Law of Contracts
WHAT MUST BE IN
A CONTRACT?
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Offer and acceptance
Genuine assent
Legality
Consideration
Capacity
Writing
REQUIREMENTS OF AN
OFFER
• Contractual intent must be present
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Jests
Statements made in anger or terror
Preliminary negotiations
Social agreements
• Offer must be communicated to the offeree
• Essential terms must be complete and definite
HOW CAN OFFERS
BE ENDED?
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Revocation by the offeror
Time stated in the offer
Reasonable length of time
Rejection by the offeree
Counteroffer
Death or insanity of either the offeror or offeree
Destruction of the specific subject matter
HOW CAN AN OFFER BE
KEPT OPEN?
• Options
• Firm offers
WHAT IS REQUIRED
OF AN ACCEPTANCE?
• Only offerees may accept
• The acceptance must match the offer
• Acceptance must be communicated to the
offeror
– Silence, bilateral, unilateral acceptance
– Modes of contractual communication
– When acceptances are effective
GENUINE ASSENT
AND DURESS
• Genuine assent
• Duress
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Threats of illegal conduct
Threats to report crimes
Threats to sue
Economic threats
UNDUE INFLUENCE
AND ASSENT
• The relationship
• Unfair persuasion
WHAT ARE THE TYPES OF
CONTRACTUAL MISTAKES?
• Unilateral mistakes
• Mutual mistakes
WHAT IS
MISREPRESENTATION?
• Untrue statement of fact
– Active concealment
– Silence
• Materiality
• Reasonable reliance
FRAUD
• The misrepresentation must be intentional
or reckless
• The misrepresentation or concealment
must injure
REMEDIES FOR FRAUD
• Rescission
• Damages
• Punitive damages
FOCUS
Scenario
• Jane contracts with Mike to purchase one of his
two skateboards. Jane thinks she has bought
the red one, a premier skateboard. Mike thinks
Jane has bought the blue one, his less valuable
skateboard.
Question
• Does a contract exist?
FOCUS
Scenario
• The Thompsons were told that if they did not
sign a contract to repay a $2,000 loan at 40
percent interest, their son would be in danger of
physical harm. Afraid that their son would be
hurt, the Thompsons signed the contract.
Questions
• Is the contract enforceable?
• Why or why not?
CONSIDERATION
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Act, forbearance, or promise
Trading
Legal value
Adequacy of consideration
Nominal consideration
CIRCUMSTANTIAL
CONSIDERATION
• Illusory promises
– Termination clauses
CIRCUMSTANTIAL
CONSIDERATION
• Existing duty
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Existing public duty
Existing private duty
Settlement of liquidated debts
Settlement of unliquidated debts
Release
Composition of creditors
(continued)
FOCUS
Scenario
• Prof. Feer tells his students: “You have worked
hard, and if you continue to perform at this high
level, I'll pay for a pizza party at the end of the
year—if I think it is warranted.” The students
continue to work hard, and class grades are
high, but no party is given.
Question
• Can the students enforce the promise?
FALSE CONSIDERATION
• Mutual gifts
• Past performance
EXCEPTIONS TO THE
REQUIREMENT OF CONSIDERATION
• Promises to charitable organizations
• Promises covered by the UCC
– Firm offers
– Modifications
• Promises barred from collection by statute
– Statute of limitations
– Debts discharged in bankruptcy
• Promissory estoppel
WHAT IS CAPACITY?
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Protections for those who lack capacity
Minors
Those mentally incapacitated
The intoxicated
WHO HAS CONTRACTUAL
CAPACITY IN ORGANIZATIONS?
Scope of authority
• Employer grants authority to employee
• Assumption of authority based on job title
WHEN CAN DISAFFIRMANCE
OCCUR?
• Any time while still under the incapacity
• Within a reasonable time after attaining
capacity
WHAT MUST BE DONE UPON
DISAFFIRMANCE?
• Loss of value
• Obligations of party with capacity
DISAFFIRMANCE TIMELINE
CONTRACTS THAT CANNOT
BE DISAFFIRMED
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Court-approved contracts
Major commitments
Banking contracts
Insurance contracts
Work-related contracts
Sale of realty
Apartment rental
CONTRACTUAL EFFECT OF
MISREPRESENTING AGE
• Other party to the contract may collect
damages
• Minor still may be able to disaffirm
contract