Chapters 7 and 8
Genuine Assent and
Consideration in Contract Law
Genuine Assent
Chapter 7
Donald Drapkin Awarded $16M
► Discussing
his lawsuit against former friend
and colleague Ronald Perleman for breach
of contract, with Donald Drapkin, former
MacAndrew & Forbes vice chair.
► http://video.cnbc.com/gallery/?video=30000
70229
► http://video.cnbc.com/gallery/?video=30000
71834
Six Requirements of a
Legally Binding Contract
1.
Offer and Acceptance
1. Offer: intent, communicated, terms
2. Acceptance: Come from the offeree, mirror image rule, Be communicated to the
offeror
2.
Genuine Assent
1. No deception
3.
Legality
1. follow the Law/ cannot be based on any illegal actions
4.
Consideration
1. Agreement must involve both sides receiving something of value
5.
Capacity
1. Both Parties must be able to perform contract for themselves - Cannot “outsource”
duties
6.
Writing
1. As a general rule, it is wisest to have the terms written in understandable language
2. Statute of Frauds – lists Contracts that must be in writing to be enforced (By State)
Genuine Assent
►True
and complete intent to
enter into a contract
► Assent
means agreement, approval or
permission
Without it, contracts are
typically voidable
Federal Lawsuit Alleges Infringement of
Minors' New York Right of Publicity by
Facebook "Like" and "Friend Finder"
Features
►
Read article:
http://newmedialaw.proskauer.com/2011/05/articles/contracts/federallawsuit-alleges-infringement-of-minors-new-york-right-of-publicity-byfacebook-like-and-friend-finder-features/
►
Be able to describe the issue of Assent in this article
Voidable – if the injured
party desires, they can
cancel their obligation
and get back what they
have already put in
►Rescission
– when the
injured/forced party
cancels their obligation of
a contract
Rescission
► In
contract law, rescission has been
defined as the unmaking of a contract
between parties.
► Rescission is the unwinding of a
transaction.
► This is done to bring the parties, as far as
possible, back to the position in which they
were before they entered into a contract
Ratification:
► Collective
suggesting you intend to be bound by
contract
bargaining agreements
► Example:
 The Union authorizes one or more people to
negotiate and sign an agreement with
management.
 A collective bargaining agreement can not
become legally binding until the union members
ratify the agreement. I
 f they do not approve it, the agreement is of no
effect, and negotiations resume.
Unfair persuasion
► refers
to a form of undue influence by which a
stronger party succeeds over the weaker through
seriously impairing weaker party’s free and
competent exercise of judgment.
► When compared to duress and misrepresentation,
the effects brought by undue persuasion are less
serious.
► If a contract is obtained by undue influence, the
document is invalid;
Duress
►Occurs
when one party
uses improper threat or
act to obtain a contract
Creates a VOIDABLE
contract
►
Deion Sanders Divorce
►
http://www.youtube.com/watch?v=EqXNiD3tFBk&safety_mode=tru
e&persist_safety_mode=1
Should the Prenup
be thrown out
because of Duress?
Types of Duress
1. Threats
of illegal conduct
2. Threats to report crimes
3. Threats to sue
4. Economic threats
Undue Influence
►Occurs
when one party is
in a position of trust and
wrongfully dominates and
deceives the other party
►VOIDABLE
by the victim
Validity and Contesting a Trust /
Undue Influence
► http://www.youtube.com/watch?v=cL65pCX
CbO8&feature=related&safety_mode=true&
persist_safety_mode=1
► http://www.youtube.com/watch?v=Nm0IsU
ZhvC0&feature=related&safety_mode=true
&persist_safety_mode=1
Mistake,
Misrepresentation
& Fraud
The People’s Court:
Misrepresentation
► http://www.youtube.com/watch?v=bpcgAGr
jj0I&safety_mode=true&persist_safety_mod
e=1
Unilateral Mistake
►Occurs
when only one
party holds an incorrect
belief about the facts of
a contract
Mutual (bilateral) Mistake
►Both
parties have an
incorrect belief about an
important fact of a contract
►Also
known as “Mutual
Mistake”
►Contract is VOID
Material Facts are the
important facts that
influence a persons
decision to enter into a
contract
Two types of Misrepresentation
►Innocent
Misrepresentation
(involuntary)
►Fraudulent
(voluntary)
Misrepresentation
Requirements of Misrepresentation
1.
2.
3.
Untrue statement is one of
fact or active concealment
Statement is material to the
transaction
Victim reasonably relied on
statement
Fraud
►Based
►Must
on misrepresentation
be proven to show…
All elements of misrepresentation
Intent
Injury
Remedies for Fraud
►Rescission
(cancel the contract)
►Damages
 Recovery from loss
►Punitive
Damages
 Forms of punishment (above and
beyond recovery from loss)
5 Types of Contracts in Business
► Many
types of
contracts are used in
business, many of
them specific to a
particular industry.
Independent Contractor
Agreements
 An independent
contractor agreement is
an agreement between
two independent parties
to perform certain
services.
 The independent
contractor has much
greater freedom and is
subject to far less
supervision than an
employee.
