© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C HAPTER 9: I NTRODUCTION TO C ONTRACTS

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T OPICS C OVERED IN C HAPTER 9: I NTRODUCTION TO C ONTRACTS A. Development of the Law of Contracts. B. Definition of a Contract. C. Requirements of a Contract. D. Classification of Contracts. E. Promissory Estoppel. F. Quasi Contracts. 2

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. L AW OF C ONTRACTS  Definition of Contract – a binding agreement that the courts will enforce.  Common Law – most contracts are governed primarily by State common law, including contracts involving employment, services, insurance, real property (land and anything attached to it), patents, and copyrights. 3

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. L AW OF C ONTRACTS  Uniform Commercial Code. Article 2 of the UCC governs the sales of goods. Sale – the transfer of title from seller to buyer. Goods – tangible personal property (personal property is all property other than an interest in land). 4

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D EFINITION OF A C ONTRACT  A contract is a binding agreement that the courts will enforce. Not all agreements are enforceable. Usually consists of a set of promises by the promisor (offeror) and the offeree (promissee) to do—or not do— something. A breach is a failure to keep a promise. 5

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. L AW G OVERNING C ONTRACTS Sale of goods? General contract law governs No Specific provision of UCC applicable? Yes UCC governs Yes No

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. R EQUIREMENTS OF A C ONTRACT  Mutual Assent – the parties to a contract must manifest by words or conduct that they have agreed to enter into a contract.  Consideration – a mutual exchange of legal benefit or legal detriment as an inducement to the other party to make a return exchange.  7

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. R EQUIREMENTS OF A C ONTRACT  Legality of Object – the purpose of a contract must not be criminal, tortious, or otherwise against public policy.  Capacity – the parties to a contract must have contractual capacity.  S TEINBERG V. C HICAGO M EDICAL S CHOOL (1976). 8

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Mutual Assent? Consideration? Yes Capacity? Yes Free from Invalidating Conduct? Yes Void No Void or Voidable No Yes Subject Matter Legal? Statutes of Frauds Satisfied? Yes Unenforceable No Valid Contract Yes V ALIDITY OF A GREEMENTS

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C LASSIFICATION OF C ONTRACTS  Express and Implied Contracts. Express Contract – an agreement that is stated in words, either orally or in writing. Implied in Fact Contract – a contract in which the agreement of the parties is inferred from their conduct. F OX V. M OUNTAIN W EST E LECTRIC, I NC. (2002).  F OX V. M OUNTAIN W EST E LECTRIC, I NC. (2002).  10

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C LASSIFICATION OF C ONTRACTS  Bilateral and Unilateral Contracts Bilateral Contract – a contract in which both parties exchange promises. Unilateral Contract – a contract in which only one party makes a promise. 11

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C LASSIFICATION OF C ONTRACTS  Valid, Void, Voidable, and Unenforceable Contracts. Valid Contract – one that meets all of the requirements of a binding contract. Void Contract – no contract at all; without legal effect.  12

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C LASSIFICATION OF C ONTRACTS  Valid, Void, Voidable, and Unenforceable Contracts. Voidable Contract – a contract capable of being made void. Unenforceable Contract – a contract for the breach of which the law provides no remedy. 13

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C LASSIFICATION OF C ONTRACTS  Executed and Executory Contracts. Executed Contract – a contract that has been fully performed by all of the parties. Executory Contract – a contract that has yet to be fully performed. 14

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. P ROMISSORY E STOPPEL  Definition – a doctrine enforcing some noncontractual promises to prevent injustice. S KEBBA V. K ASCH (2006).  S KEBBA V. K ASCH (2006).  15

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. P ROMISSORY E STOPPEL  Requirements – a promise made under circumstances that should lead the promisor reasonably to expect that the promise would induce the promisee to take definite and substantial action, and the promisee does take such action. 16

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Q UASI C ONTRACTS  Definition – contract implied-in-law. Obligation not based on express or implied promises or conduct.  Requirements. A court will impose a quasi contract when (1)­the plaintiff confers a benefit upon the defendant, (2)­the defendant knows or appreciates the benefit, and . 17

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Q UASI C ONTRACTS  Requirements. (3)­the defendant's retention of the benefit is inequitable.  Remedy – the plaintiff recovers the reasonable value of the benefit she conferred upon the defendant. W EICHERT C O. R EALTORS V. R YAN (1992). W EICHERT C O. R EALTORS V. R YAN (1992). 18