Contracts

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Agreement (Contracts)

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includes an offer and an acceptance. One party must offer to enter into a legal agreement and another party must accept the terms of the offer

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Consideration (Contracts)

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something of value received or promised to convince a person to make a deal

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Contractual Capacity (contracts)

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Law must recognize them as possessing characteristics that qualify them as competent parties

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Legality (Contracts)

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The Contract’s purpose must be to accomplish some goal that is legal

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What are the two Defenses of Enforceability?

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Genuineness of Assent
Form

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Genuineness of Assent (Contracts)

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the apparent consent of both parties must be genuine

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Implied (Contracts)

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based on conduct
Plaintiff furnished service or product.
Plaintiff expects to be compensated

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Formal (Contracts)

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require special form or method to be enforceable

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Informal (Contracts)

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all other contracts that don't require special form or method to be enforceable

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Executory performance

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at least one side has not performed

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Voidable Contract.

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-that is legally defective and can be avoided (rescinded) by one of the parties.

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Void Contract.

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-No contract at all.

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Unenforceable Contracts

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one that cannot be enforced by legal defenses against it, failed to satisfy legal requirement

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Quasi contracts

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– imposed to avoid the unjust enrichment of one party at the expense of another
Limitations on quasi-contractual recovery.
(unnecessarily as a result of misconduct or negligence
Cannot be used when an actual contract exists.

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What is an Offer?

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An offer is a promise or commitment to perform or refrain from performing some specified act in the future

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What are elements necessary for an offer?

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Intention.
Reasonably definite terms.
Communication to Offeree.

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What are 4 things are typically not offers?

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Negotiations
Agreements to Agree
Good Intentions
Opinions Preliminary

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How can the Offer be Accepted?

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Termination
Acceptance

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How can the Contract be Terminated?

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By Act of the Parties.
Revocation by the Offeror (unless irrevocable).
Rejection by the Offeree (or counteroffer).
Operation of Law: lapse of time, destruction, death or incompetence, supervening illegality.

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Mailbox Rule

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“Offeree accepts offer when the acceptance is dispatched to Offeror in the form it was received, unless offer requires a different method (e.g., Fed-Ex, or receipt by Offeror).

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What are the exceptions to the MailBox Rule?

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Exceptions:
1. Acceptance is not properly dispatched.
2. Offer stipulates not accepted until received.
3. Offeree rejects then accepts. First communication received determines whether contract is formed.

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When does revocation come into effect?

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when it is received by te offeree

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Mirror Image Rule

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Offeree must unequivocally accept offer.
Additional terms may be considered a counteroffer.

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Acceptance (Contract)

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Voluntary act by Offeree that shows assent to terms of original offer.

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Acceptance by Silence.

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Silence cannot constitute acceptance

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What are the elements of Consideration (contracts)

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Elements:
Something of legally sufficient value given in exchange for a promise
promise, forebearance or performance
That is bargained for between the parties.
(cannot be a gift)

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What types of Contracts lack consideration?

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Pre-Existing Duty.
Unforeseen Difficulties.
Rescission and New Contract.
Past Consideration.
Illusory Promises.

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Promissory Estoppel

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doctrine applies when a person relies on the promise of another to her legal detriment.

There must be:
Clear and definite promise with substantial reliance.
Justice is served by enforcement of the promise.

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Contractual Capacity

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Full competence.
No competence.
Limited competence.

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Disaffirmance

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the legal avoidance or setting aside

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Minors

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Definition: A contract can be dis affirmed at any time during minority or for a reasonable period after the minor comes of age.
.

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Intoxicated persons

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must prove that intoxication clouded their judgment and they didn’t understand the legal consequences

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Mentally Incompetent

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Void.
If a person has been adjudged mentally incompetent by a court of law and a guardian has been appointed.
Voidable.
If the person does not know he or she is entering into the contract or lacks the mental capacity to comprehend its nature, purpose, and consequences.
Valid.
If person is able to understand the nature and effect of entering into a contract yet lacks capacity to engage in other activities.
Lucid Interval.

