LS311 – Business Law I
Seminar Presentation
UNIT 5
Contracts – Part II
Chapter 10 – Defenses Against Contract Enforceability
Chapter 11 – Third Party Rights and Discharge
Unit 5
• Four (4) items to complete in Unit 5. They
are:
– Unit 5 Written Assignment (30 points)
– Unit 5 Review Quiz (10 points)
– Unit 5 DB (20 points)
– Unit 5 Case Study (20 points)
• Let’s discuss the Unit 5 Written
Assignment.
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Unit 5 Written Assignment
• Read the following news story at
http://www.huffingtonpost.com/2008/11/04/charlize-theronsettles-2_n_140920.html involving a breach of contract.
• Then, answer the following questions: Breach of Contract:
1. How the contract was allegedly breached,
2. What defenses may be available to the defendant, and
3. What remedy (or remedies) may be available to the Plaintiff.
• Note: Your assignment must be in APA format, include a title
page, the paper itself (the discussion) and a reference page
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Chapter 10
Overview – Contract consists of:
• Agreement – There must be an Offer and Acceptance. One
party must offer to enter into a legal agreement and another
party must accept the terms of the offer.
• Consideration – Promises must be supported by legally
sufficient & bargained-for consideration.
• Contractual Capacity – Both parties entering into a Contract
must have the “contractual capacity” to do so.
• Legality – The Contract’s purpose must be to accomplish
some goal that is legal and not against public policy.
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Chapter 10
• HOWEVER…even if all of these elements exist, a
KT may be UNENFORCEABLE if the following
requirements are NOT met. A party will assert them
as DEFENSES to the formation or enforcement of a
contract. They are:
– Genuineness of Assent – The apparent consent of
both parties must be “genuine”.
– Form – The contract must be in whatever form the law
requires. (For example, some contracts must be in
writing to be enforceable).
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Genuineness of Assent
• A Contract may not be enforceable if the parties
have not genuinely assented to its terms.
• Genuineness of assent may be lacking because of:
• Mistake
• Fraudulent Misrepresentation
• Undue Influence or
• Duress
• A party who demonstrates that he did not
genuinely assent to the terms of a contract can
choose either to carry out the contract or to rescind
it.
Mistakes of Fact
Fraudulent Misrepresentation
• When an innocent party consents to a contract with
fraudulent terms, the contract usually can be
avoided because he has not voluntarily consented
to the terms.
• Fraud involves 3 Elements:
– A Misrepresentation of a material fact must occur.
– There must be an intent to deceive.
– The innocent party must justifiably rely on the
misrepresentation.
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Undue Influence
• Undue Influence arises from relationships in which one party
can greatly influence another party, thus overcoming that
party’s free will.
• Contract is Voidable (it is a valid KT but one that can be
“avoided”)
• It can arise from a number of confidential/fiduciary
relationships such as:
– Trustee – Beneficiary
– Parent – Child
– Physician – Patient
– Husband – Wife
– Guardian – Ward
The weak party is talked into doing something not beneficial
to him or herself.
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Duress
• Forcing a party to enter into a contract under
fear or threat (voidable contract)
• Threatened act must be wrongful or illegal.
• Improper Threat.
– Threat to exercise legal rights (criminal or civil suit).
– Economic or physical.
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Statute of Frauds (SOF)
•
•
The primary purpose of the statute is to ensure that, for
certain types of contracts there is reliable evidence of the
contracts and their terms.
To be enforceable, the following types of contracts must be
in writing and signed:
1. Contracts involving interest in land (real property)
2. Contracts involving “One year rule.”
3. Collateral or Secondary Contracts.
4. Promise made in consideration of marriage.
5. Contracts for the sale of goods priced at $500 or more.
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Exceptions to
the Statute of Frauds
• Partial performance
– Purchaser has paid part of purchase price, taken
possession and made valuable improvements to
property.
• Admissions
– Party admits in court records contract exists
• Promissory Estoppel/Detrimental Reliance
– Promisee justifiably relies
• Customized Goods / Specially Manufactured
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Statute of Frauds
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Sufficiency of Writing
• Includes memorandum, invoice, fax, check, email, etc.
• Essential terms sufficient
• Signed by party against whom enforcement is
sought (Initials adequate)
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Parol Evidence Rule
• Prohibits the introduction at trial of evidence of the
parties’ prior negotiations, previous agreements, or
contemporaneous oral agreements IF that evidence
contradicts or varies the terms of the parties’ written
contract.
• If the court finds that the parties intended their written
contract to be a complete and final embodiment of their
agreement, a party cannot introduce evidence of any
oral agreement or promise made prior to the contract’s
formation or at the time the contract was created.
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Exceptions to the
Parol Evidence Rule
• Oral evidence to show contract was void or
voidable
• Contracts containing ambiguous terms.
• Prior dealing, course of performance, or usage
of trade.
• Contracts with an obvious or gross clerical error
that clearly would not represent the agreement
of the parties.
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Chapter 11 – Assignments
• 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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Delegation
• 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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Assignment vs. Delegation
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Intended vs. Incidental
Beneficiaries
• Intended Beneficiaries
– Benefit is intentional
– After rights vest, third party can sue
• Incidental Beneficiaries
– Benefit is unintentional
– Third party has no rights
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Third-Party Beneficiaries
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Contract Discharge
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Seminar Scenario
Aaron, a college student, signs a one-year lease agreement that
runs from September 1 to August 31.
The lease agreement specifies that the lease cannot be assigned
without the landlord’s consent. In late may, Aaron decides not
to go to summer school and assigns the balance of the lease
(three months) to a close friend, Erica. The landlord objects to
the assignment and denies Erica access to the apartment.
Aaron claims that Erica is financially sound and should be
allowed the full rights and privileges of an assignee.
Discuss fully whether the landlord or Aaron is correct.
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Questions & Reminders
• Questions on Unit 5 material?
• Next Seminar: Unit 6, Wednesday, July 13th
• Remember to complete all Assignments
– Unit Review Quiz (Graded Automatically)
– Discussion (See Discussion Board Posting Requirements)
– Written Assignment
– Case Analysis
• Office Hours: Thursdays 7-9PM (ET)
• Let’s review for the Unit 5 Review/Quiz
• Have a great week!
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