Jurisprudence Ch. 2

Front 1

ELEMENTS OF A CONTRACT

Back 1

- Competent parties
- Legal subject matter
- Offer
- Acceptance
- Consideration
- Mutual Agreement
- and sometimes - Required form

Front 2

HOW IS A CONTRACT DIFFERENT FROM A GIFT AND VICE VERSA?

Back 2

A contract is a legally binding agreement
A gift is not

Front 3

OBJECTIVE THEORY OF CONTRACTS (RULE)

Back 3

The intent will be determined, in effect, by asking "What would a reasonable person have intended?"

Front 4

RULES OF INTERPRETATION

Back 4

- Plain / common meaning rule
- Rule of conflicting provisions
- Rule against ambiguities
- Rule of severability
- Parol evidence rule / exceptions

Front 5

DEFENSES

Back 5

- Elemental
- Performance
- Impossibility
- Frustration of performance
- Frustration of purpose
- Sovereign immunity
- Statute of Limitation (S/L) 4-6 years
- Release
- Res judicata

Front 6

REMEDIES

Back 6

- Damages
- Rescission
- Restitution
- Specific performance
- Reformation

Front 7

DAMAGES

Back 7

- Compensatory damages
- General compensatory
- Nominal
- Liquidated

- Punitive damages (tort actions) are, as a general rule, not available in contract actions

Front 8

METHODS OF CLASSIFICATION

Back 8

- By means of formation
- By stage of performance
- By enforceability

Front 9

CLASSIFICATION BY MEANS OF FORMATION

Back 9

- Unilateral or Bilateral
- Express or Implied
- Formal or Informal

Front 10

UNILATERAL

Back 10

Acceptance requires performance

Front 11

BILATERAL

Back 11

Acceptance requires only a promise

Front 12

EXPRESS

Back 12

Terms are spelled out

Front 13

IMPLIED

Back 13

At least one term is inferred from the conduct of the parties

Front 14

IMPLIED-IN-FACT CONTRACT

Back 14

There is an expressed intention
The obligation is based on conduct rather than on expressed agreement
- Plaintiff furnished a service or property
- Plaintiff reasonably expected to be paid

Front 15

FORMAL

Back 15

Complies with stated requirements, such as to be in writing

Front 16

INFORMAL

Back 16

Has no stated requirements of formality

Front 17

CLASSIFICATION BY STAGE OF PERFORMANCE

Back 17

Executed -- Completed

Executory -- Not yet completed

Front 18

CLASSIFICATION BY ENFORCEABILITY

Back 18

- Valid

- Voidable: There is some reason one party may be able to get out of it, e.g., declared incompetent after the contract was signed

- Void: There is no contract, e.g., one of the parties had already been declared incompetent before the attempted contract was signed

Front 19

ELEMENTS OF A CONTRACT (7)

Back 19

- Competent parties
- Legal subject matter
- Offer
- Acceptance
- Consideration
- Mutual Agreement
- and sometimes - Required form

Front 20

1. COMPETENT PARTIES

Back 20

- Minority
- Other possible incompetence

-- Ratification may be a possibility: making the no good or voidable bargain good

Front 21

2. LEGALITY OF THE SUBJECT MATTER

Back 21

Has to be legal
Cannot be a contract to kill someone, sell drugs, prostitution, etc.

Front 22

3. VALIDITY OF THE OFFER

Back 22

- What constitutes an offer?
An offer has to have sufficient specificity. Must have a period of time in which it is valid

- What does not?
Advertisements do not constitute an offer, but an invitation to deal. The offer is what you are willing to pay. A wish does not constitute an offer

- How is an offer terminated?
You can say it "I terminate the offer"
You can put a termination date

Front 23

4. VALIDITY OF ACCEPTANCE

Back 23

Mirror Image

-- or Counter - offer

Front 24

5. VALIDITY OF CONSIDERATION

Back 24

Something of value for something of value
- A promise
- Money
- A service
- Detrimental reliance

Front 25

5. VALIDITY OF CONSIDERATION IS SUFFICIENT WHEN

Back 25

- Detrimental to him who gives / promises it

- Beneficial to him who receives / is promised it

Front 26

5. VALIDITY OF CONSIDERATION IS INSUFFICIENT WHEN

Back 26

- Preexisting duty
- Moral obligation only
- Promised thing has occurred

Front 27

6. MUTUALITY OF AGREEMENT

Back 27

Meeting of the minds as to the subject matter

Parties are talking about the same thing

Front 28

7. FORMALITY

Back 28

Is there a requirement for a writing under --

- A statute of frauds?
- The Uniform Commercial Code (UCC)?

