UNIT
2
1
5
6
7
8
9
10
11
12
1
UNIT
2
1
2
CHAPTER
5
1
3
CHAPTER
5
1
What You Will Learn:
 How to identify a contract’s elements
 How to identify valid, void, voidable and unenforceable
contracts
 How to distinguish between express and implied contracts
 How to distinguish between oral and written contracts
Why It Is Important:
Identifying a contract’s elements will help you manage your
affairs in an intelligent and effective manner.
4
CHAPTER
5
1
• Understanding Contract Law
– Many common daily activities are contracts
• Fast food
• Pumping gas
– You create a contract anytime that you agree to
exchange things of value
5
CHAPTER
5
1
• The Nature of a Contract
– A contract is any agreement enforceable by law.
– Contracts are based upon what the involved parties
do and say to one another
– The Three Theories of Contract Law
• Equity Theory
• Will Theory
• Formalist Theory
6
1. Outside platform Atticus player Gregory (1)
2. Lad’s stratagems (1)
3. Desire Helvetica or Arial (1)
4. Actress Witherspoon’s sibs’ girls (2)
5. Church officer sneakin’ a look (2)
6. Dunce-cap-shaped Houston newspaper (3)
CHAPTER
5
1
– The Elements of a Contract
•
•
•
•
•
•
Offer
Acceptance
Genuine Agreement
Consideration
Capacity
Legality
8
CHAPTER
5
1
9
CHAPTER
5
1
• Characteristics of a Contract
– Can be created in different ways and can assume
diverse forms
– Valid, Void, Voidable or Unenforceable
•
•
•
•
Valid – legally binding or good
Void – has no legal effect
Voidable – when a contract can be voided
Unenforceable – a contract that the court will not
uphold
10
CHAPTER
5
1
– Express
• Words of the contract are in words
– Implied
• Actions performed by the parties
– Oral or Written
– Contracts created by spoken word are oral contracts.
– One offers to do something and the other offers to do
something in return
– Contracts are written in many cases
– Both parties know the exact terms
– Provides proof of the agreement
– Statute of Frauds requires certain contracts be written
11
CHAPTER
5
1
– Bilateral – two sided
• When the contract contains two promises
– Unilateral – one sided
• When a contract only contains the offer and the
condition, but no acceptance
• Example are reward posters
12
CHAPTER
5
1
• Reviewing What You Learned
– What are the elements of a contract?
– What are the differences among valid, void,
voidable, and unenforceable contracts?
– What are the differences between express and
implied contracts?
– What are the differences between unilateral and
bilateral contracts?
– What are the differences between oral and written
contracts?
13
1. Garden tilling tool misfortune (1)
2. Ornamental vase plant with fronds (1)
3. Master Skywalker’s fists (1)
4. Mostly stylishly attired (1)
5. Not as bright flash of hope (2)
6. Ill-tempered complainers’ sofas (2)
CHAPTER
5
1
What You Will Learn:
 How to recognize the requirements of an offer
 How to distinguish between an offer and an invitation to
negotiate
 How to recognize the requirements of an acceptance
 How to distinguish between an acceptance and a
counteroffer
 How to recognize when an offer has terminated
Why It Is Important:
You need to know when an offer has been made and when an
acceptance goes into effect to make sound contracts
15
CHAPTER
5
1
• Requirements of an Offer
– First element of a legally binding contract
– Offers have three requirements
• Made seriously
• Definite and certain
• Communicated to the offeree
Offerer is the party who offers the
contract
Offeree is the party to whom
offer has been made
16
CHAPTER
5
1
– Serious Intent
• Offer must be made in a serious manner
• An invitation to negotiate is often confused as an offer
– Price tags on items
– Signs in windows
• Exceptions do exist
– Advertisers must use phrases like:
» First come/first served
» Quantities limited
» Makes it an offer not a ITN
17
CHAPTER
5
1
– Definiteness and Certainty
• Terms must be clear and have NO doubt
– Tenant/landlord plumbing fix
– Job offer with “reasonable” commission
– Communication to the Offeree
18
1. Actress Blanchett dined (1)
2. Romantically see 6+2 people (1)
3. Dinner dish shipping box (1)
4. Terrific list of candidates (1)
5. Cargo condition after shipping (1)
6. Can’t stand dumbbells and barbells (1)
CHAPTER
5
1
• Requirements of Acceptance
• Acceptance is the second element of a legally binding
contract
– Unconditional Acceptance
• Mirror image rule
• Counteroffer
• Exceptions to the MIR
–
–
–
–
Personal property items
Created by the UCC – uniform commercial code
Non-merchants – non-regular sellers
Sales between merchants or B2B sales
20
CHAPTER
5
1
– Method of Acceptance
• Time limits may be imposed as well
• Offers may be accepted by actions
• Cannot impose silence as means of acceptance
21
CHAPTER
5
1
• Termination of an Offer
– Revocation
• Offer taken off the table by offeror
– Rejection
• Offer rejected by offeree
– Counteroffer
• Negotiating over price – one contract ends and another
one starts
– Expiration of Time
• Must accept offer before a set time passes
• Option contract
– Death or Insanity
22
CHAPTER
5
1
• Reviewing What You Learned
– What are the requirements of an offer?
– What is the difference between an offer and an
invitation to negotiate?
– What are the requirements of an acceptance?
– What is the difference between an acceptance and
a counteroffer?
– When is an offer terminated?
