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© 2012 Cengage Learning

Contract LawChapter 7

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In This Chapter

You will be introduced to contract law and how a contract is created.

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Contract

A contract is a legally enforceable agreement to do or not to do a specific thing.

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Legally Enforceable Agreements Expressed – declare intentions

Implied - created by action Bilateral - promise exchanged for a

promise

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Legally Enforceable Agreements Unilateral - promise exchanged for

performance. Executory- both parties have work to

be done after the contract is signed. Executed - one that is complete upon

signing.

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Bilateral Contract Unilateral Contract

Promise for Promise Promise for Performance

Bilateral and Unilateral Contracts

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Legal Effect of Contracts Valid - meets all requirements of law. Void - no legal effect & not a contract. Voidable - one party bound but not

the other. Unenforceable – may have been valid

at an earlier time but now enforcement is barred.

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Contract Essentials

1. Competent parties

2. Mutual assent

3. Lawful objective

4. Consideration or cause

5. Written

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Meeting of the Minds

Offer

Acceptance Counteroffer

OfferAcceptance

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Mutual Agreement Offer Acceptance Counteroffer

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Problems

Fraud Innocent misrepresentation Mistake Duress

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Parol Evidence Rule

Rule permits oral evidence to complete an otherwise incomplete or ambiguous written contract.

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STATUE OF FRAUDS

Requires real estate contracts be written Electronic form acceptable - Esign

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Electronic Transactions Effective March 1, 2001 Esign – electronic signature legal Applies only to interstate commerce Texas passed UETA in 2001 Watch for

Electronic closings Recordings Commercial contracts

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Performance

Most contracts are discharged by being fully performed or executed by the contracting parties in accordance with the contract terms.

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Discharge

Being fully performed by the contracting parties in accordance with the contract terms.

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Novation

A contract can also be performed by novation.

The substitution of a new contract between the same or new parties.

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Breach of Contract

Partial performance Unilateral Rescission Specific performance Money damages Liquidated damages Mutual Rescission

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Statute of Limitations

Written contracts have 4 years. Oral contracts have 2 years limit.

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Implied Obligations

Contractual obligations by implication. No more “caveat emptor.”

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Key Terms Breach of contract Competent parties Contract Duress Fraud

Liquidated damages Minor, Infant Specific

performance Void contract Voidable contract