If there is not a requirement for writing, it is not enforceable

Front 29

OBJECTIVE THEORY OF CONTRACTS (RULE)

Back 29

The intent will be determined, in effect, by asking "What would a reasonable person have intended?"

Front 30

RULES OF INTERPRETATION (5)

Back 30

- Plain / common meaning rule
- Rule of conflicting provisions
- Rule against ambiguities
- Rules of severability
- Parol evidence rule / exceptions

Front 31

1. PLAIN OR COMMON MEANING RULE

Back 31

- Don't torture the language
- Do consider trade - usage

Common language, common meaning, and according to the nature of the business

Front 32

2. RULE OF CONFLICTING PROVISIONS

Back 32

- The specific will govern over the general
- The handwritten will govern over the typed/printed

See the one that is more specific

Front 33

3. RULE AGAINST AMBIGUITIES

Back 33

Ambiguities will be construed against the author

The person who writes the contract takes the hit for the ambiguity

Front 34

4. RULE OF SEVERABILITY

Back 34

If a part of a contract becomes invalid (illegal), that part is severed from / cut of the rest of the contract; and, if what remains makes sense and expresses the parties' general intent, it is considered a valid contract

Front 35

5. PAROL EVIDENCE RULE

Back 35

Nothing outside the contract may be used to change its terms if the parties intended it to be the final and complete expression of their agreement

Front 36

5. EXCEPTIONS TO THE PAROL EVIDENCE RULE

Back 36

- Evidence of subsequent modification: add-on, after the fact
- Evidence that the contract is void or voidable: to prevent injustice
- Evidence of an ambiguity: trying to figure out what people meant
- Evidence as to custom and usage: how words are used, and in which scopes of business
- Evidence of a mistake

Front 37

ASSIGNMENTS AND DELEGATIONS

Back 37

- The transfer of rights to a third person in known as an assignment

- The transfer of obligations to a third person is known as a delegation

Front 38

RELATIONSHIP OF THE PARTIES

Back 38

- Assignor's rights are extinguished

- Assignor's duties remain

- Delegator's duties remain if the delegatee fails to perform

Front 39

SOME DUTIES CANNOT BE DELEGATED

Back 39

- Performance depends on the personal skill or talent of the obligor

- Special trust has been placed in the obligor

Most common are: medical care, paint jobs, musical performance.

Some rights cannot be assigned to someone else either

Front 40

CONTRACTUAL CONDITIONS

Back 40

- Conditions precedent
- Conditions subsequent
- Concurrent conditions

Front 41

1. CONDITION PRECEDENT

Back 41

A condition that must be fulfilled before a party's performance can be required

Front 42

2. CONDITION SUBSEQUENT

Back 42

A condition that if operated would terminate a party's obligation

Front 43

3. CONCURRENT CONDITION

Back 43

A condition requiring the parties to perform their obligations at the same time

Front 44

EXPRESSED CONDITIONS

Back 44

Stated in agreement (if, when, provided that...) All terms are spelled out

Front 45

IMPLIED CONDITION

Back 45

Not actually in the agreement; but understood by the parties as agreed to

Front 46

COVENANTS NOT TO COMPETE
also called
RESTRICTIVE COVENANTS

Back 46

Restrictive covenants are frowned upon but are judged based upon their reasonableness as to -- type of service; length of time; place (area of restriction)

Front 47

BREACH OF CONTRACT

Back 47

Breach is the nonperformance of duty
Breach of contract may be:
- material / major / substantial
- minor
- anticipatory (non-breaching party can sue immediately)

Front 48

TYPES OF DEFENSES

Back 48

- Elemental: something is missing and it is not reasonably implied by the conduct of the parties
- Performance: contract has been fulfilled
- Impossibility: it cannot be done. This is different from Difficulty, which is not a defense
- Sovereign Immunity: cannot sue the sovereign unless sovereign allows it

Front 49

TYPES OF DEFENSES (Cont..)