23
CHAPTER
5
1
• Workbook Exercises
– Terms – page 45
– Judge – page 46
– Concepts – page 47 & 48
– Case – page 49
– Self Assessment – page 52
24
CHAPTER
6
1
25
CHAPTER
6
1
What You Will Learn:
 How to identify the elements of fraud
 How to distinguish between fraud and concealment
 How to distinguish between fraud and innocent
misrepresentation
 How to distinguish between the remedy available for fraud
and the remedy available for misrepresentation
Why It Is Important:
Learning the elements of fraud may prevent you from being
victimized or help you claim your rights if you are defrauded
26
CHAPTER
6
1
• Defective Agreements
– Something goes wrong
– What you thought was a valid contract is nothing of
the such
– Agreement is defective
•
•
•
•
•
Fraud
Misrepresentation
Mistake
Duress
Undue influence
27
CHAPTER
6
1
• Fraud
– Is the deliberate deception intended to secure an
unfair or unlawful gain.
• You were talked into entering a contract
• Rescind the contract or sue for money damages
• Deliberate deception may lead to punitive damages
– Award money greater then the amount needed to pay back
These 5 elements
must be present to
succeed in a fraud
lawsuit
28
1. Atop a mafia Chief (1)
2. Imprison a Disney chipmunk (1)
3. Not so sharp actress Helen (1)
4. Computer nerd’s seven-day spans (1)
5. Cosmetics drastic reorganization (2)
6. More miserly snoozer (2)
CHAPTER
6
1
– False Representation of Fact
• Material Fact
– Is a fact that is important
» Matter to one of the parties
» Cannot be a promise of future actions or an opinion
» Not limited to oral or written statements
» Actions intended to deceive
• Concealment
– Is when chooses not to reveal important information
» Also called passive fraud or nondisclosure
• Hidden problems in a house
30
CHAPTER
6
1
– Representation Known to be False
• The party making the false representation must be
aware that the representation is false
– Statement made without regard for the truth
31
CHAPTER
6
1
– False Representation Intended to Be Relied Upon
• The person making the misrepresentation must intend
that the other party will rely on the information as part
of negotiations
– False Representation Actually Relied Upon
• When someone uses misrepresented information as part
of negotiating a contract
– Resulting Loss
• Actual monetary loss must have resulted
32
CHAPTER
6
1
• Innocent Misrepresentation
– Sometimes a person will make an innocent
statement that turns out to be false.
• Honestly believed that statement was true at the time it
was made.
• The law gives you the right to rescind the contract
• Damages not awarded
33
CHAPTER
6
1
34
1. That guy’ll pass out poker cards (1)
2. Long, measureless history (1)
3. Superman’s last name lost money (1)
4. Movie intended for women (1)
5. Gridiron meeting in a rainwater pool (2)
6. Port-au-Prince native country (2)
CHAPTER
6
1
• Reviewing What You Learned
– What are the elements of fraud?
– What is the difference between fraud and
concealment?
– What is the difference between fraud and innocent
misrepresentation?
– What is the difference between the remedy
available for fraud and the remedy available for
misrepresentation?
36
CHAPTER
6
1
What You Will Learn:
 How to distinguish between unilateral and bilateral mistake
 How to recognize the types of mistake that will allow
rescission of a contract
 How to recognize the requirements of economic duress
 How to recognize the requirements of undue influence
Why It Is Important:
Recognizing how mistake, duress, and undue influence can
affect agreements will help you make better decisions in such
situations
37
CHAPTER
6
1
• Mistake
– Unilateral Mistake
– Is a mistake on the part of one of the parties to the contract
– Reasonable expectations should not be blocked because of a
mistake
» http://public.findlaw.com/abaflg/flg-9-1b-10.html
• Mistake as to the Nature of the Agreement
– What exactly did you agree too?
– If you don’t understand the language, bring someone who does
and can explain it.
• Mistake as to the Identity of a Party
– Making the contract to the wrong person.
38
CHAPTER
6
1
– Bilateral Mistake
• Sometimes both parties involved in a contract make
mistakes.
– Contract is voidable by either party
• Mistake as to the Possibility of Performance
– Something happens that will not allow the contract to be
completed
• Mistake as to the Subject Matter
– When both parties are mistaken as to the identity of the
subject matter
– Contract may be voided
39
CHAPTER
6
1
40
CHAPTER
6
1
• Duress
– Influencing a person’s will by use of force or threat
– Physical or Emotional Duress
• Agreements made under duress are void or voidable
– Mob offering protection to merchants
– Threat made against the party of a member of their family
– Economic Duress
• Is the threat of a person’s business or income as
establishment of a contract.
41
CHAPTER
6
1
• Undue Influence
– Is when one person used unfair and improper
persuasive pressure to force someone else into a
contract
• Ill health
• Old age
• Mental instability
– The stronger persons substitutes his will for the will of the
weaker person
42
CHAPTER
6
1
• Reviewing What You Learned
– What is the difference between unilateral and
bilateral mistake?
– What types of mistake will allow rescission of a
contract?
– What are the requirements of economic duress?
– What are the requirements of undue influence?
