Chapters 7 and 8Chapters 7 and 8Genuine AssentGenuine Assent and and

Consideration Consideration in Contract in Contract LawLaw

Genuine Genuine AssentAssentChapter 7Chapter 7

Donald Drapkin Awarded $16MDonald Drapkin Awarded $16M

►Discussing his lawsuit against former Discussing his lawsuit against former friend and colleague Ronald Perleman friend and colleague Ronald Perleman for breach of contract, with Donald for breach of contract, with Donald Drapkin, former MacAndrew & Forbes Drapkin, former MacAndrew & Forbes vice chair. vice chair.

►http://video.cnbc.com/gallery/?http://video.cnbc.com/gallery/?video=3000070229 video=3000070229

►http://video.cnbc.com/gallery/?http://video.cnbc.com/gallery/?video=3000071834 video=3000071834

Six Requirements of a Six Requirements of a Legally Binding ContractLegally Binding Contract

1.1. Offer and AcceptanceOffer and Acceptance1.1. Offer: intent, communicated, termsOffer: intent, communicated, terms2.2. Acceptance: Come from the offeree, mirror image rule, Be communicated Acceptance: Come from the offeree, mirror image rule, Be communicated

to the offerorto the offeror2.2. Genuine Assent Genuine Assent

1.1. No deceptionNo deception3.3. LegalityLegality

1.1. follow the Law/ cannot be based on any illegal actionsfollow the Law/ cannot be based on any illegal actions4.4. ConsiderationConsideration

1.1. Agreement must involve both sides receiving something of valueAgreement must involve both sides receiving something of value5.5. CapacityCapacity

1.1. Both Parties must be able to perform contract for themselves - Cannot Both Parties must be able to perform contract for themselves - Cannot “outsource” duties“outsource” duties

6.6. Writing Writing 1.1. As a general rule, it is wisest to have the terms written in understandable As a general rule, it is wisest to have the terms written in understandable

language language 2.2. Statute of Frauds – lists Contracts that must be in writing to be enforced Statute of Frauds – lists Contracts that must be in writing to be enforced

(By State)(By State)

Genuine AssentGenuine Assent►True and complete intent True and complete intent to enter into a contractto enter into a contract

► Assent means Assent means agreement, approval or agreement, approval or permissionpermission

Without it, contracts are Without it, contracts are typically typically voidablevoidable

Federal Lawsuit Alleges Federal Lawsuit Alleges Infringement of Minors' New York Infringement of Minors' New York

Right of Publicity by Facebook Right of Publicity by Facebook "Like" and "Friend Finder" Features"Like" and "Friend Finder" Features ► Read article: Read article:

http://newmedialaw.proskauer.com/2011/05/articles/contracts/fehttp://newmedialaw.proskauer.com/2011/05/articles/contracts/federal-lawsuit-alleges-infringement-of-minors-new-york-right-of-pderal-lawsuit-alleges-infringement-of-minors-new-york-right-of-publicity-by-facebook-like-and-friend-finder-features/ublicity-by-facebook-like-and-friend-finder-features/

► Be able to describe the issue Be able to describe the issue of Assent of Assent inin this article this article

VoidableVoidable – if the – if the injured party desires, injured party desires, they can cancel their they can cancel their obligation and get obligation and get back what they have back what they have already put inalready put in

►RescissionRescission – when the – when the injured/forced party injured/forced party cancels their obligation cancels their obligation of a contractof a contract

Rescission Rescission

► In contract law, In contract law, rescissionrescission has been has been defined as the unmaking of a contract defined as the unmaking of a contract between parties.between parties.

► Rescission is the unwinding of a Rescission is the unwinding of a transaction. transaction.

►This is done to bring the parties, as far This is done to bring the parties, as far as possible, back to the position in as possible, back to the position in which they were before they entered which they were before they entered into a contract into a contract

Ratification: Ratification: suggesting you intend to be suggesting you intend to be bound by contractbound by contract

►Collective bargaining agreementsCollective bargaining agreements►Example:Example:

The Union authorizes one or more people The Union authorizes one or more people to negotiate and sign an agreement with to negotiate and sign an agreement with management.management.

A collective bargaining agreement can A collective bargaining agreement can not become legally binding until the union not become legally binding until the union members members ratify ratify the agreement. Ithe agreement. I

f they do not approve it, the agreement is f they do not approve it, the agreement is of no effect, and negotiations resume. of no effect, and negotiations resume.

Unfair persuasionUnfair persuasion

► refers to a form of refers to a form of undue influenceundue influence by by which a stronger party succeeds over the which a stronger party succeeds over the weaker through seriously impairing weaker weaker through seriously impairing weaker party’s free and competent exercise of party’s free and competent exercise of judgment. judgment.

