UNIT 7

The Essentials of Contract Law

SUNY CRIMINAL & BUSINESS LAW/MUSOLINO

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Learning Objectives

1. Explain the three theories of contract law.

2. Identify the six elements of a contract.3. Explain the place of the UCC in contract

law.4. Distinguish contracts from other

agreements between different parties.5. Explain the concept of privity and

contract law.6. Explain the nature of valid, void,

voidable, and unenforceable contracts

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Learning Objectives

6. Contrast unilateral and bilateral contractual arrangements.

7. Outline the difference between express and implied contracts.

8. Discuss the difference between quasi-contracts and implied-in-fact contracts.

9. Differentiate between formal and informal contracts.

10. Explain how executory contracts differ from executed contracts.

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Question?

What is an agreement between two or more competent parties?

A. DealB. BondC. TreatyD. Contract

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The Basics of Contract Law

Contract – an agreement between two or

more competent parties, based on mutual promises, to do or refrain from doing some particular thing that is neither illegal nor impossible

– results in an obligation or a duty that can be enforced in a court of law

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Question?

What is the contracting party who makes a promise?

A. PromiseeB. PromisorC. ObligeeD. Obligor

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Question?

What is the contracting party to whom a party owes an obligation?

A. PromiseeB. PromisorC. ObligeeD. Obligor

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The Basics of Contract Law

Promisor – the contracting party who makes a promise

Promisee – the one to whom the promise is made is the

Obligor – the party who is obligated to deliver on a

promise or undertake some act of performance

Obligee– the contracting party to whom this party

owes an obligation

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The Objectives of Contract Law

The court’s goal in the remedy phase of a contract dispute is to place the injured party in as good a position as he or she would have been had the contract been carried out

Mitigation Punitive damages

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Question?

Which theory states that a contract will exist once all of the parties with the legal capacity to contract have actually accepted all obligations and benefits under the contract ?

A. Equal value theoryB. Equity theory C. Will theoryD. Judgment theory

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Three Theories of Contract Law

The will theory – a general principle of law that

states that a contract will exist once all of the parties with the legal capacity to contract have actually accepted all obligations and benefits under the contract and have exchanged, or promised to exchange, things of value

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Three Theories of Contract Law

The equal value theory or equity theory – insisted that a contract would

be valid only if the things exchanged were of equal value

– bartering

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Three Theories of Contract Law

If each element is present, then a contract exists, regardless of what the parties may argue after the fact

The formalist theory of contract law– the courts look to see if certain

elements exist– offer, acceptance, mutual, assent,

capacity, consideration, and legality.

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The Six Elements of a Contract

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Contracts and the UCC

The Uniform Commercial Code (UCC) is a unified set of statutes designed to govern almost all commercial transactions

Article 2 of the UCC sets down the rules that govern sale-of-goods contracts

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Contracts and Other Agreements

All contracts are agreements, but not all agreements are contracts.

To be enforceable, an agreement must conform to the law of contracts.

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Question?

When both parties have a legally recognized interest in the subject of the contract it is called ________.

A. PrivityB. JudgmentC. Contractual obligationD. Gordon defense

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Contracts and Privity

Privity– both parties have a legally

recognized interest in the subject of the contract if they are to be bound by it

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Contractual Characteristics

Valid contract – one that is legally binding and

fully enforceable by the courtVoid contract

– one that has no legal effect whatsoever

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Contractual Characteristics

Voidable contract – one that may be avoided or

canceled by one of the partiesUnenforceable contract

– one that, because of some rule of law, cannot be upheld by a court of law

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Question?

What type of contract is one in which both parties make promises?

A. Voided contractB. Unilateral contractC. Express contractD. Bilateral contract

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Contractual Characteristics

Unilateral contract – an agreement in which one party

makes a promise to do something in return for an act of some sort

Bilateral contract – one in which both parties make

promises Breach of contract

– occurs when one of the two parties fails to keep the promise

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Contractual Characteristics

Express contract – requires some sort of written or

spoken expression indicating a desire to enter the contractual relationship

Implied contract – created by the actions or

gestures of the parties involved in the transaction

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Contractual Characteristics

Informal contract – Any oral or written contract that is

not under seal or is not a contract of record

Formal contract – has to be (1) written; (2) signed,

witnessed, and placed under the seal of the parties; and (3) delivered

– Contract of record

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Contractual Characteristics

Executory contract – A contract that has not yet been

fully performed by the parties is called an

Executed contract – When a contract’s terms have

been completely and satisfactorily carried out by both parties