43
1. Junk a baseball player’s headgear (1)
2. Funny Groucho dog talk (1)
3. Move a car that stopped running (1)
4. More adorable cheering fan (2)
5. Bottom scraping creamy chocolate treats (2)
6. Faster football punter (2)
CHAPTER
6
1
• Workbook Exercises
– Terms – page 53
– Judge – page 54
– Concepts – page 55 & 56
– Case – page 57
– Self Assessment – page 60
45
CHAPTER
7
1
46
CHAPTER
7
1
What You Will Learn:
 How to explain the legal concept of minority
 How to identify the rights of minors in relation to contract
 How to identify contract that are voidable by a minor
 How a person can ratify a contract made in minority
 How to identify other, besides minors, who can rescind
contracts
Why It Is Important:
Understanding the rights afforded to minors in contract law
will enable you to exercise your rights and help others
47
CHAPTER
7
1
• The Requirement of Capacity
– We’ve covered Offer, Acceptance, and Genuine
Agreement
– The fourth element is Capacity
• Deals with minors and contracts they enter
• The law permits minor to rescind their contracts
• Its intent was to protect minors from dishonest adults
48
CHAPTER
7
1
• Minor’s Rights and Obligations
– Capacity
• is the legal ability to enter a contract.
– Rebuttable presumption
• The assumption that the other party is of legal age.
– Definition of Minority
• Legal Age
• Emancipation and Abandonment
49
CHAPTER
7
1
– Misrepresentation of Age
• When minors who lie about their age or use a fake ID
• They have committed fraud
• Some states allow minors to be sued for fraud while
others do not.
• It is often considered a criminal offense to buy agerestricted products
50
1. Scolding the making of a toothed knife edges (3)
2. Stage background plants and trees (3)
3. Being suspicious of recon work (2)
4. Singer Bonnie’s 3-of-a-kind beaters (1)
5. Tiered stadium seats’ traits (2)
6. Sandy strands’ security lapses (2)
CHAPTER
7
1
• Contracts of Minors
• Law shields minors from making contracts as a protective
measure.
• Does not give the right of the minor to take advantage of
others.
– Voidable Contracts
• Contract made by minor are voidable
• Even if they damage or destroy the item
• Some states allow for deduction for damage
– Returning the Merchandise
• Items should be returned when contract is disaffirmed
52
CHAPTER
7
1
– Disaffirming the Whole Contract
• The whole contract must be disaffirmed
– Disaffirming Contracts Made With Other Minors
• Both parties have the right to disaffirm
53
CHAPTER
7
1
54
CHAPTER
7
1
– Ratification of Minor’s Contacts
• When one turns of majority age they can ratify, or
approve, their contract
– Ratification ends the privileges that they had as a minor
– Can be done orally, in writing, or by actions
» Using or selling items
» Making payment for items
» Keeping for a reasonable amount of time
55
CHAPTER
7
1
56
CHAPTER
7
1
– Contracts for Necessaries
• Minors are held responsible for the fair value of
necessaries
– Food, Clothing, Shelter, & Medical Care
• One “Station in Life” has a bearing on what is necessary
– $150 pair of shoes
» Necessary if you have a foot injury
» Luxury if you just want them
– Special Statutory Rules
57
CHAPTER
7
1
• Other Contractual Capacity Rules
– Mentally Impaired Persons
• Must be given the right to disaffirm a contract
• They are responsible for the fair value of necessaries
– Intoxicated Persons
• If you enter into a contract while drunk you may
disaffirm
• Treated in the same way as minor and mentally impaired
– Other Capacity Limitations
• Aliens may not have the ability to enter into contacts
58
1. Made of acorn tree strangle (1)
2. The major bodies of water right here (1)
3. Devoted to bear Winnie (1)
4. Angrier one who sums (2)
5. Crazy one’s T-bones and porterhouses (1)
6. Publicly commending a mass sending (2)
CHAPTER
7
1
• Workbook Exercises
– Terms – page 61
– Judge – page 62
– Concepts – page 63 & 64
– Case – page 65
– Self Assessment – page 68
60
CHAPTER
8
1
61
CHAPTER
8
1
What You Will Learn:
 How to explain the legal concept of consideration
 How to explain the types of consideration
 How to identify certain problems regarding consideration
 How to identify the principles that apply to consideration in
everyday life
Why It Is Important:
By understanding the concept of consideration, you will be
able to avoid problems that frequently result when
agreements lack this important contractual element
62
CHAPTER
8
1
• Requirements of Consideration
– Where each party surrenders something of value
• Many agreements are not legally binding because they
lack consideration
• Social agreements have no consideration
63
CHAPTER
8
1
– The Legal Concept of Consideration
• Consideration is the exchange of benefits and
detriments by parties to an agreement.
• A Benefit is something that you were not previously
entitled to.
