Contract law

Slides developed byLes Wiletzky Copyright © 2006 by Pearson Prentice-Hall. All rights reserved

PowerPoint Slides to AccompanyESSENTIALS OF BUSINESS AND

ONLINE COMMERCE LAW1st Edition

by Henry R. Cheeseman

Chapter 7Contracts: Classification, Agreement, and Consideration

Chapter 7Contracts: Classification, Agreement, and Consideration

Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 07 - 2

Introduction Contracts are the basis of many of our daily

activities They provide the means for individuals and

businesses to sell and otherwise transfer property, services, and other rights

Without enforceable contracts, commerce would collapse


Definition of a Contract A contract is an agreement that is enforceable

by a court of law or equity

If one party fails to perform as promised, the other party can use the court system to enforce the contract and recover damages or other remedy


Parties to a Contract OfferorOfferor – The party who makes an offer to enter into a

contract OffereeOfferee – The party to whom an offer to enter into a contract is

made

OfferorOfferor – The party who makes an offer to enter into a contract

OffereeOfferee – The party to whom an offer to enter into a contract is made

Offer

Acceptance

Offeror Offeree

Offeror makes an offer to the offeree

Offeree has the power to accept the offer and

create a contract


1. Agreement 2. Consideration

3. ContractualCapacity

4. Lawful Object

Elements of a Contract


Sources of Contract Law1. The Common Law of Contracts

2. The Uniform Commercial Code

3. The Restatement of the Law of Contracts

4. Uniform Computer Information Transactions

Act (UCITA)


Classifications of Contracts:FormationFormation (1 of 2)

1.1. Bilateral contractBilateral contract – a promise for a promise

2.2. Unilateral contractUnilateral contract – A promise for an act

3.3. Express contractExpress contract – A contract expressed in oral or written words

4.4. Implied-in-fact contractImplied-in-fact contract – A contract inferred from the conduct of the parties


Classifications of Contracts:FormationFormation (2 of 2)

5.5. Quasi-contractQuasi-contract – A contract implied by law to prevent unjust enrichment

6.6. Formal contractFormal contract – A contract that requires a special form or method of creation

7.7. Informal contractInformal contract – A contract that requires no special form or mode of creation


Classifications of Contracts:EnforceabilityEnforceability

1.1. Valid contractValid contract – A contract that meets all of the essential elements to establish a contract

2.2. Void contractVoid contract – No contract exists

3.3. Voidable contractVoidable contract – A party has the option of voiding or enforcing the contract

4.4. Unenforceable contractUnenforceable contract – A contract that cannot be enforced because of a legal defense


Classifications of Contracts:PerformancePerformance

1.1. Executed contractExecuted contract – A contract that is fully performed on both sides

2.2. Executory contractExecutory contract – A contract that is not fully performed by one or both parties


Agreement AgreementAgreement – the manifestation by two or

more persons of the substance of a contract

It requires an offeroffer and an acceptanceacceptance


Offer The manifestation of willingness to enter into

a bargain, so as to justify another person in understanding that his assent to that bargain is invited and will conclude it [Section 24 of the Restatement (Second) of Contracts]


Termination of an Offer

1. Revocation of the offer by the offeror

2. Rejection of the offer by the offeree

3. Counteroffer by the offeree

4. Destruction of the subject matter

5. Death or incompetence of the offeror or offeree

6. Supervening illegality

7. Lapse of time

1. Revocation of the offer by the offeror

2. Rejection of the offer by the offeree

3. Counteroffer by the offeree

4. Destruction of the subject matter

5. Death or incompetence of the offeror or offeree

6. Supervening illegality

7. Lapse of time


Option Contracts An offeree can prevent the offeror from

revoking his or her offer by paying the offeror compensation to keep the offer open for an agreed-upon period of time

This payment is called an option contractoption contract The offeror agrees not to sell the property to

anyone but the offeree during the option period


Acceptance A manifestation of assent by the offeree to the

terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts [Section 50 of the Restatement (Second) of Contracts]

The oferee’s acceptance must be unequivocalunequivocal The mirror image rulemirror image rule


Time and Mode of Acceptance (1 of 2)

Mailbox RuleMailbox Rule (Acceptance-Upon-Dispatch Rule) An acceptance is effective when it is dispatched

Proper DispatchProper Dispatch An acceptance must be properly addressed,

packaged, and posted to fall within the mailbox rule


Time and Mode of Acceptance (2 of 2)

Express AuthorizationExpress Authorization A stipulation in the offer that says the acceptance must be

by a specified means of communication e.g., registered mail, telegram


Offer and Acceptance - SummaryCommunication by Offeror Effective When

Offer Received by offeree

Revocation of offer Received by offeree

Communication by Offeree Effective When

Rejection of offer Received by offeror

Counteroffer Received by offeror

Acceptance of offer Sent by offeree


Consideration ConsiderationConsideration – something of legal valuelegal value

given in exchange for a promise Consideration must be given before a contract

can exist Most common types of consideration:

Tangible paymentTangible payment (e.g., money or property) Performance of an actPerformance of an act (e.g., providing legal services)


Gift Promise Gift promisesGift promises (gratuitous promises) are

unenforceable because they lack consideration

A “completed gift promise” becomes a true gift, which by definition is irrevocable


Contracts Lacking Consideration (1 of 2)

Illegal ConsiderationIllegal Consideration A contract cannot be supported by a promise to refrain

from doing an illegal act because that is illegal illegal considerationconsideration

Contracts based on illegal consideration are void Moral ObligationsMoral Obligations

Promises made out of a sense of moral obligationmoral obligation or honor are generally not enforceable on the ground that they lack consideration


Contracts Lacking Consideration (2 of 2)

Preexisting DutyPreexisting Duty A promise lacks consideration if a person promises to

perform an act or do something he or she is already under an obligation to do

The promise is unenforceable because no new consideration has been given

Past ConsiderationPast Consideration Past consideration (e.g., prior acts) will not support a new

contract New consideration must be given


The United Nations Convention on Contracts for the International Sale of Goods (CISG)

Applies to contracts for the international sale of goods i.e., the buyer and seller must have their places of

business in different countries Additionally, either

both of the nations must be parties to the convention, or the contract specifies that the CISG controls

Contract law

Business

Transcript of Contract law