CHAPTER 9 Test review

PARTS OF A CONTRACT Offer and Acceptance: Complete terms accepted Genuine Assent: “Not” being forced or misled into contract Consideration: Both sides gain something “Fair” not necessarily equal Capacity: Understanding a contract and your actions Legality: Terms must be legal Written: “Some” contracts must be written to be considered valid

CONSIDERATION Makes serious transactions valid Fair transactions for both sides “Both” sides must gain something from the contract Creates actual contractual agreements, rather than promises or gifts

3 elements of consideration Give: What each party promises to do Trade: Proof the promise was actually traded Legal Value: Worth something in the eyes of the law (Party got what they expected to get)

Gifts Transfer of ownership without getting anything back Does NOT contain consideration Donor- person who gives the gift Donee- person who receives the gift

Forbearance A promise NOT to do something you have a right to do Asking a bank to not make you pay a loan back while you are out of work (Even though you can)

Legal Value Defined as a change in the legal position of the parties as a result of the contract (Property Rights) Example: You go into a store and buy a bag of grapes. You get the grapes (Ownership rights) and the store gets your money (Ownership rights)

Adequacy of consideration Court do NOT look at if the considerations value was equal, only if it was fair Value is based on what the 2 parties negotiate Courts look at if the parties got what they expected

Nominal Consideration A token or small amount of consideration give Example: Give someone a $1 for a $1000 car Allows a contract to be created

Illusory Promise An “Open Ended” promise, which means either party can back out at any time Example: “If I get a chance to help you fix your car, I’ll be there”

Termination Clause A Illusory promise where only “1” side has a right to back out ONE side can back out for any reason and at any time It is an Implied Duty, that both sides will be fair to the other

DIFFERENCE BETWEEN Output contract Requirements Contract When a buyer agrees to purchase everything a company produces Example: McDonalds buying the rights to the only potato that is used for their French fries When a seller agrees to sell only to certain types of companies Example: Microsoft sells its operating system to only PC based computer manufacturers, like IMB or Dell

DIFFERENCE BETWEEN Existing Public Duty Existing Private Duty Agreeing to something you are already obligated to do by law Saying “I won’t speed again if you don’t give me this ticket” No consideration for party since you are already supposed to do this Agreeing to something that you are already obligated to do within the agreement Example: If you already get an extended warranty with a purchase, the store cannot ask you to pay for it

Settlement of a debt Unliquidated Debt: Parties do NOT agree to a debt and its amount Liquidated Debt: Parties agree that a debt exists and to its amount, therefore it must be paid

PAYING LESS THAN FULL AMOUNT OWED Accord and Satisfaction: Paying less than the full amount due in exchange for an agreement NOT to sue Ex) Paying $600 on a $1000 debt in exchange for an agreement that you will not be sued (Released) Release: When your obligation to another party ends or you are “Let out” of your contract early

Past performance You cannot bargain using something that has already occurred in a past contract as part of a current contract Example: If you deliver Pepsi to a local grocery store and give the store a 10% discount, you cannot bargain with the store using this past offer as the basis for why they should pay you more in the future to make up for that discount. It’s a completed agreement.

Promissory Estoppel An exception to where mutual consideration is needed to make a contract valid One party may intend a gift or an open ended promise, but sometimes the promise may be enforceable Used to stop people from being taken advantage of

ELEMENTS Rely on the promise made Acted in reliance of the promise made Suffered a “Substantial” economic loss Ask for the courts help

Promises to charities Usually an open ended gift or a pledge “ONLY” way a pledge can be honored is if the charity tells the donor what the donation will be used for Pledge is enforced if a legal detriment is taken on

Statute of limitations Time limit for filing a lawsuit against another person States usually give most people 3 years to file Purpose is because evidence may get lost over time

DIFFERENCE Giving collateral to leave an offer open Common Law based Option Contract Firm Offer Giving collateral to leave an offer open Common Law based Non-Retail A written agreement Good for 3 months UCC law based Retail

Modification To change a contract If you want to modify (Or change), additional consideration must be given to be allowed to make this change Example: If a car dealer wants to sell you an extended warranty “After” you agree to a car price, you will pay extra to get the contract modified

Questions?