• A detriment is any loss suffered
– Three types of consideration
» Giving up something that you have the legal right to keep
» Doing something that you have the legal right not to do
» Not doing something that you have the legal right to do
• forbearance
64
CHAPTER
8
1
– The Characteristics of Consideration
• Bargained-for-Exchange
– Both parties gain something when the promises are kept and
the exchange is made
• Something of Value
– No specific value requirements
» Value does not have to be the same as market value
» Courts will not consider value, but rather enforcement
– One exception – when a contract is deemed unconscionable
» A great inequality exists between the parties
• Legality of Consideration
– Consideration must be legal, if not then the contract is invalid
65
CHAPTER
8
1
66
1. Which beer belly? (1)
2. Little devil’s astronaut apes (1)
3. Apple or berry sloping channel (1)
4. Influenced a cleaning lady (1)
5. Early U.S. luxury car sign (2)
6. Havin’ faith in singer Timberlake (2)
CHAPTER
8
1
• Types of Consideration
– Money, Property, and Services qualify as valid
consideration
– Money as Consideration
• Money is exchanged for another’s performance
• Free to negotiate and exchange any amount
• Exception is where the government regulates
– Minimum wage
– Rent controlled
– Property and Services as Consideration
• Barter agreements are valid agreements
68
CHAPTER
8
1
– A Promise Not to Sue
• One party has the right to sue but gives up that right
– Example of forbearance – not doing something you have the
right to do
• Auto Accidents
• Home Improvements
– Charitable Pledges
• Organizations enter into contracts and rely upon
donations to pay for things
– Your charitable pledge is a verbal contract is treated as such
69
CHAPTER
8
1
• Problems With Consideration
– Parties can disagree about the amount of money
that the debtor owes the creditor
• A problem in regard to the consideration involved
70
CHAPTER
8
1
– Disputed Amounts
• Parties don’t agree on amount owed
– A per hour contract
• Settled by accord and satisfaction
– Accord is the acceptance of less by the creditor
– Satisfaction is the acceptance of the accord
– Undisputed Amounts
• Mutually agreed upon price per contract
– A fixed price contract
71
CHAPTER
8
1
72
CHAPTER
8
1
• Reviewing What You Learned
– What is consideration?
– What are the types of consideration?
– What problems can arise regarding consideration?
– What are the principals that apply to consideration
in everyday life?
73
1. Prison bucket (1)
2. Props to a merit badge earner (1)
3. Deluge dirt that is wet (1)
4. “Royal Harry, meet actor Vaughn” (1)
5. One ridiculing Betty on food labels (2)
6. Narrow urban passageway’s peaks’ opposites (2)
CHAPTER
8
1
What You Will Learn:
 How to identify agreements that are enforceable without
consideration
 How to explain the legal concept of promissory estoppel
 How to identify agreements that are not enforceable
without consideration
 How to distinguish between past consideration and
preexisting duties
Why It Is Important:
Understanding the difference between contract that require
consideration and those that do no will enable you to avoid
common problems associated with consideration or the lack
thereof.
75
CHAPTER
8
1
• Enforceable Agreements W/O Consideration
• A contract is usually invalid if there is no consideration
• Some agreements where there is no consideration
– Promises Under Seal
• A seal is a mark or impression made on a written
contract
– Must have the word “seal” or “L.S.”
– Promises After Discharge in Bankruptcy
• One can choose to pay debts after discharge
– Must be in writing
– It is optional
– It is a new contract
76
CHAPTER
8
1
– Debts Barred by Statutes of Limitations
• Establishes the time frame within which a party is
allowed to bring suit.
– Times vary by state – 3 to 10 years
– Partial payment is affirmation
– Option
• Keeping the contract OPEN for a reasonable period of
time
– Not to exceed 3 months
77
CHAPTER
8
1
– Promises Enforced by Promissory Estoppel
• Promissory = “containing a promise”
• Estoppel = restraint to prevent from contradicting a
previous act
– The promise must be made to bring about action by another
– Offeree relied upon the promise and changed position
– Injustice avoided by enforcing promise
78
CHAPTER
8
1
• Unenforceable Agreements Without Consideration
• Some promises will not be enforced by the courts because
they lack basic considerations
– Illusory Promises
• Both parties are under obligation to do something
– Look like a valid contract but are hollow
– Future Gifts
• A promise of a future gift is not enforceable where there
is no consideration
– Past Consideration
• Actions of the past can not be used as current
considerations
79
CHAPTER
8
1
– Preexisting Duties
• Promising to do something that you are already under a
contract to provide
– Promise to Attend a Social Engagement
• All contracts are agreement
• Not all agreements are contracts
– Going to lunch with a friend is not legally binding.
– Nothing given as consideration
80
1. Donated to an Atlanta player (1)
2. Turned a schnoz to ice (1)
3. Took advantage of agent 007 (1)
4. Delaware capital shamrock (2)
5. Laid-back chap (2)
6. Talented Screen Actors association (1)
CHAPTER
8
1
• Reviewing What You Learned
– What agreements are enforceable without
consideration?
– What is the legal doctrine of promissory estoppel?
– What agreements are not enforceable without
consideration?
– What is the difference between past consideration
and preexisting duties?
82
CHAPTER
8
1
• Workbook Exercises
– Terms – page 69
– You be the Judge – page 70
– Concepts – page 71 &72
– Case – page 73
– Self Assessment – page 76
83
CHAPTER
9
1
84
CHAPTER
9
1
What You Will Learn:
 How to explain what make a contract illegal
 How to identify the consequences of illegality in relation to
contract law
 How to identify contract that are illegal by statutory law
 How to identify different types of licenses
Why It Is Important:
By understanding the concept of illegality in contract law, you
will be able to avoid problems that might arise when you
consider entering a contract
85
1. Weird Massachusetts cape fish (1)
2. Say to inventor Alexander Graham (1)
3. NASCAR event location (1)
4. Offer gratitude to singer Sinatra (1)
5. Teacher of the blind Louis’ buckets (1)
6. Priest assistant’s lighthouse lights (2)
CHAPTER
9
1
• The Nature and Consequences of Illegality
• A contract can have all of the previous elements but if
lacks a legal purpose it is invalid
– Illegality in Entire Agreement
• If any part of the contract is illegal it makes the entire
contract would be considered illegal
– In Pari Delicto and Divisible Contracts
• When some elements of a contract can be performed by
themselves
87
CHAPTER
9
1
• Agreements that Violate Statutes
• Laws passed declaring that certain types of agreements
are illegal
– Civil and Criminal Statues
• Contacts that require one party to commit a tort or
crime
• A contract that would protect one party from
consequences
– Usury Statutes
• Charging more than the state set interest rate
• Truth in Lending Act
88
CHAPTER
9
1
– Gambling Statutes
• Gambling agreements are when one person wins and
the other loses
– Bets on sports and bets on card playing
– States regulate types of gambling
» Betting at the track if ok
» Off track betting is not
– Giveaway games as promos are legal as long as there is no
purchase necessary
• Lottery is a state sponsored game of chance
89
CHAPTER
9
1
– Sunday Statutes
• Contracts used to not be made on Sundays
Sunday Statutes
commonly known as
“blue laws” are state laws
that attempt to regulate
public and private activity
on Sunday. They are
called “blue laws”
because they were
printed on blue paper in
the 17th century
90
1. Hockey venue’s whammy (1)
2. Discoloration on a jet (1)
3. Socially exclusive British Cop (2)
4. Cast blame on bank chambers (1)
5. Cheers the spirits of Michigan State’s team (2)
6. Clothes shedder’s snorkeling footwear (2)
CHAPTER
9
1
– Licensing Statutes
• A license is a legal document stating that the holder has
permission from proper authorities to perform that
trade or profession.
