1 UNIT 2 1 65 7 8 9 10 11 12. 1 UNIT 2 2 1 CHAPTER 5 3.

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NIT Contracts2

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NIT Contracts2

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How Contracts AriseCH

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ContractsWhat You Will Learn:

Why It Is Important:

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

Identifying a contract’s elements will help you manage your affairs in an intelligent and effective manner.

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• 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

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• 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

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)

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– The Elements of a Contract• Offer• Acceptance• Genuine Agreement• Consideration• Capacity• Legality

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• 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

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– 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

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– 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

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• 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?

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)

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Offer and AcceptanceWhat 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

You need to know when an offer has been made and when an acceptance goes into effect to make sound contracts

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• 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

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– 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

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– Definiteness and Certainty• Terms must be clear and have NO doubt

– Tenant/landlord plumbing fix– Job offer with “reasonable” commission

– Communication to the Offeree

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)

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• 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

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– Method of Acceptance

• Time limits may be imposed as well

• Offers may be accepted by actions

• Cannot impose silence as means of acceptance

http://www.youtube.com/watch?v=oTmyrLb0rCk

http://www.youtube.com/watch?v=oTmyrLb0rCk

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• 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

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• 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?

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• Workbook Exercises– Terms – page 45– Judge – page 46– Concepts – page 47 & 48– Case – page 49– Self Assessment – page 52

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Genuine AgreementCH

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Genuine AgreementCH

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Fraud and MisrepresentationWhat 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

Learning the elements of fraud may prevent you from being victimized or help you claim your rights if you are defrauded

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Genuine AgreementCH

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• 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

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Genuine AgreementCH

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• 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

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)

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Genuine AgreementCH

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– 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

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Genuine AgreementCH

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– 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

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Genuine AgreementCH

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– 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

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Genuine AgreementCH

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• 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

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Genuine AgreementCH

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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)

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Genuine AgreementCH

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• 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?

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Genuine AgreementCH

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Mistake, Duress, & Undue InfluenceWhat 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

Recognizing how mistake, duress, and undue influence can affect agreements will help you make better decisions in such situations

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Genuine AgreementCH

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• 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.

http://public.findlaw.com/abaflg/flg-9-1b-10.html

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– 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

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Genuine AgreementCH

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Genuine AgreementCH

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• 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.

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Genuine AgreementCH

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• 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

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Genuine AgreementCH

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• 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?

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)

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Genuine AgreementCH

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Contractual CapacityCH

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Contractual CapacityWhat 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

Understanding the rights afforded to minors in contract law will enable you to exercise your rights and help others

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• 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

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• 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

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– 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 age-

restricted products

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)

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• 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

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– Disaffirming the Whole Contract• The whole contract must be disaffirmed

– Disaffirming Contracts Made With Other Minors• Both parties have the right to disaffirm

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– 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

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– 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

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• 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

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)

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ConsiderationCH

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ConsiderationCH

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ConsiderationWhat 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

By understanding the concept of consideration, you will be able to avoid problems that frequently result when agreements lack this important contractual element

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ConsiderationCH

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• 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

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ConsiderationCH

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– 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

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ConsiderationCH

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– 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

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ConsiderationCH

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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)

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ConsiderationCH

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• 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

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ConsiderationCH

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– 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

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ConsiderationCH

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• 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

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ConsiderationCH

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– 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

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ConsiderationCH

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ConsiderationCH

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• 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?

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)

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ConsiderationCH

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Agreements Without ConsiderationWhat 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

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.

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ConsiderationCH

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• 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

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ConsiderationCH

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– 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

http://www.nolo.com/legal-encyclopedia/statute-of-limitations-state-laws-chart-29941.html

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ConsiderationCH

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– 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

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ConsiderationCH

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• 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

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ConsiderationCH

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– 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

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)

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ConsiderationCH

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• 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?

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ConsiderationCH

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• Workbook Exercises– Terms – page 69– You be the Judge – page 70– Concepts – page 71 &72– Case – page 73– Self Assessment – page 76

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LegalityCH

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LegalityCH

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Agreements That Violate StatutesWhat 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

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

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)

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LegalityCH

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• 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

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LegalityCH

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• 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

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LegalityCH

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– 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

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LegalityCH

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– 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

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)

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LegalityCH

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– 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

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LegalityCH

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• 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?

