Thomson/South-Western©2008 Chapter 7 Contract Law _______________________________________

Thomson/South-Western©2008 Legally Enforceable Agreement Expressed – declare intentions Implied - created by action Bilateral - promise exchanged for a promise Unilateral - promise exchanged for performance

Thomson/South-Western©2008 Bilateral ContractUnilateral Contract Promise for PromisePromise for Performance Bilateral and Unilateral Contracts

Thomson/South-Western©2008 Legal Effect of Contracts Valid - meets all requirements of law. Void - no legal effect & not a contract. Voidable - one party bound but not the other. Unenforceable – may have been valid at an earlier time but now enforcement is barred.

Thomson/South-Western©2008 Contract Essentials 1.Competent parties 2.Mutual assent 3.Lawful objective 4.Consideration or cause 5.Written

Thomson/South-Western©2008 Meeting of the Minds Offer Acceptance Counteroffer Offer Acceptance

Thomson/South-Western©2008 Mutual Agreement Offer & Acceptance Counteroffer

Thomson/South-Western©2008 Problems Innocent misrepresentation Mistake Duress Parol Evidence rule

Thomson/South-Western©2008 STATUE OF FRAUDS Requires real estate contracts be written Electronic form acceptable - Esign

Thomson/South-Western©2008 Electronic Transactions Effective March 1, 2001 Esign – electronic signature legal! Applies only to interstate commerce Texas passed UETA in 2001 Look to the future for –Electronic closing –Recordings –Commercial contracts

Thomson/South-Western©2008 Performance Most contracts are discharged by being fully performed or executed by the contracting parties in accordance with the contract terms.

Thomson/South-Western©2008 NOVATION A contract can also be performed by novation The substitution of a new contract between the same or new parties

Thomson/South-Western©2008 Breach of Contract Partial performance Unilateral Rescission Specific performance Money damages Liquidated damages Mutual Rescission

Thomson/South-Western©2008 Statute of limitations Written contracts have 4 years. Oral contracts have 2 years limit.

Thomson/South-Western©2008 Implied Obligations Contractual obligations by implication. No more “caveat emptor.”

Thomson/South-Western©2008 Performance Novation Breach of Contract Specific Performance Duress Fraud Mistake Misrepresentation

Thomson/South-Western©2008 Key Terms Breach of contract Competent parties Contract Duress Fraud Liquidated damages Minor, Infant Specific performance Void contract Voidable contract