– Licensing Agreements
– Vendors License
– Occupational Licensing
• Laws were designed to protect people from dealing with
unqualified professionals
• Revenue generator for local governments – competence
not required
– Which allows you to enter into a contract with an unlicensed
vendor
92
CHAPTER
9
1
• Reviewing What You Learned
– What makes a contract illegal?
– What are the consequences of illegality in relation
to contract law?
– What contracts are illegal by statutory law?
– What are the different types of licenses?
93
CHAPTER
9
1
What You Will Learn:
 How to explain the legal doctrine of public policy
 How to identify agreements that are contrary to public
policy
 How to identify contract that involve an unreasonable
restraint of trade
 How to explain the nature of restrictive covenant
Why It Is Important:
By understanding public policy and contracts that are contrary
to public policy, you will be able to avoid common problems
associated with violations of this important legal doctrine
94
CHAPTER
9
1
• The Nature of Public Policy
– Some agreements are illegal because they violate a
time-honored legal doctrine know as public policy
– The underlying principle is that nobody should get
away with doing something that harms the public
at large
95
1. Whacked a louse egg (1)
2. Court jester’s game regulations (1)
3. Snub-nosed forward section (1)
4. Deal with a birthday cake light (2)
5. Unhappy having to set an old watch (2)
6. S-troubled speaker’s hushed asides (2)
CHAPTER
9
1
• Violations of Public Policy
• If an activity harms the health, safety, welfare, or morals
of the public, that activity violates public policy
– Agreements that involve an unreasonable restraint of trade
» Contract do not compete
» Price fixing agreements
» Defeating competitive agreements
– Agreements obstruct justice
– Agreements inducing fraud or breach of duty
– Contracts that interfere with marriage
97
CHAPTER
9
1
– Agreements that Unreasonable Restrain Trade
– The law protects the rights of people to make a living and do
business in a market economy.
– A restraint of trade is a limitation on the full exercise of doing
business with others
• Outright Contracts Not to Compete
– Restrictive covenant or a non-compete agreement
• Price Fixing
– When competitors agree on ranges within which to set their
prices.
• Agreements to Defeat Competitive Bidding
– Rival submit bids for a project – the best bid wins
98
CHAPTER
9
1
– Agreements to Obstruct Justice
• Any contract that interferes with the administration of
justice is illegal
–
–
–
–
Protecting someone from arrest
Encouraging lawsuits
Giving false testimony
Bribing a juror
» Paying a non-expert to testify as an expert
» Agree not to prosecute someone in return for money
99
CHAPTER
9
1
– Agreements Inducing Breach of Duty or Fraud
• Many people hold positions of trust – responsible for the
well being of others
– Congress critters and other public officials
– They owe a duty to work for the best interest of the public
– Contracts that tried to influence position for gain are
unenforceable
– This rule also applies to anyone in a position of trust
– Agreements Interfering with Marriage
• Law encourages marriages and protects family
relationships
– Contracts that interfere with a marriage are illegal and
unenforceable
» $1,000 to never marry
» $1,000 to leave your spouse
100
1. Cons St. Louis NFL Team (1)
2. Fiercely questions Buffalo NFLers (1)
3. Frightens Chicago’s NFL team (1)
4. Kansas City NFL team gripes (1)
5. Does an oil of New Orleans NFLers (1)
6. Baltimore NFL team’s refuges (2)
CHAPTER
9
1
• Effect of Illegality
– Generally, a court will not aid either party to an
illegal contract
• Neither party can enforce the contract nor can they
receive aid from the court
– Exception does exist when the parties are not equally at fault
» If you are less at fault the court may award money or
property lost
– There may be an occasion that only part of the contract is illegal
» If the illegal part can be separated, the legal part may be
enforceable
» If it can’t then the entire contract will be void
102
CHAPTER
9
1
103
CHAPTER
9
1
• Looking at the few contradictory statements
we have discovered in just the last few
chapters:
– A judge once said to Coach Hamilton:
“Mr. Hamilton, if you are looking for logic and
common sense, law is not the place to look”
104
CHAPTER
9
1
• Reviewing What You Learned
– What is the legal doctrine of public policy?
– What contracts are considered to be contrary to
public policy?
