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LAW II

LAW II. CONTRACT LAW. INTRODUCTION. CONTRACT: An agreement between two or more parties that creates obligations enforceable by law. A contract is created any time things of value are exchanged.

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LAW II

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  1. LAW II CONTRACT LAW CONTRACT LAW

  2. INTRODUCTION • CONTRACT: An agreement between two or more parties that creates obligations enforceable by law. • A contract is created any time things of value are exchanged. • Contract law was developed to support and enforce promises that people make in reliance on the promises or acts of others. CONTRACT LAW

  3. INTRODUCTION • A contract gives reasonable assurances to all parties that the agreements will be fulfilled. • The law provides remedies for those who suffer losses due to other’s failures to keep contractual promises. CONTRACT LAW

  4. ELEMENTS OF A CONTRACT • There are (~) seven major requirements that must be satisfied before courts will treat a transaction as a legally enforceable contract: offer, acceptance, genuine assent, legality, consideration, capacity, and sometimes writing. CONTRACT LAW

  5. OFFER • OFFER: A proposal by an offeror to do something, provided the offeree does something in return. • OFFEROR: The person who makes an offer. • OFFEREE: The person to whom the offer is made. • There are three tests that a valid offer must pass: CONTRACT LAW

  6. OFFER • Contractual intent must be present in the offer. • Jest offers are not valid; therefore, an offer cannot appear to be a joke. • Statements made in anger or terror are not legally valid offers. • Preliminary negotiations such as newspaper ads are actually invitations to negotiate, not offers. CONTRACT LAW

  7. OFFER • Social agreements do not create legal obligations. CONTRACT LAW

  8. OFFER • The offer must be communicated to the offeree. • A person who is not the intended offeree cannot accept the offer even if they share an identical name. • Rewards cannot be accepted by someone who has never seen or heard the offer. CONTRACT LAW

  9. OFFER • The essential terms of the offer must be complete and definite: price, quantity, terms of payment, date of delivery, etc. • Offers may be terminated by reasons of revocation (withdrawal by offeror before it is accepted), time, rejection, counteroffer, death/insanity, and/or destruction of subject matter. CONTRACT LAW

  10. ACCEPTANCE • ACCEPTANCE: When an offeree agrees to a proposal. • The terms of the offer must be definite and accepted without change (by the party to whom it was intended to be offered). CONTRACT LAW

  11. GENUINE ASSENT • GENUINE ASSENT: When a valid offer is met by a valid acceptance and the agreement is not based on duress, undue influence, mistake, misrepresentation, or fraud. • This element is often referred to as the “meeting of the minds.” CONTRACT LAW

  12. GENUINE ASSENT • DURESS: When one party uses an improper threat or act of coercion to obtain an expression of agreement. • If duress occurs, the contract is voidable. CONTRACT LAW

  13. GENUINE ASSENT • UNDUE INFLUENCE:When one party to the contract is in a position of trust and wrongfully dominates the other party. • If undue influence occurs, the contract is voidable. • Possible relationships include attorney/client, husband/wife, parent/child, physician/patient, etc. CONTRACT LAW

  14. GENUINE ASSENT • Mistake is categorized as either unilateral or bilateral (mutual). • UNILATERAL MISTAKE: Occurs when only one party holds an incorrect belief about the facts related to a contract. • This generally does not affect the validity of a contract. • Therefore, contracts should always be read carefully before signing. CONTRACT LAW

  15. GENUINE ASSENT • BILATERAL MISTAKE: When both parties have an incorrect belief about an important fact. • If a mutual mistake of fact occurs, the contract is void. CONTRACT LAW

  16. GENUINE ASSENT • Misrepresentation is categorized as either innocent or fraudulent. • INNOCENT MISREPRESENTATION: When a party to a contract does not know that a statement they made is untrue. • FRAUDULENT MISREPRESENTATION: When a party to a contract knows that a statement they made is untrue. CONTRACT LAW

  17. GENUINE ASSENT • In both of these situations, the contract that results is voidable by the party to whom the misrepresentation is made. • Statements are considered misrepresentations by law only if: • The untrue statement is one of fact (not opinion) or there is active concealment. • The statement is material to the transaction or is fraudulent. • The victim reasonably relied on the statement. CONTRACT LAW

  18. GENUINE ASSENT • FRAUD: Based on misrepresentation but also done with intent which results in injury. • Therefore, misrepresentation must first be proven to show fraud plus the elements of intent and injury. • If a victim can show fraud, courts will grant the victim assistance beyond rescission: compensatory damages and possibly punitive damages. CONTRACT LAW