► Unlike
an employee, an independent contractor
does not work regularly for an employer but works
as and when required, during which time he or
she may be subject to the Law of Agency.
► An independent contractor is An independent
person, business, or corporation that provides
goods or services to another entity under terms
specified in a contract
► Independent contractors are usually paid on a
freelance basis.
Examples of occupations where independent
contractor arrangements are typical:
Accountant
Author
► DJ
► Engineering Consultant
► Entertainer
► Gardner
► General contractor
► Hair Stylist
► Lawn care worker
► Lawyer
► Massage therapist
► Doctor
►
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Nurse
Personal trainer
Pool Maintenance Person
Private investigator
Private security
Professional athlete
Real estate agent
Short term university instructor
Stock broker
Talent agent
Tattoo artist
Taxi Driver or limousine driver
Truck Driver
Tutor
Licenses and Permits
► Before
you start a business as an independent
contractor, you will want to obtain the professional
licenses and permits that are required for your
profession.
► Each professional organization has licenses and
permits that are required, as does each city/state
► This license is sometimes called a business license
► Protects you Personally from being sued, only
the Business can be sued!
Employment Agreements
► Employment
agreements set out the terms
of the relationship between employer and
employee.
► It should include provisions that define job
duties, work rules, duration of employment
and grounds for termination.
► Employed at Will
► Find
an article about an employee fired for
violating their employment contract
Confidentiality Agreements
► important
in certain industries, such as the
software and finance industry, where employees
have access to company trade secrets.
► Confidentiality agreements may be executed
between a company and its employee, between a
company an an independent contractor and
between two companies doing business together.
Non-compete Agreements
►A
non-compete agreement prevents an
employee or independent contractor from
working for the employer's competitor,
sometimes for years after the employment
or contract relationship has ended.
► State laws provide limits on the duration
and geographic scope of non-compete
agreements.
Sales Contracts
► Sales
contracts are generally executed between
two companies when one purchases goods from
the other.
► A written agreement is required if the value of the
transaction is at least $500.
► In many cases, sales transactions are evidenced
only by the exchange of letters, emails and
invoices.
► Under the Uniform Commercial Code, a valid
contract can be created in this way even if there is
no single written agreement.
Download and Complete the
worksheet regarding types of
Business Contracts and specific
lawsuits (filed/pending)
Consideration
Chapter 8
Consideration – what a
person demands and
generally must receive
in order to make a
contract legally
binding
3 Requirements of Consideration
1.
Each party must give an
act, forbearance, or
promise to the other party
Forbearance – refraining from
doing something you have
the right to do
3 Requirements of Consideration
2. Each party must trade what
they contribute to the
transaction
3. What each party trades
must have legal value
** Consideration
distinguishes a
contractual promise
from a promise to
give a gift **
Gift – transfer of ownership
without receiving anything in
return
 generally not legally enforceable
Donor – gives
Donee – receives
 After gift exchange occurs,
transaction becomes binding
Nominal Consideration – token
amount identified in a
written contract when parties
either cannot or do not wish
to state the amount
specifically
Ex. $1 and other valuable
consideration in exchange for a car
Questionable
Consideration
Illusory Promises
►A
contract clause that allows
you to escape legal obligation
Ex. I promise to paint your
house…if I have time.
Termination Clauses
►Gives
power to withdraw from a
contract if certain circumstances
change, or after the passage of
a certain length of time
 Exceptions must be defined
Output and Requirement Contracts
Output Contract – A buyer’s
agreement to purchase all of a
particular producer’s
production
Requirements Contract – A
seller’s agreement to supply all
of the needs of a buyer
Existing Duty
A promise to do something that
you are already obligated to
do by law or prior contract
does not serve as
consideration
This is called…
Existing Public/Private Duty
Liquidated Debt
Where an agreement is made
that a debt and the true amount
of that debt exists and must be
repaid
►
All debt must be recovered
Unliquidated Debts
Where an agreement cannot
be reached as to the
amount of debt owed
►Accord
and Satisfaction
- a compromise must be
made
Once an agreement is
reached concerning
unliquidated debt, this
is called a release
Composition of Creditors
When a group of creditors
cooperatively agree to accept
less than what they are
entitled to in exchange for
the debtor not filing
bankruptcy
Past Performance
►An
act that has already been
performed cannot serve as
consideration for an
immediate or future contract
This is known as past
consideration
When is
Consideration
not Required?
1. Promises
to Charitable
Organizations
2. Promises
UCC
► Firm
covered by the
Offers
► Modifications
3. Promises barred from Collection
by Statute
Statute of Limitations
 A specific time limit for bringing a
lawsuit
Debts Discharged in Bankruptcy
 Some debt lost in bankruptcy can
still be reinstated by a promise of
the debtor
4. Promissory Estoppel
 Prevents a promisor from
stating in court that they
did not receive
consideration for their
promises
Requirements for P.E.
1.Must forsee reliability
on the promise
2.Promisee does act in
reliance of the promise
3. Promisee would suffer
economic loss
4. Injustice can be
avoided only by
enforcement of the
promise