– What types of contracts involve an unreasonable
restraint of trade?
– What is a restrictive covenant?
105
CHAPTER
9
1
• Workbook Exercises
– Terms – page 77
– You be the Judge – page 78
– Concepts – pages 79 & 80
– Case – page 81
– Assessment – page 84
106
1. Late-night comic Leno might (1)
2. In-front warhorse (1)
3. Dupe one of the Jonas Brothers (1)
4. Party thrower made before taxes (1)
5. Boxing titleholder’s vise grippers (1)
6. Stiff hair on an ICBM (2)
CHAPTER
10
1
108
CHAPTER
10
1
What You Will Learn:
 How to explain the purpose of the Statute of Frauds
 How to explain the legal status of a contract that is not in
writing
 How to identify the elements that must be included in a
written contract
 How to deal with contradictory and ambiguous terms in a
written agreement
 How to identify which contracts must be writing
Why It Is Important:
Understanding which contract must be in writing, as well as
the elements of writing, will help you avoid pitfalls associated
with the Statute of Frauds
109
CHAPTER
10
1
• Purpose of Writing
– Breach of Contract
• Is a wrongful failure to perform one of more promises of
a contract
– Perjury
• Is making false statements while under oath of the court
– Statute of Frauds
• Are state laws requiring that certain contracts be in
writing
• A written contract helps the clarify the agreement
110
CHAPTER
10
1
• Elements of a Writing
– Memorandum
• Does not need to be formal
– Sales slip, invoice, check
– Place, date, parties involved, price and terms, and signatures
111
CHAPTER
10
1
– Evaluating Contradictory Terms
• Hand written term contradict typed contracts
• Written words prevail over numbers
– Evaluating Ambiguous Clauses
• Written contracts can be understood in different ways
• Courts will typically rule in favor of the party who did not
write the contract
112
CHAPTER
10
1
• Contracts Must Be in Writing
– Some states require that certain types of contracts
be in writing to be enforceable
– It does not eliminate the essential elements, but
requires the contract to be in writing
•
•
•
•
•
•
Debts of others
Debts of the dead
Year or longer in length
Marriage
Sales in the amount over $500
Real property
113
1. Spirit sinker of one who curbs emotions (3)
2. Clothes-shedding performer’s L.A. team (2)
3. Highlight the Black Lagoon monster (2)
4. Completed football pass trickery (3)
5. (with 6) Without ever ceasing…
6. …to be without any pals (3)
CHAPTER
10
1
– Contracts to Pay Debts of Others
• Agreements for one person to pay the debts of an other
must be in writing.
• Co-signer
– Contracts to Pay Debts of Deceased Persons
• Agreeing to pay a dead persons debt needs to be in
writing
– Contracts Requiring More Than a Year to Perform
• Must be in writing if they cannot be performed within
one year of the date they are made
115
CHAPTER
10
1
– Contracts in Consideration of Marriage
•
•
•
•
Marriage is a valid and binding contract
Promises made to one another are the consideration
Oral in nature
Generally not enforceable
– Either party can back out without being liable
• If a third person agrees to pay two other for marrying,
that needs to be in writing
• Adopting a child from a previous marriage must be in
writing as well
116
CHAPTER
10
1
– Contracts of Sale of Goods of $500 or More
• Must be in writing if price is over $500 to be enforceable
• Goods are movable items
– Contracts to Sell Real Property
• Must be in writing to be enforceable
The exception is called Equitable Estoppel
Also called Part performance
- changes position in a big way
117
CHAPTER
10
1
• Reviewing What You Learned
– What is the purpose of the Statute of Frauds?
– What is the legal status of a contract that is not in
writing?
– What are the elements that must be included in a
written contract?
– How are contradictory and ambiguous terms in a
written agreement interpreted by a court?
– What contract must be in writing?
118
1. Pennant price label (1)
2. Actor Damon’s small quarrels (1)
3. Window outcropping brink (1)
4. Not a butterfly thin soup (1)
5. Less comprehending dueling athlete (2)
6. Giving up removing centers from cherries (2)
CHAPTER
10
1
What You Will Learn:
 How to explain the parol evidence rule
 How to identify the exception to the parol evidence rule
 How to explain the best evidence rule
 How to change a contractual writing
Why It Is Important:
By understanding the parol evidence and best evidence rules,
you will know what business records to keep when you enter
a contractual relationship that requires a writing
120
CHAPTER
10
1
• Special Rules for Written Contracts
– Special rules apply to written contracts
– Parol Evidence Rule
• Oral agreements prior to written contract are not
enforceable
– Parol – from the mouth
– Evidence – anything presented as proof
– The Best Evidence Rule
• Original is usually required
– Copies are looked at with disfavor by the court
– Duplicate originals are your copy of the original contract
121
CHAPTER
10
1
• Changing the Writing
– Beware of the small print
• Read the ENTIRE contract BEFORE you sign it.
• If you don’t understand or agree to it, cross it out before
you sign. Have the other party initial where you crossed
out
• Don’t be afraid to make changes to a printed form. If
promises were made to you, write them in.
• Refuse to sign if you do not agree with everything in
writing. Sometimes an oral agreement is a better
position.
• If the contract is too complicated and unclear, consider
have a lawyer look at it – it may be worth the price. 122
CHAPTER
10
1
• Reviewing What You Learned
– What is the parol evidence rule?
– What are the expectation to the parol evidence
rule?
– What is the best evidence rule?
– What rules govern the changes in a written
contract?