  19. LEGALITY • LEGALITY:The contractual element stating that the basis of the agreement by the parties must be legal in nature. • An agreement to pay someone to commit a crime/tort cannot be a contract. • Contracts involving gambling debts are usually void except for a few areas in the U.S., notably Las Vegas and Atlantic City. CONTRACT LAW

  20. LEGALITY • But most states do have legalized various forms of gambling under regulated conditions such as casinos, state-run lotteries, and bingo games. CONTRACT LAW

  21. CONSIDERATION • CONSIDERATION:The exchange of things of value that creates the legal bond between the parties to the contract. • Examples include money, products, services, bartered goods, etc. • A promise to make a gift is generally not legally enforceable because there is no consideration. CONTRACT LAW

  22. CONSIDERATION • An exception for equal consideration is promises made to charitable organizations. • Courts generally enforce such promises provided the charity states a specific use for the money and actually acts in reliance on the pledge. CONTRACT LAW

  23. CAPACITY • CAPACITY: The legal ability to enter a contract. • The age of majority to contract in most states, including Michigan, is 18 years old. • Minors may make contracts, however. • As a general rule, minors cannot be forced to carry out their promises and may disaffirm (cancel) or refuse to honor their contracts. CONTRACT LAW

  24. CAPACITY • This rule is designed to protect minors from being taken advantage of because of their age and lack of experience. • Minors who cancel contracts usually must return any goods or consideration still in their possession. • Minors are typically held responsible for contracts that involve necessaries such as food, clothing, shelter, or medical aid. CONTRACT LAW

  25. CAPACITY • Many stores require minors to have a parent or other adult cosign any major contract. • The adult cosigner is responsible for making payments if the minor does not honor the deal. • In most states, a minor who continues making payments on a contract after reaching the age of majority is considered to have ratified the contract. CONTRACT LAW

  26. CAPACITY • Once the contract has been ratified, it can no longer be canceled without some type of penalty. • A sufficient mental ability to understand contracts is also required. CONTRACT LAW

  27. CAPACITY • People who are mentally incapacitated (insanity, mental illness, mentally challenged) and/or so intoxicated (drunk, high) ordinarily lack the mental ability to enter into a contract. • When an extremely intoxicated person sobers up, they have the option of canceling or ratifying a contract made while inebriated. CONTRACT LAW

  28. WRITING • The following agreements must be placed in WRITINGto be fully enforceable in court: • Contracts for the sale of land or real estate; • Contracts for the sale of goods priced at $500 or more; • Contracts for services that require more than one year to complete; CONTRACT LAW

  29. WRITING • Agreements to give something of value in return for a promise of marriage; and • Agreements to pay another person’s debt. • Most contracts are actually made through spoken words or possibly nonverbal actions. CONTRACT LAW

  30. WRITING • An oral contract is just as valid as a written contract but it’s always preferable to have a contract in writing and signed by each party. • This way it’s much easier to prove the terms of the contract with specificity. CONTRACT LAW

  31. WRITING • EXPRESS CONTRACT: Stated in words and may be either oral or written. • IMPLIED CONTRACT: Originates from the actions of the parties. CONTRACT LAW

  32. CLASSWORK CHAPTER 6: OFFER & ACCEPTANCE • What’s Your Verdict? pg. 107 • 6-1 Assessment, pg. 111 (1-6, 7a, 8, & 9) • What’s Your Verdict? pg. 112 • 6-2 Assessment, pg. 115 (1-7, & 13-14). • 6-3 Assessment, pg. 119 (1-2, & 6-7). CONTRACT LAW

  33. CLASSWORK CHAPTER 7: GENUINE ASSENT • What’s Your Verdict? pg. 125 • 7-1 Assessment, pg. 127 (1-3, 7, & 9) • 7-2 Assessment, pg. 133 (1-2, 4-5, & 7-8). CHAPTER 8: CONSIDERATION • What’s Your Verdict? pg. 139 • What’s Your Verdict? pg. 145 • What’s Your Verdict? pg. 147 CONTRACT LAW

  34. CLASSWORK CHAPTER 9: CAPACITY • What’s Your Verdict? pg. 155 • 9-1 Assessment, pg. 159 (3-5, & 7-8) • What’s Your Verdict? pg. 160 • 9-2 Assessment, pg. 163 (1-2 & 6-7). CHAPTER 10: LEGALITY • 10-1 Assessment, pg. 174 (1 & 5). CONTRACT LAW

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