► When compared to duress and When compared to duress and misrepresentation, the effects brought by misrepresentation, the effects brought by undue persuasion are less serious. undue persuasion are less serious.

► If a contract is obtained by undue influence, If a contract is obtained by undue influence, the document is the document is invalidinvalid; ;

DuressDuress►Occurs when one party Occurs when one party uses improper threat or uses improper threat or act to obtain a contractact to obtain a contract

► Creates a VOIDABLE Creates a VOIDABLE contractcontract

Deion Sanders DivorceDeion Sanders Divorce

►

http://www.youtube.com/watch?v=EqXNiD3tFBk&safety_mode=true&persist_safety_mode=1

Should the Prenup be thrown out

because of Duress?

Types of DuressTypes of Duress

1.1. Threats of illegal conductThreats of illegal conduct

2.2. Threats to report crimesThreats to report crimes

3.3. Threats to sueThreats to sue

4.4. Economic threatsEconomic threats

Undue InfluenceUndue Influence►Occurs when one party is Occurs when one party is in a position of trust and in a position of trust and wrongfully dominates and wrongfully dominates and deceives the other partydeceives the other party

►VOIDABLE by the victimVOIDABLE by the victim

Validity and Contesting a Trust / Validity and Contesting a Trust / Undue Influence Undue Influence

►http://www.youtube.com/watch?http://www.youtube.com/watch?v=cL65pCXCbO8&feature=related&safv=cL65pCXCbO8&feature=related&safety_mode=true&persist_safety_mode=ety_mode=true&persist_safety_mode=1 1

►http://www.youtube.com/watch?http://www.youtube.com/watch?v=Nm0IsUZhvC0&feature=related&safv=Nm0IsUZhvC0&feature=related&safety_mode=true&persist_safety_mode=ety_mode=true&persist_safety_mode=1 1

Mistake, Mistake, MisrepresentatiMisrepresentati

on & Fraudon & Fraud

The People’s Court: The People’s Court: Misrepresentation Misrepresentation

►http://www.youtube.com/watch?http://www.youtube.com/watch?v=bpcgAGrjj0I&safety_mode=true&pev=bpcgAGrjj0I&safety_mode=true&persist_safety_mode=1 rsist_safety_mode=1

Unilateral MistakeUnilateral Mistake►Occurs when only Occurs when only one party holds an one party holds an incorrect belief incorrect belief about the facts of a about the facts of a contractcontract

Mutual (bilateral) Mutual (bilateral) MistakeMistake

►Both parties have an Both parties have an incorrect belief about an incorrect belief about an important fact of a contractimportant fact of a contract

►Also known as “Mutual Also known as “Mutual Mistake”Mistake”

►Contract is VOIDContract is VOID

Material FactsMaterial Facts are the are the important facts that important facts that influence a persons influence a persons decision to enter decision to enter into a contractinto a contract

Two types of Two types of MisrepresentationMisrepresentation

►Innocent Misrepresentation Innocent Misrepresentation (involuntary)(involuntary)

►Fraudulent Fraudulent Misrepresentation Misrepresentation (voluntary)(voluntary)

Requirements of Requirements of MisrepresentationMisrepresentation

1.1. Untrue statement is one of Untrue statement is one of fact or fact or active concealmentactive concealment

2.2. Statement is material to Statement is material to the transactionthe transaction

3.3. Victim reasonably relied Victim reasonably relied on statementon statement

FraudFraud►Based on misrepresentationBased on misrepresentation

►Must be proven to show…Must be proven to show…All elements of misrepresentationAll elements of misrepresentation IntentIntent InjuryInjury

Remedies for FraudRemedies for Fraud►Rescission (cancel the Rescission (cancel the

contract)contract)

►DamagesDamagesRecovery from lossRecovery from loss

►Punitive DamagesPunitive DamagesForms of punishment (above Forms of punishment (above and beyond recovery from loss)and beyond recovery from loss)

5 Types of Contracts in Business5 Types of Contracts in Business

► Many types of Many types of contracts are used contracts are used in business, many of in business, many of them specific to a them specific to a particular particular industry. industry.

Independent Contractor Independent Contractor AgreementsAgreements

An independent An independent contractor agreement is contractor agreement is an agreement between an agreement between two independent parties two independent parties to perform certain to perform certain services. services.

The independent The independent contractor has much contractor has much greater freedom and is greater freedom and is subject to far less subject to far less supervision than an supervision than an employee. employee.