123
1. Took actor Law to Court (1)
2. Final dynamite explosion (1)
3. Street-smart comic strip orphan (2)
4. More ashy letter sender (2)
5. Schemer’s red-dot disease (2)
6. Most intelligent picture painter (2)
CHAPTER
10
1
• Workbook Exercises
– Terms – page 85
– You be the Judge – page 86
– Concepts – pages 87 & 88
– Case Study – page 89
– Assessment – page 92
125
CHAPTER
11
1
126
CHAPTER
11
1
What You Will Learn:
 How to identify when time is important in a contract
 How to distinguish between satisfactory and substantial
performance
 How to explain tender of performance
 How to explain how contracts can be discharged by
agreement
Why It Is Important:
Understanding when contracts come to an end will help you
determine your legal rights and obligations in such situations
127
CHAPTER
11
1
• Ending a Contract
– When a contract comes to an end it is referred to
as discharged
• By performance or by agreement
• Discharge by Performance
– Performance meaning the parties complete the
terms of the contract
• You promised to paint my house
• I promised to pay you
128
CHAPTER
11
1
– Time for Performance
• If time not stated, performance must be completed in a
reasonable time
– Reasonable time varies with the circumstances of each case
– Tender of Performance
• A tender is an offer to do what you have agreed to do
under a contract
– It is important to make tender even if you know the other party
will not perform their part of the contract
129
1. Actor Jackman matured (1)
2. Queue right after number 8 (1)
3. Destroys levels on a ship (1)
4. NBA great Moses without company (2)
5. Really skinny Little Rascals Character (2)
6. Clocking the ascending of Everest (2)
CHAPTER
11
1
– Satisfactory Performance
• When services are preformed for others, the law
requires that they be done in a satisfactory manner
• Court will use the “reasonable person test” if there is a
question as to the satisfactory performance
• One party will agree to perform services for another “to
the other’s satisfaction.” If satisfied, the other party is
bound to the contract
– Substantial Performance
• Is performance that is slightly less than full performance
• Fulfilled the major requirements, but has left only minor
details incomplete
131
CHAPTER
11
1
• Discharge by Agreement
• Contracts may be terminated by mutual agreement
– Mutual Release
• When two parties mutually agree to end their
agreement
– Accord and Satisfaction
• When one contract is substituted for another
• Often used to settle honest disagreements or
unforeseen circumstances regarding an amount owed
132
CHAPTER
11
1
• Reviewing What You Learned
– What is reasonable time for completing a contract?
– What is the difference between satisfactory and
substantial performance of a contract?
– What is tender of performance?
– How can contracts be discharged by agreement?
133
1. Intelligent beginning (1)
2. Pawn a group of sheep (1)
3. Out-of-shape taxi driver (2)
4. Choose a mason’s building block (1)
5. Not a true gliding dance (1)
6. Funny actor Carell’s shirt arms (1)
CHAPTER
11
1
What You Will Learn:
 How to explain situations in which the law will permit a
discharge by impossibility
 How to identify discharges that occur by operation of law
 How to define the statute of limitations
 How to identify debts that cannot be discharged in
bankruptcy
Why It Is Important:
Understanding when contracts are discharged by impossibility
and by operation of law will help you know your legal rights
and obligations in such situations
135
CHAPTER
11
1
• Involuntary Discharge
– Impossibility of Performance
– Operation of Law
• Discharge by Impossibility of Performance
– a contract the become impossible to perform may
be discharged and both parties released from their
obligations
•
•
•
•
Death and Pain
Destruction of subject matter
Means of Performance
Illegality
136
CHAPTER
11
1
– Death or Illness in a Personal Service Contract
• Contract will be discharged if the contract requires
personal service
• Person selected for their ability
– Destruction of the Exact Subject Matter
• If the subject matter that is destroyed through no fault
of either party
• Must occur after the contract accepted, but before
carried out
137
CHAPTER
11
1
– Means of Performance
• Sometimes the means for performance is destroyed and
the contract can not be completed.
– You sign a contract to get a new roof, but your house burns
down before the job is started.
– The house must exist for the contract to be performed
– Illegality
• Contract is void if performance is illegal at initiation.
• Same rule applies if performance becomes illegal after
initiation.
138
1. Sketch a dog or cat “hand” (1)
2. Nix a piece of legislation (1)
3. Air outlet got crooked (1)
4. Dawgs bisque or gazpacho (1)
5. Wet dog sandwich shop (2)
6. Going south Wall Street action (2)
CHAPTER
11
1
• Discharge by Operation of Law
• Sometimes the best interest of society demands that a
contract be terminated
– Wrongful Alteration
• Altering or changing a contract after acceptance
– Statute of Limitations
• When time voids your right to sue for performance
• You can’t “sleep on your rights” and expect help
• You can “stop the clock” and still collect damages
– Bankruptcy
• Set up for the discharging of debt
• Debtors used to go to prison
140
CHAPTER
11
1
• Reviewing What You Learned
– When will the law permit a discharge by
impossibility?
– When will the permit a discharge by operation of
law?
– What is the statute of limitations?
– What debts cannot be discharged in bankruptcy?