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Minor's obligation to disaffirmance

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subject to the contract, provided the goods are in the minor’s possession or control.
In increasing number of states, the minor must restore the adult to the position held before the contract was made.

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Exceptions to Minors

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Neccessaries
Insurance.
Not viewed as necessaries, so minor can disaffirm contract and recover all premiums paid.
Loans.
Seldom considered to be necessaries.
Exception:
Loan to a minor for the express purpose of enabling the minor to purchase necessaries.

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Ratification of a Minor

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Occurs when a minor, on or after reaching majority, indicates (expressly or impliedly) an intention to become bound by a contract made as a minor.

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Contracts to Commit a Crime.

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Usury.
Gambling (online).
Sabbath (Sunday) Laws.
Licensing Statutes: doctors, lawyers, engineers, real estate brokers, etc.
(if contract does not bar, then must look at underlying reasonableness)

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Contracts Against Public Policy

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Covenants Not to Compete in Sale of Ongoing Business.
Covenants Not to Compete in Employment Contracts (valid if reasonable limits of geography and time).
Exculpatory Clause
(release a party from liability in the event of monetary or physical injury no matter who is at fault
Fraud, Duress or Undue Influence
(induced to enter an illegal bargain through fraud, duress, or undue influence, then it is not enforceable)

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Examples against Legality

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Contracts that commit Crimes
Contracts against Public Policy

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Exculpatory Clause

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Release a party in the event of injury or damages,
Regardless of who is at fault

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Elements of Fraud

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i. A misrepresentation of fact
ii. Must be intent to deceive
Innocent party must justifiably rely on the misrepresentation.
Plaintiff must have suffered a legal injury.

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Types of Mistakes in the Contract

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Mistake of Value (or Quality).
Contract is enforceable.
Unilateral Mistake (of Fact).
Party does not have the right to cancel contract unless:
(1) the non-mistaken party knew or should have known about the mistake, or
(2) there is a clerical error.

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Bilateral Mistakes

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if both are mistaken either one can cancel the contract.

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What Contracts must be in writing to be enforceable? (5)

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a. Contracts involving land
b. Contracts over a year
c. Collateral Contracts
d. Promises made in consideration of marriage
e. Sale of goods of 500 or more

Exceptions:
Partial performance, detrimental reliance.
Promissory Estoppel.

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What must be contained in the writing.

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1. Essential terms only.
2. Must name parties.
3. Be signed by party against whom enforcement is sought (usually Defendant).

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Assignments

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Transfer of contractual rights to a 3rd party (assignee).
The assignee has the right to demand performance from the other original party (Obligor) to the contract.
Cannot Assign rights for personal services or when obligor’s performance changes.

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Delegations

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Transfer of duties to a 3rd party (Delegatee) by Delegator.
Delegatee owes duty to original party in contract.
Delegator is still liable for performance of duty.

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What are the differences between incidental and intended 3rd parties

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Original parties to K intend at the time of contracting that the contract performance directly benefit a 3rd party. After rights vest, 3P can sue for breach.

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Reasonable person test

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if a reasonable person in the position of the beneficiary would believe that the promise intended to confer on the beneficiary the right o bring suit to enforce the contract

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What rights cannot be assigned?

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when a statute expressly prohibits
when contract expressly prohibits
when a contract is personal
when assignment will increase risk or duties of the obligator

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What things cannot be prohibited from assignment?

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real estate
negotiable instrument
receive damages for breach of a contract

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Duties that cannot be delegated

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persona skill or talents
special trust has been placed in the obligor
when performance by a third party will vary materially
when the contract expressly prohibits delegation

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When can third party enforce a contract?

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when the right of the third party have vested
taken effect and cannot be taken away

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When do third party rights vest?

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demonstrates manifest assent to contract

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When does the Contract Discharge

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a. Performance
b. Material Breach
c. Discharge by Agreement
By operation of law
c. By failure of Condition

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What are some of ways you can perform in a Contract?

