Chapters 6-11
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1.
Agreement between 2 or more people
Offer & Acceptance: serious, definite &
accepted without change. Can be oral.
Acceptance makes the contract.
-Offeree can counteroffer, reject or accept.
-Offeror can rescind (revoke) anytime before
acceptance
2. Mutual (genuine) Assent: both parties agree
to & understand the contract.
3. Consideration: must be something of value
exchanged.
-Consideration?
A)Joe tells Jack he will give him a ride to
work.
B)Joe tells Jack he will give him a ride to work
in exchange for parking money, consideration
has been exchanged.
4. Legality: if the purpose of the contract is
illegal it may be voided
5. Capacity:
-An ability to understand terms of contract ---Corporations and most adults have capacity.
-Minors, mentally incompetent and
intoxicated do not have capacity & any
contracts they enter into are voidable.
6. Legal Form – must be in writing if:
 Paying money due from an estate
 Changing ownership of property
 Sale of land
 Contracts for over 1 year
 Consideration given for Marriage
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Genuine Assent: true & complete agreement
 Without this contract is voidable
 Injured party can rescind
 Ratification: conduct suggesting you intend to be
bound by the contract
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Duress: improper threat to obtain agreement
 Examples?
 Threats to commit crime or tort
 Threats to report a crime, to sue or economic
threats
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What’s Your Verdict – p. 125
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Undue Influence: one party in a position of
trust and dominates the other party
 Relationship
 Unfair Persuasion
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What’s Your Verdict – p. 126
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Mistake
 Unilateral mistake: one party holds incorrect belief
▪ Failure to read, careless reading – contract valid
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Mutual Mistake (bilateral mistake)
 Both parties have incorrect material facts, contract
void.
 Still valid if it involves applicable law.
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What’s Your Verdict – p. 128
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Misrepresentation
 Innocent
 Fraudulent
▪ Both result in contract being voidable
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Misrepresentation if all 3 exists:
1. Must be one of fact or there is active
concealment
2. Statement is material to transaction or is
fraudulent
3. Victim reasonably relied on statement
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What’s Your Verdict – p. 129
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Page 134 #1-9
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3 requirements of consideration:
1. Each party must give act or promise to other party
2. Each party must trade what they contribute
3. What each party trades must have legal value (be
worth something in the value of the law)
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Only one party giving consideration = gift
Forbearance: agreement to not do
something
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Items traded do not have to be of equal
economic value.
Contract voidable if contract is
unconscionable (grossly unfair).
Nominal Consideration
 Paying $1 for property
 Paying an executive a $1,000 salary
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Past consideration: acts already performed
cannot serve as consideration
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Promises to charitable organizations & nonprofits
 Courts enforce promises even though one party
receives nothing of legal value in return
 What’s Your Verdict – p. 147
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Firm Offers-covered by UCC
 Signed offer bound for 3 months without
consideration
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Modifications
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Statute of Limitations: 3 years to sue over
breach of contract or you can no longer sue
Debts discharged in bankruptcy
 Example: see legal brief p. 148
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Legal inability of the person who made the false
statement to deny it makes it an enforceable
promise called "promissory estoppel.
Example: Bernie Blower tells Arthur Artist that
Blowhard has a contract to make a movie and wants
Artist to paint the background scenery in return for a
percentage of the profits. Artist paints, and Blower
then admits he needed the scenery to try to get a
movie deal which fell through and there are no
profits to share. Artist sues and the judge finds that
Blower cannot deny a contract with Artist and gives
Artist judgment for the value of his work
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Contracts entered into by those lacking capacity
are voidable
 Disaffirmance: refusal to be bound by contract
 What’s Your Verdict – p. 155
 Read page 156
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After reaching age of majority power to
disaffirm is lost
Minors cannot ratifiy contracts unless they
emancipate themselves or reach majority
What’s Your Verdict - p. 160
Courts less likely to allow disaffirmance to
which one?