► Unlike an employee, an independent Unlike an employee, an independent contractor does not work regularly for an contractor does not work regularly for an employer but works as and when required, employer but works as and when required, during which time he or she may be subject during which time he or she may be subject to the Law of Agency. to the Law of Agency.

► An An independent contractorindependent contractor is An is An independent person, business, or corporation independent person, business, or corporation that provides goods or services to another that provides goods or services to another entity under terms specified in a contractentity under terms specified in a contract

► Independent contractors are usually paid on Independent contractors are usually paid on a freelance basis. a freelance basis.

Examples of occupations where Examples of occupations where independent contractor arrangements independent contractor arrangements

are typical:are typical:

► AccountantAccountant► AuthorAuthor ► DJDJ► Engineering ConsultantEngineering Consultant ► EntertainerEntertainer ► GardnerGardner ► General contractorGeneral contractor ► Hair StylistHair Stylist ► Lawn care workerLawn care worker ► LawyerLawyer ► Massage therapistMassage therapist ► DoctorDoctor

► NurseNurse ► Personal trainerPersonal trainer ► Pool Maintenance PersonPool Maintenance Person ► Private investigatorPrivate investigator ► Private securityPrivate security ► Professional athleteProfessional athlete ► Real estate agentReal estate agent ► Short term university instructoShort term university instructo

rr

► Stock broker Stock broker ► Talent agent Talent agent ► Tattoo artist Tattoo artist ► Taxi Driver or limousine driver Taxi Driver or limousine driver

► Truck DriverTruck Driver► Tutor Tutor

Licenses and PermitsLicenses and Permits

► Before you start a business as an independent Before you start a business as an independent contractor, you will want to obtain the contractor, you will want to obtain the professional licenses and permits that are professional licenses and permits that are required for your profession. required for your profession.

► Each professional organization has licenses and Each professional organization has licenses and permits that are required, as does each permits that are required, as does each city/statecity/state

► This license is sometimes called a business This license is sometimes called a business licenselicense

► Protects Protects you Personallyyou Personally from being sued, only from being sued, only the Businessthe Business can be sued! can be sued!

Employment AgreementsEmployment Agreements

►Employment agreements set out the Employment agreements set out the terms of the relationship between terms of the relationship between employer and employee. employer and employee.

► It should include provisions that define It should include provisions that define job duties, work rules, duration of job duties, work rules, duration of employment and grounds for employment and grounds for termination. termination.

►Employed at WillEmployed at Will

►Find an article about an employee Find an article about an employee fired for violating their employment fired for violating their employment contractcontract

Confidentiality Confidentiality AgreementsAgreements

► important in certain industries, such as the important in certain industries, such as the software and finance industry, where software and finance industry, where employees have access to company trade employees have access to company trade secrets.secrets.

► Confidentiality agreements may be Confidentiality agreements may be executed between a company and its executed between a company and its employee, between a company an an employee, between a company an an independent contractor and between two independent contractor and between two companies doing business together. companies doing business together.

Non-compete AgreementsNon-compete Agreements

►A non-compete agreement prevents A non-compete agreement prevents an employee or independent an employee or independent contractor from working for the contractor from working for the employer's competitor, sometimes for employer's competitor, sometimes for years after the employment or years after the employment or contract relationship has ended. contract relationship has ended.

►State laws provide limits on the State laws provide limits on the duration and geographic scope of non-duration and geographic scope of non-compete agreements.compete agreements.

Sales ContractsSales Contracts

► Sales contracts are generally executed Sales contracts are generally executed between two companies when one between two companies when one purchases goods from the other. purchases goods from the other.

► A written agreement is required if the value A written agreement is required if the value of the transaction is at least $500. of the transaction is at least $500.

► In many cases, sales transactions are In many cases, sales transactions are evidenced only by the exchange of letters, evidenced only by the exchange of letters, emails and invoices. emails and invoices.

► Under the Under the Uniform Commercial Code,Uniform Commercial Code, a a valid contract can be created in this way valid contract can be created in this way even if there is no single written agreement.even if there is no single written agreement.