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Complete Performance: perfect performance under the contract.
Substantial Performance: technically a minor breach but as long as in good faith, the non-breaching party remains liable to pay.
Satisfaction Contract: performance is conditioned on reasonable satisfaction.

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Types of Satisfaction

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Conditional vs. test of satisfaction of a reasonable person

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Material Breach

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Performance is not deemed substantial

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Anticipatory Repudiation

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non breach party can collect damages before performance

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Types of Discharge by Agreement

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i. Rescission
ii. Novation
iii. Accord and Satisfaction

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Discharge by operation of law

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1. Contract alteration
2. Statues of Limitations
3. Bankruptcy
4. When performance is impossible

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Compensatory Damages?

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Compensates injured party (Plaintiff).
Plaintiff must prove actual damages caused by breach. Amount:
Generally: difference between Defendant’s promised performance and actual.
Sale of Goods: difference between the contract price and market.
Sale of Land: Specific performance?
Construction Contracts: Depends on the stage of construction.

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Consequential Damages

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Foreseeable damages that result from breach of contract.
Caused by other than breach of contract.

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Nominal

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Small

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Punitive

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Deter

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Mitigation of Damages

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Injured party has a legal duty to mitigate damages.

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Liquidated Damages

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paid a specific amoutn in case it is breached

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Recovery based on Quasi Contract

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Benefit was conferred on the other party.
Party conferring benefit expected to be paid.
Party seeking recovery did not volunteer.
Retaining benefit without payment would be unjust enrichment.

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4 Sources of American Law

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U.S Constitution
Case Law
Administrative agencies
Statutes

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Statutes

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laws enacted by Congress

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Adjucate

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render a judicial decision

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Remedies at Law vs Remedies in Equity

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Money vs Specific Performance

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Substantive vs Procedural

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regualte adnd create rights

protect rights

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Civil vs Criminal

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rights between people and government

rights that have to do with wrongs commited against society

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Dormant Commerce clause

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balance states interest with right for federal government to regulate itnerstate commerce

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Preemption clause

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Congress chooses to act exclusively in a concurrent area, then federal is supreme

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Supremacy

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when there is a conflict between states and federal, state law is rendered invalid

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Restrictions on Commercial speech are ok if three things are established:

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1. must implement a substantial gov. interest
2. must directly advancethat interest
3. must go no further than to advance the interest

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restrictions to speech

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obscenity
defamatory
fighting words

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Fifth Amendment

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prohibits compulsory self incrimination

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Tenth Amendment

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all powers to the states that have not been expressly delegated to the national government.

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State's police powers

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Police powers include right to regulate health, safety, morals and general welfare.
Includes licensing, building codes, parking regulations and zoning restrictions.

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Article I Section 8:

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Congress has the power to “lay and collect taxes, duties, imposts and excises.”

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Civil vs Criminal

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rights between people and government

rights that have to do with wrongs commited against society

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Dormant Commerce clause

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balance states interest with right for federal government to regulate itnerstate commerce

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Preemption clause

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Congress chooses to act exclusively in a concurrent area, then federal is supreme

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Supremacy

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when there is a conflict between states and federal, state law is rendered invalid

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Restrictions on Commercial speech are ok if:

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must implement a substantial gov. interst
must directly advancethat interest
must go no further than to advance the interest

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Establishment clause:

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o state-sponsored religion or preference for one religion over another.

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Free exercise

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person can believe what he wants, but actions may be unconstitutional.

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Substantive: f

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focuses on the content or the legislation (the right itself).

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Procedural:

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Procedural: any government decision to take life, liberty or property must be fair. Requires: Notice and Fair Hearing.

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Fundamental Right:

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Fundamental Right: requires compelling state interest.

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Non-Fundamental:

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rational relationship to state interest.

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14th amendment

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a state may not “deny to any person within its jurisdiction the equal protection of the laws

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4th amendment

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protects against unreasonable search and seizures.