Introduction to Contracts and Contract Terminology

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Chapter 8

• Introduction to Contracts and Contract Terminology

2
What is a Contract?

• A set of promises
• An agreement
• Private law
• Enforceable by a court
• Voluntary creation of obligations where none
  existed before

3
Contract Law Sources

• Common LawCourt decisions
• Differs somewhat from state to state
• Goods
• Need for uniformity
• Uniform Commercial Code
• State law similar in all states

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Objective theory of contracts

• Whether there is a contract depends on if a
  reasonable person would think there is one based
  on words and conduct

5
Lucy v. Zehmer (p. 252)

• Farmers out drinking with wives
• Zehmer Ill sell you the farm for 50,000
• Wrote up a deal Ill sell.
• Lucy refused to sign
• Wrote up again Well sell.
• Lucy wants farm, Z says a joke

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Lucy v. Zehmer

• Should Zehmer be required to sell?
• Factors?
• Reason for outcome?

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Contract Basic Reqs.

• Agreement (Ch. 9)
• Consideration (Ch. 9)
• Having something at stake
• Capacity (Ch 10.)
• Legal ability to contract
• Legality (Ch. 10)
• Hit man contract is void

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Contract Parties

• Offeror Makes the offer to the offeree
• Offeree One who receives an offer.and can then
  accept, reject, or ignore
• In law, an or usually does something to an ee

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Contract Characteristics

• Bilateral v. Unilateral
• Addresses how the contract is formed
• What does offeror seek from offeree in order to
  form the contract?
• Affects when contract comes into existence

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Bilateral v. Unilateral

• Bilateral Seeks a promise from the offeree
• If youll promise to repair my car, Ill pay you
  350.00.
• Unilateral Seeks action only
• I dont care if you do it or not, but if you
  shovel my driveway today, Ill pay you 25.
• Most business contracts are which?

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Unilateral examples

• Rewards
• Car dealership promotion
• If the last 3 numbers of your SS match the last
  three numbers of the VIN, well give you 100.
• What is this?
• Must they pay?

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Bilateral v. Unilateral When contract formed

• Bilateral Contract is formed upon the return
  promise
• Once formed, both obligated
• Unilateral Contract is not formed until the
  action is done
• No obligation, till act is done
• Once done, the offeror is obligated

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Classifications

• Formal v. Informal
• Express Created by words
• Can be oral or written
• Most are created this way
• Implied in fact Based on conduct and reasonable
  expectations
• Restaurant
• Self-serve gasoline

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Other characteristics

• Executed v. executory
• Based on timing
• Void v. Voidable
• Voidable Void able
• One can make it void
• Unenforceable
• Void v. unenforceable

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Quasi Contract

• No contract, but the court implies one
• Aka Implied in law contract
• Based on preventing unjust enrichment.

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Contract Interpretation

• A law question (judge decides)
• Plain meaning rule
• Specific terms qualify general terms
• Handwritten or typed controls over pre-printed
• Ambiguities against the drafter
• Words control over numbers
• Words?advance princ. object

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Oral Contracts

• Most oral contract are legally valid and
  enforceable
• Oral contracts are hard to prove
• It will be difficult to enforce
• But, you can be dragged into court by the other
  party
• Enforceable.but beware