 Minor? Mentally Incapacitated? Intoxicated?
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Scope of authority: capacity to contract on
behalf of business
Illegal Agreements
 Agreements that contract for an illegal act
are VOID
1. Gambling: illegal except
▪
▪
▪
▪
▪
Casinos
Nevada
Pari-mutel betting: horse & dog tracks
State-run lotteries
Bingo games: for charities like schools & churches
2. Usury Laws: most states cap interest rates
charged to customers.
 Example: Loan sharks charging 50% interest
 South Dakota does not & Citi credit card company
headquarters there
3. Agreements involving Discrimination
4. Agreements to obstruct justice
 Paying for testimony, bribing jurors,
compounding a crime (promise to not inform or
prosecute in exchange for consideration)
5. Agreements made without competency license
 Trades such as barbers, plumbers, electricians, lawyers,
pharmacists, real estate brokers, etc.
6. Agreements affecting marriage negatively
 Ex: for citizenship, to not marry, to divorce, etc. –p. 171
7. Agreements that restrain trade
 Price fixing, bid rigging
 Resale price maintenance: msrp legal because it’s
suggested
 Allocation of markets: divide markets & agree where to
sell & where not to sell – p. 171
8. Agreements not to compete
 Exception: Covenant not to compete valid based on:
▪ Geographic area
▪ Time period for the limitation
▪ Employer’s interest protected by the limitation
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Others:
 Protected victims, excusably ignorant, rescission
prior to illegal act, divisible contracts (enforce legal
part)
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A contract is within the statute of frauds if it
is required to be in writing
 Requirements:
1. Names of parties
2. Subject matter description
3. Price
4. Quantity
5. Signature
6. Other essential terms
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To buy or sell goods of $500 or more –p 177-178
To buy or sell real property
Those that require more than one year to
complete - What’s Your Verdict p. 177
Promises to pay the debt or answer for a legal
obligation of another person – In This Case p.179
Promises to give something of value in return for a
promise of marriage.
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Assignment: Transfer of a right a party may
have under a contract to another party
Performance: fulfillment of contractual
promises
What’s Your Verdict, page 191.
Other examples? Credit card companies
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Discharge: termination of duties
 Most contracts discharged by complete
performance
 Failure to complete performance is breach of
contract
1.
2.
3.
4.
5.
6.
By performance
By the initial terms
By subsequent agreement
By impossibility of performance
By operation of law
By tender of performance
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Minor breach: monetary damages
Major breach:
1. Rescission & restitution
2. Monetary Damages (Compensatory,
consequential, punitive, liquidated)
3. Specific Performance
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Prenuptial Agreement
Common Law Marriage
Annulment
In This Case - p. 200
What’s Your Verdict – p. 202
Inter vivos Gift: “between the living”
 transfer of property by an agreement between people while they are
alive. The contract is completed by delivery of the gift from the donor
(giver) to the donee (receiver) and cannot be recovered by the person
who donated the gift.
Casa Mortis Gift: “gift on the occasion of death”
 gift given to another person while on their deathbed.
 Gift donor must expect to die imminently from a particular illness or
event.
 Example: woman is engaged to a man whose mother is dying. She gives
the “bride to be” her engagement and wedding ring set which is a family
heirloom she wishes to keep in the family. The couple’s marriage falls
apart and after divorce, can the man get the rings back so that they
remain in his family?
 What if the mother recovers from her condition and wants the rings
back?
Conditional Gift:
 given to a person provided that they met the condition
agreed upon by both parties.
 Example: man gives an engagement ring on the promise
that the woman marries him. The engagement falls apart,
therefore, the condition of marriage did not occur and the
ring may be returned to him. However, if he is responsible
for the breakup, the laws say that she gets to keep the
ring.
Unconditional Gift:
 Some states say it does not matter who breaks off the
engagement, the woman gets to keep the ring
 Varies among states