Making a Contract Enforceable

1. Making a Contract Enforceable Was Consideration given? Was there Capacity to Contract? Legal Subject Matter? Was there Genuine Assent? Was the Statute of Frauds Satisfied? OBE 118, Section 3 Fall 2004

2. Basic Elements of a Contract Agreement (or “Mutual Assent”) Consideration Capacity Legality Genuineness of assent Writing and Form

3. Party B Party A Reciprocal Consideration We call the requirement “reciprocal consideration” because for each promise there must be corresponding consideration that makes that promise enforceable

4. Consideration: Legal Value • A legal detriment • Dollar cost • Doing or promising to do something that there was no prior legal duty to perform • No requirement that each side give up something of equal value

5. Consideration Complications • Pre-existing duty • Unforeseen difficulties situations • Past consideration • Illusory promises

6. Promissory Estoppel Issue: Is there another means to enforce the promise? Elements of Promissory Estoppel Fact pattern: A party relies on a promise to their detriment but no consideration was given. 1) A promise 2) Justifiable reliance on the promise 3) Substantial and definite reliance 4) Enforcing the promise serves the interests of justice

7. Capacity Issues: 1) Minority 2) Mental Incompetence 3) Intoxication

8. Legality 1. Contracts calling for an illegal or tortious act Legality is our fourth element of a contract and failure to meet this element often renders a contract void 2. Contracts against public policy 3. Licensing Statutes

9. Illegal Acts 1. Usury - often not a void contract 2. Gambling - void Contracts calling for violation of federal or state statutes are void 3.Licensing statutes – void or voidable

10. Restraint of Trade Violation of Antitrust Laws - Void Covenants Not to Compete Contracts that interfere with or inhibit free trade are usually against the public interest A covenant not to compete can be valid and enforceable if it is reasonably limited in time, scope, and distance. 1. Part of a sale of a business 2. Part of an employment agreement

11. Genuineness of Assent Genuine Assent is our fifth element of a contract and requires that their be a true objective meeting of the minds.

12. The Defenses of Genuine Assent Many defenses make up this “element” • Mistakes • Fraud • Undue Influence • Duress Genuine Assent is our fifth element of a contract and requires that their be a true objective meeting of the minds.

13. Bilateral Mistakes • Bilateral: Both parties • Material: Important and central to contract • Fact: Not value, opinion, etc. Must be a bilateral mistake of a materialfact! • EFFECT: • Example: Different subject matter

14. Fraud • Fraudulent in the factum Tricked into signing wrong document • Fraudulent Misrepresentation False statement to induce signing correct document Basic Elements to be ___________ Misrepresentation of a material fact Intent to deceive Justifiable reliance Injury from the reliance

15. Writing and Form “_____________” 1) Interests in land (sale, lease, mortgage, easement) Some contracts must be evidenced in writing to be enforceable. This is the last “element” of a contract. 2) > 1 Year performance 3) Paying debt or performing duty of another 4) Sale of Goods >$500 5) Promises for marriage 6) Executor of estate assuming debt personally

16. “Written Evidence” 2) Contain essential terms of contract Parties Subject Matter Consideration Quantity 1) “Signed” by party against whom enforcement sought

17. Parol Evidence Rule When a contract is expressed in writing, oral negotiations, promises, or terms prior to the writing are not usable to prove the contract’s terms “Exceptions” 1) Later changes* 2) Evidence to show contract is voidable or void* 3) Unclear terms- to show meaning 4) Incomplete contract- to fill gaps 5) Show obvious or gross clerical error

18. A Valid Enforceable Contract Mutual Agreement Consideration Capacity Legality Genuineness of Assent Writing