptance
• Mirror Image Rule
• Acceptance must mirror offer
• Any change means there is no acceptance
• Counteroffer
• Offeree makes an offer
• Offeror becomes offeree

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Methods of Acceptance

• Contract accepted when sent, if same method of
  communication used
• Contract accepted when received, if different
  method of communication is used
• If method is stated in offer, it MUST be used
• ActionAcceptance
• Silence cannot be a method of acceptance

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Example of Acceptance
20
Example of Acceptance
21
Termination of Offer

• Revocation Taking back of an offer by offeror
• Rejection Refusal by the offeree
• Counteroffer Any change in the terms of the
  offer
• Expiration of Time If the offer puts a time
  limit on the offer and it has passed
• Death Offeror dies
• Insanity Offeror is declared insane

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Genuine Agreement

• A valid offer has been made by the offeror, and a
  valid acceptance has been exercised by the
  offeree

23
Mistake

• Unilateral Mistake
• An error on the part of one of the parties
• Cannot get out of contract
• Types
• Nature of the Agreement
• Signing a contract you dont understand or have
  not read
• This applies to signing a contract in a language
  you dont understand
• Identity of a Party
• Bound by contract with face to face meetings
• May be able to void a contract made NOT face to
  face

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• Bilateral Mistake (Mutual Mistake)
• Both parties are mistaken
• Types
• Possibility of Performance
• Contract is impossible to perform Either party
  can void contract
• Subject Matter
• Either party can void contract

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Fraud

• Deliberate deception for an unfair or unlawful
  gain
• Define each word in bold

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• Deliberate Done with or marked by full
  consciousness of the nature and effects
  intentional
• Deception The fact or state of being deceived
• Gain To secure as profit or reward
• In order to prove fraud, you must prove the above
  3 definitions

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• Proving Fraud
• False Representation of Fact
• Must be a material (important) fact
• Concealment (nondisclosure) may be considered
  false representation
• Representation Known to be False
• False Representation Intended to be Relied Upon
• False Representation Actually Relied Upon
• Resulting Loss

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Innocent Misrepresentation

• Make an innocent statement of supposed fact that
  turns out to be false
• Injured party has the right to rescind (take
  back) the offer No rights to damages

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Duress

• Overcoming a persons will by use of force or by
  threat of force or bodily harm
• Economic Duress
• Threats to a persons business or income
• Actual physical harm will void the contract
• Threat of physical harm will make contract
  voidable
• A threat of exercising ones legal right is NOT
  duress Ex Threatening to sue someone and you
  have right to sue, is NOT duress

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Undue Influence

• Unfair and improper persuasive pressure within a
  relationship of trust

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Match the column on left with who they have undue
influence over in the right column?

• Doctor
• Lawyer
• Parents
• Teacher

• Student
• Children
• Client
• Patient

Answers 1-4, 2-3, 3-2, 4-1
32
Capacity to Contract
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Capacity to Contract

• Capacity legal ability to enter a contract
• Majority age of legal adulthood
• Minor not yet reached legal age (minority)
• NC Age of Majority 18 years old
• Voidable Contracts minors may disaffirm or
  avoid their contracts if they so choose
• Infancy minority minor under 18 yrs old

34
Capacity to Contract

• Returning Merchandise must be returned if
  disaffirming a contract
• Tender offer to return
• Misrepresenting Age fraud
• - if contract disaffirmed, you may be sued
  for fraud

35
Capacity to Contract

• Disaffirming the Whole Contract - cant
  disaffirm parts of a contract
• -- must disaffirm all or none
• Disaffirming Contracts made with Minors
• both can disaffirm contact

36
Ratification of Contracts with Minors

• Ratify approve contract
• - after reaching majority age, a minor can
  ratify a contract made while he or she was a
  minor
• - ratification ends all rights given to a
  minor
• Contracts for Necessaries necessities food,
  clothing, shelter, and medical care
• - responsible for the fair value of item

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Ratification of Contracts with Minors

• Special Statutory Rules minors have capacity to
  buy car/life insurance
• - married adult
• - limited capacity if you own a business
• - renting apartment is a necessity

38
Other Contractual Capacity Rules

• Mentally impaired persons if declared insane
• Prior to guardian being appointed Contract is
  voidable
• After guardian appointed - all contracts are void
• Intoxicated person must not understand the
  purpose, nature, or effect of the transaction
• - fair value of necessities

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Other Capacity Limitations

• Convicts have certain limitations
• Aliens people who live in U.S. but own
  allegiance to a different country
• - limited capacity
• ex war