141
CHAPTER
11
1
• Workbook Exercises
– Terms – page 93
– You be the Judge – page 94
– Concepts – pages 95 & 96
– Case – page 97
– Assessment – page 100
142
CHAPTER
12
1
143
CHAPTER
12
1
What You Will Learn:





How to explain the nature of an assignment
How to identify contractual rights that can be assigned
How to explain the nature of a delegation
How to explain the nature of a novation
How to identify a situation involving privity of contract
Why It Is Important:
Understanding when contractual rights and duties can be
assigned will prepare you to deal with such situation when
they arise
144
CHAPTER
12
1
• Transfer of Rights
• Some people transfer their rights to receive payment to
other parties to pay off debts
• Some people transfer their duties to other qualified
parties
– Assignment
• Is the transfer of right under contract
– Assignor and assignee
– How Rights May Be Assigned
– The person who is owed money can assign it to anyone else
– The person who owes the money needs to be notified of the
assignment
145
CHAPTER
12
1
– What Right May Be Assigned
• Any rights that do not change obligations of the other
party in an important way.
– You complete a job that you agreed to do, but assign the right
of the payment to someone else.
– The person paying you still needs to pay, but will pay the person
you assigned the right of the payment to.
146
1. Jon or Mia chowder bits (1)
2. Broad handbook or tour leader (1)
3. Rotate a plant with fronds (1)
4. More elevated purchaser (2)
5. Placed a pigtail on a scale (1)
6. Afghan maker’s tot caretakers (2)
CHAPTER
12
1
• Transfer of Duties
• When duties are assigned to someone else
– Delegation
• Is where a party of a contract has someone else perform
the obligations in their place
– Some duties can not be delegated
» Party agrees to perform the task personally
» Contract calls for personal skill and judgment
» Contract prohibits delegation
• Duties may be delegated but not the responsibility
148
CHAPTER
12
1
• Novation
– Is an agreement where an original party to a
contract is replaced by a new party
– The other terms of the new contract remain the
save as the original contract
– To be effective, the substitution requires the
consent of all of the parties involved
149
CHAPTER
12
1
• Third Parties
• Privity of Contract
– Is the relationship between the parties of a contract
– it determines who can sue in regard to performance
» Usually it is the parties to the contract
• Third Party Beneficiary
– Is a person who benefits from the performance of the contract
but is not a party in the contract.
– A third person may enforce a contract when it is to their benefit
150
1. Permeate a fish’s breathing organ (1)
2. Warm up a major Kansas crop (1)
3. Late-night Leno’s accolade (1)
4. Disorganized mess in a rain channel (2)
5. Ref’s blowing device on a Scud (2)
6. Flash cook in water tree limb (1)
CHAPTER
12
1
• Reviewing What You Learned
– What is an assignment?
– What?
– What is novation?
– What is privity of contract?
152
CHAPTER
12
1
What You Will Learn:
 How to explain the concept of anticipatory breach
 How to identify remedies available for breach of contract
 How to define specific performance
 Why you must minimize the damages involved in a breach
of contract
Why It Is Important:
Understanding the remedies available when a contract is
breached will help you pursue satisfaction if this happens to
you
153
CHAPTER
12
1
• Breach of Contract
– Breach of Contract
• Occurs when one party to a contract fails to perform the
duties set out in the terms of the agreement
– Anticipatory Breach
• Occurs when one party to a contract notifies the other
that they will not be able to fulfill the contract BEFORE
the agreed upon start date
• Does not apply to the promise of payment of money in
the future.
– Can only sue for breach of contract after the due date has
passes
154
CHAPTER
12
1
• Damages
– Upon breach of contract, the injured party has a
choice of remedies.
• A remedy is a legal means of enforcing the contract
• As the injured party, you have three options:
– Accept the breach
– Sue for money damages
– Ask the court for equitable remedy
155
1. Large Fruit in a Newton cookie (1)
2. Model Heidi’s lenses for close-ups (1)
3. May chomp like a mosquito (1)
4. Barely nick feral animals (1)
5. Heavy metal musician’s pants brand (2)
6. Worthy of being cited person of importance (3)
CHAPTER
12
1
– Acceptance of Breach
• Accepting the breach
• Consider the contract discharged
– Money Damages
• Are the amount recovered in due to breach of contract
• Actual & Incidental Damages
– Actual damages are the difference between contracted price
and market value
– Incidental damages are any reasonable expenses incurred
• Liquidated Damages
– Agreed upon damages should one of the parties breach
157
CHAPTER
12
1
158
CHAPTER
12
1
• Minimizing Damages
– An injured party must take reasonable steps to
minimize damages that result from another party’s
breach.
– Sometimes you must protect the other party from
unnecessary losses – known as mitigation of
damages
159
CHAPTER
12
1
• Equitable Remedies
– The remedy of money damages is not always
enough to repay an injured party
• Specific Performance
• Injunction
– Specific Performance
• Is asking the court to enforce the contract
• Can only be asked for when money damages would be
inadequate
– Injunction
• Is a court order that prevents a party from performing an
act.
160
1. Weekly news mag green citris fruit (1)
2. Condé Nast health mag bookcase level (1)
3. “Capitalist Tool” magazine spheres (1)
4. $ magazine bee product (2)
5. Fashion magazine rules of language (2)
6. Us Magazine rival’s church spires (2)
CHAPTER
12
1
• Reviewing What You Learned
– What is involved in an anticipatory breach of
contract?
– What remedies are available to an innocent party
when a breach of contract occurs?
– What is specific performance?
– Why is it necessary to minimize the damages
involved in a breach of contract?
162
CHAPTER
12
1
• Workbook Exercises
– Terms – page 101
– You be the Judge – page 102
– Concepts – pages 103 & 104
– Case – page 105
– Assessments – page 108
163