Business Law and the
Regulation of Business
Chapter 9: Introduction to Contracts
By
Richard A. Mann
&
Barry S. Roberts
Topics Covered in this Chapter
A. Development of the Law of
Contracts
B. Definition of a Contract
C. Requirements of a Contract
D. Classification of Contracts
E. Promissory Estoppel
F. Quasi Contracts
Law of Contracts
Definition of Contract – a binding
agreement that the courts will enforce.
 Common Law – most contracts are
governed primarily by State common
law, including contracts involving
employment, services, insurance, real
property (land and anything attached to
it), patents, and copyrights.

Law Governing Contracts
Yes
Specific provision
of UCC
applicable?
Yes
No
Sale of goods?
No
General contract law
governs
UCC governs
Uniform Commercial Code
Article 2 of the UCC governs the sales
of goods.
 Sale – the transfer of title from seller to
buyer.
 Goods – tangible personal property
(personal property is all property other
than an interest in land).

Requirements of a Contract




Mutual Assent – the parties to a contract must
manifest by words or conduct that they have agreed
to enter into a contract.
Consideration – each party to a contract must
intentionally exchange a legal benefit or incur a
legal detriment as an inducement to the other party
to make a return exchange.
Legality of Object – the purpose of a contract
must not be criminal, tortious, or otherwise against
public policy.
Capacity – the parties to a contract must have
contractual capacity.
Validity of Agreements
Mutual Assent?
Yes
Consideration?
No
Void
No
Yes
Capacity?
No
Yes
Void or Voidable
No
Free from Invalidating Conduct?
Yes
Subject Matter Legal?
Yes
No
Statutes of Frauds Satisfied?
Unenforceable
No
Yes
Valid Contract
Classification of Contracts

Express and Implied Contracts
– Express Contract – an agreement that is
stated in words, either orally or in writing.
– Implied in Fact Contract – a contract in
which the agreement of the parties is
inferred from their conduct.

Bilateral and Unilateral Contracts
– Bilateral Contract – a contract in which
both parties exchange promises.
– Unilateral Contract – a contract in which
only one party makes a promise.
Classification of Contracts

Valid, Void, Voidable, and
Unenforceable Contracts
– Valid Contract – one that meets all of the
requirements of a binding contract.
– Void Contract – no contract at all; without
legal effect.
– Voidable Contract – a contract capable of
being made void.
– Unenforceable Contract – a contract for
the breach of which the law provides no
remedy.
Classification of Contracts

Executed and Executory Contracts
– Executed Contract – a contract that has
been fully performed by all of the parties.
– Executory Contract – a contract that has
yet to be fully performed.

Formal and Informal Contracts
– Formal Contract – an agreement that is
legally binding because of its particular
form or mode of expression.
– Informal Contracts – all contracts other
than formal contracts.
Contractual and Noncontractual
Promises
All Promises
Noncontractual
promises
(nonenforceable)
Contractual
promises
(enforceable)
Enforceable
noncontractual
promises
Promissory Estoppel

Definition – a doctrine enforcing some
noncontractual promises.

Requirements – a promise made under
circumstances that should lead the promisor
reasonably to expect that the promise would
induce the promisee to take definite and
substantial action, and the promisee does
take such action.

Remedy – a court will enforce the promise
to the extent necessary to avoid injustice.
Quasi Contracts

Definition – an obligation not based on
contract that is imposed to avoid injustice.
 Requirements – a court will impose a
quasi contract when (1)the plaintiff confers a
benefit upon the defendant, (2)the defendant
knows or appreciates the benefit, and (3)the
defendant's retention of the benefit is
inequitable.
 Remedy – the plaintiff recovers the
reasonable value of the benefit she conferred
upon the defendant.
Contracts, Promissory Estoppel,
and Quasi Contracts
Contract
Promissory Estoppel
Quasi Contract
Type of
Promise
Contractual
Noncontractual
None
Void
Unenforceable
Invalidated
Requirements
All of the essentials of a
contract
Detrimental and justifiable Benefit conferred and
reliance
knowingly accepted
Remedies
Equitable
Compensatory
Reliance
Restitution
Promise enforced to the
extent necessary to avoid
injustice
Reasonable value of
benefit conferred