Download and Complete the Download and Complete the worksheet regarding types of worksheet regarding types of

Business Contracts and specific Business Contracts and specific lawsuits (filed/pending)lawsuits (filed/pending)

ConsideratioConsiderationn

Chapter 8Chapter 8

ConsiderationConsideration – what – what a person demands a person demands and generally must and generally must receive in order to receive in order to make a contract make a contract legally bindinglegally binding

3 Requirements of 3 Requirements of ConsiderationConsideration

1.1. Each party must give an Each party must give an act, forbearance, or act, forbearance, or promise to the other promise to the other partyparty

ForbearanceForbearance – refraining – refraining from doing something from doing something you have the right to doyou have the right to do

3 Requirements of 3 Requirements of ConsiderationConsideration

2.2. Each party must trade Each party must trade what they contribute to what they contribute to the transactionthe transaction

3.3. What each party trades What each party trades

must have legal valuemust have legal value

** Consideration ** Consideration distinguishes a distinguishes a

contractual promise contractual promise

from a promise to from a promise to

give a gift **give a gift **

GiftGift – transfer of ownership – transfer of ownership without receiving anything in without receiving anything in returnreturn

generally not legally enforceablegenerally not legally enforceable

Donor – givesDonor – gives

Donee – receivesDonee – receives

After gift exchange occurs, After gift exchange occurs, transaction becomes bindingtransaction becomes binding

Nominal ConsiderationNominal Consideration – – token amount identified in a token amount identified in a written contract when written contract when parties either cannot or do parties either cannot or do not wish to state the not wish to state the amount specificallyamount specifically

Ex.Ex. $1 and other valuable $1 and other valuable consideration in exchange for a consideration in exchange for a carcar

QuestionableQuestionableConsiderationConsideration

IIllusory Promisesllusory Promises►A contract clause that A contract clause that allows you to escape allows you to escape legal obligationlegal obligation

Ex.Ex. I promise to paint your I promise to paint your house…house…ifif I have time. I have time.

Termination ClausesTermination Clauses

►Gives power to withdraw Gives power to withdraw from a contract if certain from a contract if certain circumstances change, or circumstances change, or after the passage of a after the passage of a certain length of timecertain length of time Exceptions must be definedExceptions must be defined

Output and Requirement Output and Requirement ContractsContracts

Output ContractOutput Contract – A buyer’s – A buyer’s agreement to purchase agreement to purchase allall of a particular producer’s of a particular producer’s productionproduction

Requirements ContractRequirements Contract – A – A seller’s agreement to supply seller’s agreement to supply allall of the needs of a buyer of the needs of a buyer

Existing DutyExisting DutyA promise to do something A promise to do something that you are already that you are already obligated to do by law or obligated to do by law or prior contract does prior contract does notnot serve as considerationserve as consideration

This is called…This is called…

Existing Public/Private DutyExisting Public/Private Duty

Liquidated DebtLiquidated Debt

Where an agreement is made Where an agreement is made that a debt and the true that a debt and the true amount of that debt exists amount of that debt exists and must be repaidand must be repaid

► All debt must be recoveredAll debt must be recovered

Unliquidated DebtsUnliquidated DebtsWhere an agreement Where an agreement cannot be reached as to cannot be reached as to the amount of debt owedthe amount of debt owed

►Accord and SatisfactionAccord and Satisfaction

- a compromise must be- a compromise must be mademade

Once an agreement is Once an agreement is reached concerning reached concerning unliquidated debt, this unliquidated debt, this is called a is called a releaserelease

Composition of Composition of CreditorsCreditors

When a group of creditors When a group of creditors cooperatively agree to cooperatively agree to accept less than what accept less than what they are entitled to in they are entitled to in exchange for the debtor exchange for the debtor not filing bankruptcynot filing bankruptcy

Past PerformancePast Performance

►An act that has already been An act that has already been performed performed cannotcannot serve as serve as consideration for an consideration for an immediate or future contractimmediate or future contractThis is known as This is known as past past considerationconsideration

When is When is Consideration Consideration not Required?not Required?

1.1. Promises to Charitable Promises to Charitable OrganizationsOrganizations

2.2. Promises covered by Promises covered by the UCCthe UCC

►Firm OffersFirm Offers►ModificationsModifications

3.3. Promises barred from Promises barred from Collection by StatuteCollection by Statute

Statute of LimitationsStatute of LimitationsA specific time limit for bringing A specific time limit for bringing a lawsuita lawsuit

Debts Discharged in Debts Discharged in BankruptcyBankruptcySome debt lost in bankruptcy Some debt lost in bankruptcy can still be reinstated by a can still be reinstated by a promise of the debtorpromise of the debtor

4.4. Promissory Estoppel Promissory Estoppel

Prevents a promisor Prevents a promisor from stating in court from stating in court that they did not that they did not receive consideration receive consideration for their promisesfor their promises

Requirements for P.E.Requirements for P.E.

1.1.Must forsee Must forsee reliability on the reliability on the promisepromise

2.2.Promisee does act Promisee does act in reliance of the in reliance of the promisepromise

3. Promisee would suffer 3. Promisee would suffer economic losseconomic loss

4. Injustice can be 4. Injustice can be avoided only by avoided only by enforcement of the enforcement of the promisepromise