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,duress, 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

7. 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

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

10. Writing must identify: • Place • Subject Matter • Terms • Signature of both parties • Date • Parties • Price • Intent of parties

11. 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 didn’t 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)

14. Parol Evidence Rule • Courts assure ALL terms are written into the agreement.

15. Changing the Writing • Read entire document • If you don’t agree with something, then cross it out and both parties initial it • Write in promises • Refuse to sign if you don’t agree contract

16. Acceptance Unqualified willingness to go along with the offer

17. 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

18. 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 • Action=Acceptance • Silence cannot be a method of acceptance

19. 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

22. 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 don’t understand or have not read • This applies to signing a contract in a language you don’t 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

24. 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

25. Fraud • Deliberatedeception for an unfair or unlawful gain • Define each word in bold

26. 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

27. 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

28. 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

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

30. Undue Influence • Unfair and improper persuasive pressure within a relationship of trust

31. 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

33. 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 - can’t 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

37. 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

39. 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

40. Consideration

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

42. 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

43. 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

44. Agreements without Consideration • Promise to make a gift • Gifts have no consideration • Cannot be enforced • Gift that has been given? • Doesn’t 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

47. Adequacy of Consideration • Courts don’t look at adequacy or value of an agreement unless it is unconscionable • Unconscionable? • So lopsided that the average person would not agree to terms

48. 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

49. 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

50. 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)