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Consideration
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Gratuitous Contracts

• The law does not enforce any contracts that are
  gratuitous
• Gratuitous contracts are free agreements

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Consideration

• Exchange of benefits and detriments by the
  parties to an agreements
• Benefits
• Something that a party was not previously
  entitled to receive
• Detriments
• Any loss suffered

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Types of Detriments

• Give up or promise to give up something you are
  entitled to receive
• Doing or promising to do something you have a
  legal right to do
• Forbearance
• Not doing something you have a legal right to do

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Agreements without Consideration

• Promise to make a gift
• Gifts have no consideration
• Cannot be enforced
• Gift that has been given?
• Doesnt have to be returned
• Donor Gives the gift
• Donee Accepts the gift

45
Agreements without Consideration

• Promise to obey the law
• No detriment
• You are obligated to obey the law
• Preexisting Duty
• If a person is already under legal duty to do
  something, a promise to do that same thing does
  not furnish consideration

46
Agreements without Consideration

• Past Consideration
• Consideration cannot already have been completed
• Promise to attend a social agreement
• No consideration
• However, in some instances (prom) there may be
  grounds for a lawsuit You must show a loss
• Exception Prom

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Adequacy of Consideration

• Courts dont look at adequacy or value of an
  agreement unless it is unconscionable
• Unconscionable?
• So lopsided that the average person would not
  agree to terms

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Special Applications

• Partial Payment of Debt
• Must have new consideration in order to relieve
  entire debt
• Settlement of Disputed Claims
• Examples Fixing your car or visit the doctor
• Extension of Time
• To extend time, one party must offer new
  consideration

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Promises Enforceable Without Consideration

• Pledges and subscriptions
• Promissory Estoppel
• Rely on what a person said
• Elements
• Promise must bring action or forbearance
• One who gave no consideration must have relied on
  the promise
• Injustice can be avoided only enforcing the
  promise

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Consideration Quiz

• Draw a box 2x2
• 1 A sells a car to B for 5000
• 2 B sells stereo to A for 150
• 3 A gives B an engagement ring
• 4 A gives B 50 for returning her lost jacket
  B received the 50 the day after the jacket was
  returned
• 5 A gives B 100 for saving his sons life (B is
  a police officer)

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Legality
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Agreements that Violate Statutes

• Civil Criminal Statutes
• Agreements to commit a crime/tort are illegal
• Usury Statutes
• State sets a max interest rate
• Interest
• Fee the borrower pays to the lender for using the
  money
• Usury
• Charging too high of an interest rate

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• Truth in Lending Act
• Lender is required to make clear the annual
  percentage rate (APR).
• Gambling Statutes
• Discuss state laws
• Lottery vs Poker
• Sunday Statutes
• Illegal to perform certain contracts on Sunday

54
Licensing Statutes

• License - legal document stating that the holder
  has permission from the proper authorities to
  carry a certain trade or profession
• (Example) - If license is only to raise revenue
  (not to show competence) contracts made are valid
  not void (Person w/out license subject to arrest
  )

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Agreements Contrary to Public Policy

• Agreement in unreasonable restraint of trade
• Types

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Agreements Contrary to Public Policy

• 1) Outright contracts not to compete - seller of
  a business may sign a restrictive covenant which
  would be upheld by the court
• Restrictive covenant - agreement not to compete
  in a region for a period of time
• Only legal for a short period of time and small
  geographic region

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Agreements Contrary to Public Policy

• 2) Price Fixing - competitors agree on certain
  price ranges within which they will sell their on
  prices
• Competitors may agree to sell a product at a
  particular price
• Manufacturers may set a price at which a product
  must be sold
• Price fixing is NOT enforced by the court

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Agreements Contrary to Public Policy

• 3) Agreements to defeat competitive bidding
• Bid - offer to buy or sell goods or services at a
  stated price
• Law often requires govt to contract public works
  or buy goods or services through competitive
  bidding
• Agreement to bid above a certain price is illegal

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Agreements Contrary to Public Policy

• 4) Agreements to obstruct justice - any
  agreement to interfere with administration of
  justice (Example - protect someone from
  arrest giving false testimony bribing)

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Agreements Contrary to Public Policy

• 5) Agreements Inducing Breach of Duty or Fraud -
  contracts that try to influence public officials
• 6) Agreements Interfering with Marriage -
  contracts that discourage, harm, or interfere
  with good family relations

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Effect of Illegality

• If the legal part can be separated from illegal
  part, the court will separate
• If the legal part cant be separated from illegal
  part, the contract is void