BUSINESS LAW
Alternate Edition 11thEd.
Jentz  Miller  Cross
Chapter 10
Contracts: Nature and Terminology
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
§1: Overview of Contract Law
 Sources of Contract Law.
– Common Law for all contracts except
sales and leases.
– Sale and lease contracts - Uniform
Commercial Code (UCC).
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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§1: Overview of Contract Law
 A contract is a:
– Promise or set of promises,
– For breach of which,
– The law provides a remedy, or
– The performance of which the law in
some way recognizes as a duty.
 Objective Theory of Contacts.
Circumstances to determine intent of
parties.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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§2: Elements of a Contract
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Agreement (Offer and Acceptance).
Consideration.
Contractual Capacity.
Legality.
Defenses:
– Genuineness of assent.
– Form.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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§3: Types of Contracts
 Bilateral v. Unilateral.
– Bilateral - Offeree must only promise to
perform (“promise for a promise”).
– Unilateral - Offeree can accept the offer only
by completing the contract performance (“a
promise for an act”). Irrevocable: Offer
cannot be revoked once performance
has begun.
• CASE 10.1 Ardito v. City of Providence
(2003).
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Express vs. Implied-in-Fact
 Express: Words (oral or written).
 Implied In Fact: Conduct creates and
defines the terms of the contract.
Requirements:
– PL furnished good or service
– PL expected to be paid
– DEF had chance to reject and did not.
– CASE 10.2 Uhrhahn Construction &
Design, Inc. v. Hopkins (2008).
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Contract Performance
 Executed v. Executory.
– Executed - A contract that has been fully
performed on both sides.
– Executory - A contract that has not been fully
performed on either side.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Contract Enforceability
 Valid.
– Elements: Agreement, consideration,
contractual capacity, and legality.
 Void.
– No contract.
 Voidable (unenforceable).
– Valid contract can be avoided or rescinded.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Contract Enforceability
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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§4: Quasi-Contracts
 Quasi Contracts are implied in law.
– Fictional contracts created by courts.
– Imposed on parties for the interest of fairness
and justice.
– Equitable remedies.
– Quantum Meruit.
 Limitations on Recovery.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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§5: Interpretation of Contracts
 Plain Meaning Rule: Courts give terms their
obvious or ordinary meaning.
– CASE 10.3 Wagner v. Columbia
Pictures Industries, Inc. (2004).
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a part of South-Western Cengage Learning.
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Other Rules of Interpretation
 Ambiguous Terms. If terms are ambiguous,
court will attempt to interpret ambiguous
contract terms in a reasonable, lawful,
effective manner.
– Contracts are interpreted as a whole.
– Terms negotiated separately given
greater weight.
– Ordinary, common meaning given.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Interpretation of Contracts
 Ambiguous Terms (cont’d)
– Specific wording given greater weight than
general language.
– Written or typewritten given greater weight
than preprinted.
– Ambiguous terms interpreted against the
drafter.
– Trade usage, prior dealing, course of
performance to allowed to clarify.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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