Back 49

- Frustration of performance: the defendant would not let you perform
- Frustration of purpose: the purpose doesn't exist anymore
- S/L: statute of limitation affects everything. Contracts typically 4-6 years, and tort typically 2 years
- Release (one party released the other from an obligation by signing a document saying so)
- Res judicata: the decision has already been made, or there is a case alike where the decision was already made

Front 50

REMEDIES

Back 50

** Try to work it out to avoid going to court!! **
Typical remedies:
- Damages
- Specific performance
Other:
- Rescission: doing away with the contract; agreeing to dissolve the contract
- Restitution: pay some amount to the other, then dissolve the contract
- Reformation: major fixing of the contract. Reform the contract

Front 51

CONTRACTUAL DAMAGES

Back 51

Purpose of damages:
To put the wronged individual in the position that he/she would have been had the contract been fully performed

Front 52

TYPES OF DAMAGES

Back 52

** The key is forseeability **
** Rule in American Law: Damages must be forseeable! **

Compensatory
- Nominal: small damage, small amounts
- Liquidated: damages must be reasonable. Cannot be perceived as a penalty. If you pay late, you will pay this much
Punitive (only in California)
- There are no punitive damages in a contract

Front 53

COMPENSATORY DAMAGES

Back 53

Those for injury actually sustained and which arose directly from failure to properly carry out the bargain (contract)

Front 54

PUNITIVE DAMAGES

Back 54

** Not in contracts, but in torts **

- Those intended to punish the wrong doer rather than to recompense the wronged

- Generally not awarded in contract actions (except, rarely, in California)

Front 55

NOMINAL DAMAGES
(a type of compensatory damages)

Back 55

Those awarded when there has been a technical breach but little, if any, actual loss

Front 56

LIQUIDATED DAMAGES
(a type of compensatory damages)

Back 56

Damages set by contractual provision specifying a certain amount to be paid in the event of a future breach

Front 57

DAMAGE AWARDS CHANGE

Back 57

Remittitur: when the amount awarded for the damages is too large, the judge can adjust it and cut it down. Plaintiff can appeal.

Additur: when the amount awarded for the damages is too low, the judge will ask the plaintiff whether to accept that amount or to appeal for a larger amount.

Front 58

OTHER REMEDIES

Back 58

- Rescission
- Restitution
- Specific performance
- Reformation

Front 59

RESTITUTION

Back 59

Repays the non-breaching party for any benefit the breaching party received. It may pay for all or some of the damages

Front 60

SPECIFIC PERFORMANCE

Back 60

- Provision of the exact bargain
- Granted only when $$$ will not be an adequate remedy

Front 61

REFORMATION

Back 61

- A remedy sought when the parties have poorly expressed their intent

- Permits rewriting the contract, usually due to mutual mistake

Front 62

THREE SPECIAL AREAS

Back 62

- Third party contracts
- Sales contracts
- Government(al) contracts

General Rule: The rights and duties arising from a contract affect only those party to it, except:
- Third party beneficiary contracts
- Assignments of rights
- Delegations of duties

Front 63

THIRD PARTY BENEFICIARIES

Back 63

Intended beneficiaries: you know who the third party beneficiary is
- Creditor: the person who is making the contract to benefit the 3rd party
- Donee: the person receiving the direct benefits of the contract

Incidental beneficiaries: people who benefit from the contract. No names are needed in order to determine if there are incidental beneficiaries. Use common sense

Front 64

SALES CONTRACTS

Back 64

Sometimes a merchant can be treated different than a non-merchant. The merchants are usually covered by the Uniform Commercial Code (UCC)

Front 65

GOVERNMENT CONTRACTS

Back 65

Much of contract law is a matter of common law; this is not true in the area of government contracts.

Government contracts are NOT common law. They are regulated under the Federal Acquisition Regulation (FAR)

Front 66

GOVERNMENT CONTRACTS
compared to
NON-GOVERNMENTAL CONTRACTS

Back 66

Government contracts are much more detailed, and follow the FAR

- Enabling statutes
- Administrative law (FAR)
- Prescriptive statutes:
- Favoring: small business, organized labor, veterans, economically depressed areas - all these are federal law

Front 67

NOTE

Back 67

Public beneficiaries of government contracts are treated as incidental beneficiaries, unless the contract provides otherwise.

Intended beneficiaries (third party beneficiaries) can sue
Incidental beneficiaries cannot sue

Front 68

OTHER CONCEPTS

Back 68

- Waiver: release, giving up the right
- Estoppel: stopped, prevented from doing something, you have waived your right
- Mitigation of damages: attempt to diminish or fix damages
- Contracts to cure: term of art. Is a contract for a promised result. If the doctors promise to cure you, they are obligated to cure you, otherwise they breach the contract