Chapter 11 Nature and Classes of Contracts

1. Chapter 11Nature and Classes of Contracts Twomey, Business Law and the Regulatory Environment (14th Ed.)

2. Landlord (Lessor) Tenant(Lessee) Parties agreeing upon occupation of a building for money (a lease) Vendor Vendee Parties to a sales contract Parties to a Contract[11-1] General parties to a contract Promisor (Obligor) Promisee (Obligee) Insurer Insured Shipper Carrier Parties to an insurance policy Parties to a transportation contract Parties may be: Individuals Partnerships Corporations Governments Chapter 11

3. Classes of Contracts [11-2] FORMAL Contracts under seal, contracts of record, negotiable instruments INFORMAL All other contracts EXPRESS Spoken or written words IMPLIED Created by law based on acts or conduct of parties VOIDABLE Circumstances surrounding execution or lack of capacity allows rejection at option of one party VOID Without legal effect VALID Binding and enforceable EXECUTORY Something remains to be done EXECUTED Completely performed UNILATERAL Only one party is obligated to perform after contract formation VOID Gives a right to one party to enter into a second contract at a later date BILATERAL One promise given in exchange for another Chapter 11

4. Types of Contracts [11-3] Express Stated orally or in writing Implied No express agreement; services rendered Valid In compliance with the laws of formation and subject matter Voidable Execution or capacity issues in formation Void Illegal subject matter incapacity (declared insane) of a party Executed Promises performed Executory Contract negotiated and signed but not performed Bilateral Promise for a promise Unilateral Promise for a performance Option Separate contract to have an offer held open Quasi Contract Right to recovery under implied contract to prevent unjust enrichment Chapter 11

5. Contractual Liability Unjust Enrichment No contract Avoided contract Void agreement Intent Intent Offer Acceptance Acceptance Communication Communication Quasi contract Contract Express Formal Executory Bilateral Implied Informal Executed Unilateral Option First refusal Chapter 11

6. Valid, Voidable, and Void Contracts [11-4] Valid Binding and enforceable Voidable Binding until voided by one of the parties Defenses • Statue of Fraud • Mistake • Fraud • Capacity Void Never existed No legal effect Subject matter illegal, or one party legally declared insane Chapter 11

7. Contracts } Parties This contract is executed between the Lookout Alarm system, herein called System, of 276 West Jackson Street, Phoenix, Arizona, and A.J. Armstrong, herein called Homeowner, of 737 Inwood Drive, Phoenix, Arizona. Installation System agrees to install a burglar alarm system at the above address of the homeowner, in accordance with the specifications that are attached hereto. Payment Homeowner agrees to pay System for the above installation the sum of $4,863.00; $663.00 being paid upon execution of this contract and the balance of $4,200.00being paid within 90 days following satisfactory completion of the work by System. 1 } 2 } 3 } 4 A.J. ArmstrongA.J. Armstrong July 1, 2001Date Lookout Alarm System by S.J. McRory S.J. McRory, President July 1, 2001 Date } 5 Chapter 11

8. Chapter 11 Summary A contract is a binding agreement between two or more parties. A contract arises when an offer is accepted with contractual intent (the intent to make a binding agreement). Chapter 11

9. Chapter 11 Summary [2] Contracts may be classified in a number of ways according to form, the way in which they were created, validity, and obligations. With respect to form, a contract may be either informal or formal, such as those under seal or those appearing on the records of courts or administrative agencies. Chapter 11

10. Chapter 11 Summary [3] Contracts may be classified by the way they were created as those that are expressed by words—written or oral—and those that are implied or deduced from conduct. The question of validity requires distinguishing between contracts that are valid; those that are voidable; and those that are not contracts at all but are merely void agreements. Chapter 11

11. Chapter 11 Summary [4] Contracts can be distinguished on the basis of the obligations created as executed contracts, in which everything has been performed, and executory contracts, in which something remains to be done. The bilateral contract is formed by exchanging a promise for a promise, so each party has the obligation of thereafter rendering the promised performance. Chapter 11

12. Chapter 11 Summary [5] In the unilateral contract, which is the doing of an act in exchange for a promise, no further performance is required of the offeree who performed the act. The only obligation is that of the promissor. Chapter 11

13. Chapter 11 Summary [6] In certain situations, the law regards it as unjust for a person to receive a benefit and not pay for it. In such a case, the law of quasi contracts allows the performing person to recover the reasonable value of the benefit conferred on the benefited person even though no contract between them requires any payment. Chapter 11

14. Chapter 11 Summary [7] Unjust enrichment, which a quasi contract is designed to prevent, sometimes arises when there was never any contract between the persons involved or when there was a contract, but for some reason it was avoided or held to be merely a void agreement. Quasi-contractual recovery is not allowed merely because someone loses money. Chapter 11