Organize the requirements of each element of a contract Competency 3.00 All 6 Elements are required in order to have a contract Contract ◦ any agreement enforceable by law ◦ Ex Every time you buy something Competency 3.00 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 Competency 3.00 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 Competency 3.00 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 Competency 3.00 Offer ◦ Proposal Offeror ◦ Makes the offer Offeree ◦ Offer made to this person Competency 3.00 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 Competency 3.00 Competency 3.00 Wrongful failure to perform one or more promises of a contract. Competency 3.00 Date Parties Price Intent of parties Place Subject Matter Terms Signature of both parties Competency 3.00 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 Competency 3.00 Requires that certain contracts must be in writing ◦ Relates to executory contracts Competency 3.00 Contracts Contracts persons Contracts perform Contracts to pay debts of others to pay debts of deceased requiring more than a year to to sell real property ◦ (Exception: Equitable Estoppel – must rely on promise.) Contracts for sale of goods over $500 Prenuptial contract (contemplation of marriage) Competency 3.00 Courts assure ALL terms are written into the agreement. Competency 3.00 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 Competency 3.00 Unqualified willingness to go along with the offer Competency 3.00 Unconditional Acceptance ◦ Mirror Image Rule Acceptance must “mirror” offer Any change means there is no acceptance ◦ Counteroffer Offeree makes an offer Offeror becomes offeree Competency 3.00 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 Competency 3.00 Offeror Method Fax Offeree Method Internet Phone Mail Internet Internet Mail Phone Fax Fax Competency 3.00 Received or Sent? Offeror Method Fax Offeree Method Internet Contract? ________ Received Phone Mail Received Internet Internet Sent Mail Phone Received Fax Fax Sent Competency 3.00 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 Competency 3.00 A valid offer has been made by the offeror, and a valid acceptance has been exercised by the offeree Competency 3.00 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 Competency 3.00 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 Competency 3.00 Deliberate deception for an unfair or unlawful gain ◦ Define each word in bold Competency 3.00 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 Competency 3.00 Proving Fraud: 1. False Representation of Fact 1. Must be a material (important) fact 2. Concealment (nondisclosure) may be considered false representation 2. Representation Known to be False 3. False Representation Intended to be Relied Upon 4. False Representation Actually Relied Upon 5. Resulting Loss Competency 3.00 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 Competency 3.00 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 Competency 3.00 Unfair and improper persuasive pressure within a relationship of trust Competency 3.00 1. 2. 3. 4. Doctor Lawyer Parents Teacher 1. 2. 3. 4. Student Children Client Patient Answers: 1-4, 2-3, 3-2, 4-1 Competency 3.00 Competency 3.00 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 Competency 3.00 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 Competency 3.00 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 Competency 3.00 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 Competency 3.00 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 Competency 3.00 Mentally insane: impaired persons – if declared 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 Competency 3.00 Convicts have certain limitations Aliens – people who live in U.S. but own allegiance to a different country - limited capacity ex: war Competency 3.00 Competency 3.00 The law does not enforce any contracts that are gratuitous Gratuitous contracts are free agreements Competency 3.00 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 Competency 3.00 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 Competency 3.00 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 Competency 3.00 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 Competency 3.00 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 Competency 3.00 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 Competency 3.00 Partial Payment of Debt ◦ Must have new consideration in order to relieve entire debt Settlement of Disputed Claims Extension of Time ◦ Examples: Fixing your car or visit the doctor ◦ To extend time, one party must offer new consideration Competency 3.00 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 Competency 3.00 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) Competency 3.00 Competency 3.00 Civil & Criminal Statutes ◦ Agreements to commit a crime/tort are illegal Usury Statutes ◦ State sets a max interest rate Interest ◦ Fee the borrower pays to the lender for using the money Usury ◦ Charging too high of an interest rate Competency 3.00 Truth in Lending Act ◦ Lender is required to make clear the annual percentage rate (APR). Gambling Statutes ◦ Discuss state laws Lottery vs Poker Sunday Statutes ◦ Illegal to perform certain contracts on Sunday Competency 3.00 License - legal document stating that the holder has permission from the proper authorities to carry a certain trade or profession (Example) - If license is only to raise revenue (not to show competence) contracts made are valid not void (Person w/out license subject to arrest ) Competency 3.00 Agreement in unreasonable restraint of trade Types: Competency 3.00 1) Outright contracts not to compete - seller of a business may sign a restrictive covenant which would be upheld by the court Restrictive covenant - agreement not to compete in a region for a period of time *Only legal for a short period of time and small geographic region Competency 3.00 2) Price Fixing - competitors agree on certain price ranges within which they will sell their on prices Competitors may agree to sell a product at a particular price Manufacturers may set a price at which a product must be sold Price fixing is NOT enforced by the court Competency 3.00 3) Agreements to defeat competitive bidding Bid - offer to buy or sell goods or services at a stated price Law often requires govt to contract public works or buy goods or services through competitive bidding Agreement to bid above a certain price is illegal Competency 3.00 4) Agreements to obstruct justice - any agreement to interfere with administration of justice (Example - protect someone from arrest; giving false testimony; bribing) Competency 3.00 5) Agreements Inducing Breach of Duty or Fraud - contracts that try to influence public officials 6) Agreements Interfering with Marriage contracts that discourage, harm, or interfere with good family relations Competency 3.00 If the legal part can be separated from illegal part, the court will separate If the legal part can’t be separated from illegal part, the contract is void Competency 3.00