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LegalityCH

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Agreements Contrary to Public PolicyWhat 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

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

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LegalityCH

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• 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

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)

1CH

APTE

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LegalityCH

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97

• 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

1CH

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LegalityCH

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98

– 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

1CH

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LegalityCH

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99

– 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

1CH

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LegalityCH

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100

– 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

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)

1CH

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LegalityCH

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102

• 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

1CH

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LegalityCH

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9

103

1CH

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LegalityCH

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104

• 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”

1CH

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LegalityCH

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9

105

• 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?

1CH

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LegalityCH

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9

106

• Workbook Exercises– Terms – page 77– You be the Judge – page 78 – Concepts – pages 79 & 80– Case – page 81– Assessment – page 84

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)

1CH

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Form of the ContractCH

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10

108

1CH

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10

109

The Statute of FraudsWhat 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

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

1CH

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110

• 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

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111

• Elements of a Writing– Memorandum

• Does not need to be formal– Sales slip, invoice, check– Place, date, parties involved, price and terms, and signatures

1CH

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112

– 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

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113

• 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

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)

1CH

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115

– 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

1CH

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116

– 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

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117

– 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

1CH

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10

118

• 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?

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)

1CH

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120

Social Rules and FormalitiesWhat 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

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

1CH

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121

• 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

1CH

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122

• 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.

1CH

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10

123

• 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?

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)

1CH

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10

125

• Workbook Exercises– Terms – page 85– You be the Judge – page 86 – Concepts – pages 87 & 88– Case Study – page 89– Assessment – page 92

1CH

APTE

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How Contracts EndCH

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11

126

1CH

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How Contracts EndCH

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11

127

Performance and AgreementWhat 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

Understanding when contracts come to an end will help you determine your legal rights and obligations in such situations

1CH

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How Contracts EndCH

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128

• 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

1CH

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How Contracts EndCH

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129

– 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

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)

1CH

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How Contracts EndCH

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131

– 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

1CH

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How Contracts EndCH

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132

• 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

1CH

APTE

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How Contracts EndCH

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11

133

• 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?

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)

1CH

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How Contracts EndCH

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11

135

Impossibility of Performance & Operation of LawWhat 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

Understanding when contracts are discharged by impossibility and by operation of law will help you know your legal rights and obligations in such situations

1CH

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How Contracts EndCH

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11

136

• 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

1CH

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How Contracts EndCH

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137

– 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

1CH

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How Contracts EndCH

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138

– 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.

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)

1CH

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How Contracts EndCH

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140

• 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

1CH

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How Contracts EndCH

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11

141

• 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?

1CH

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How Contracts EndCH

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142

• Workbook Exercises– Terms – page 93– You be the Judge – page 94– Concepts – pages 95 & 96– Case – page 97– Assessment – page 100

1CH

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Transfer of Contracts & Remedies for BreachCH

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12

143

1CH

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12

144

Transfer of Contractual Rights & DutiesWhat 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

Understanding when contractual rights and duties can be assigned will prepare you to deal with such situation when they arise

1CH

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145

• 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

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146

– 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.

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)

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148

• 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

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149

• 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

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150

• 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

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)

1CH

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12

152

• Reviewing What You Learned– What is an assignment?– What?– What is novation?– What is privity of contract?

1CH

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153

Remedies of the Injured PartyWhat 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

Understanding the remedies available when a contract is breached will help you pursue satisfaction if this happens to you

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154

• 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

1CH

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155

• 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

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)

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– 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

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158

1CH

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159

• 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

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160

• 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.

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)

1CH

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162

• 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?

1CH

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163

• Workbook Exercises– Terms – page 101– You be the Judge – page 102– Concepts – pages 103 & 104– Case – page 105– Assessments – page 108

1 UNIT 2 1 65 7 8 9 10 11 12. 1 UNIT 2 2 1 CHAPTER 5 3.

Documents

Transcript of 1 UNIT 2 1 65 7 8 9 10 11 12. 1 UNIT 2 2 1 CHAPTER 5 3.