LS311 – Business Law I Seminar Presentation UNIT 5 Contracts – Part II Chapter 10 – Defenses Against Contract Enforceability Chapter 11 – Third Party Rights and Discharge

Unit 5 Four (4) items to complete in Unit 5. They are: –Unit 5 Written Assignment (30 points) –Unit 5 Review Quiz (10 points) –Unit 5 DB (20 points) –Unit 5 Case Study (20 points) Let’s discuss the Unit 5 Written Assignment. 2

Unit 5 Written Assignment Read the following news story at settles-2_n_ html involving a breach of contract. settles-2_n_ html Then, answer the following questions: Breach of Contract: 1.How the contract was allegedly breached, 2.What defenses may be available to the defendant, and 3.What remedy (or remedies) may be available to the Plaintiff. Note: Your assignment must be in APA format, include a title page, the paper itself (the discussion) and a reference page 3

Chapter 10 Overview – Contract consists of: Agreement – There must be an Offer and Acceptance. One party must offer to enter into a legal agreement and another party must accept the terms of the offer. Consideration – Promises must be supported by legally sufficient & bargained-for consideration. Contractual Capacity – Both parties entering into a Contract must have the “contractual capacity” to do so. Legality – The Contract’s purpose must be to accomplish some goal that is legal and not against public policy. 4

Chapter 10 HOWEVER…even if all of these elements exist, a KT may be UNENFORCEABLE if the following requirements are NOT met. A party will assert them as DEFENSES to the formation or enforcement of a contract. They are: –Genuineness of Assent – The apparent consent of both parties must be “genuine”. –Form – The contract must be in whatever form the law requires. (For example, some contracts must be in writing to be enforceable). 5

Genuineness of Assent A Contract may not be enforceable if the parties have not genuinely assented to its terms. Genuineness of assent may be lacking because of: Mistake Fraudulent Misrepresentation Undue Influence or Duress A party who demonstrates that he did not genuinely assent to the terms of a contract can choose either to carry out the contract or to rescind it.

Mistakes of Fact

Fraudulent Misrepresentation When an innocent party consents to a contract with fraudulent terms, the contract usually can be avoided because he has not voluntarily consented to the terms. Fraud involves 3 Elements: –A Misrepresentation of a material fact must occur. –There must be an intent to deceive. –The innocent party must justifiably rely on the misrepresentation. 8

Undue Influence Undue Influence arises from relationships in which one party can greatly influence another party, thus overcoming that party’s free will. Contract is Voidable (it is a valid KT but one that can be “avoided”) It can arise from a number of confidential/fiduciary relationships such as: –Trustee – Beneficiary –Parent – Child –Physician – Patient –Husband – Wife –Guardian – Ward The weak party is talked into doing something not beneficial to him or herself. 9

Duress Forcing a party to enter into a contract under fear or threat (voidable contract) Threatened act must be wrongful or illegal. Improper Threat. –Threat to exercise legal rights (criminal or civil suit). –Economic or physical. 10

Statute of Frauds (SOF) 11 The primary purpose of the statute is to ensure that, for certain types of contracts there is reliable evidence of the contracts and their terms. To be enforceable, the following types of contracts must be in writing and signed: 1.Contracts involving interest in land (real property) 2.Contracts involving “One year rule.” 3.Collateral or Secondary Contracts. 4.Promise made in consideration of marriage. 5.Contracts for the sale of goods priced at $500 or more.

Exceptions to the Statute of Frauds Partial performance –Purchaser has paid part of purchase price, taken possession and made valuable improvements to property. Admissions –Party admits in court records contract exists Promissory Estoppel/Detrimental Reliance –Promisee justifiably relies Customized Goods / Specially Manufactured 12

Statute of Frauds 13

Sufficiency of Writing Includes memorandum, invoice, fax, check, e- mail, etc. Essential terms sufficient Signed by party against whom enforcement is sought (Initials adequate) 14

Parol Evidence Rule Prohibits the introduction at trial of evidence of the parties’ prior negotiations, previous agreements, or contemporaneous oral agreements IF that evidence contradicts or varies the terms of the parties’ written contract. If the court finds that the parties intended their written contract to be a complete and final embodiment of their agreement, a party cannot introduce evidence of any oral agreement or promise made prior to the contract’s formation or at the time the contract was created. 15

Exceptions to the Parol Evidence Rule Oral evidence to show contract was void or voidable Contracts containing ambiguous terms. Prior dealing, course of performance, or usage of trade. Contracts with an obvious or gross clerical error that clearly would not represent the agreement of the parties. 16

Chapter 11 – Assignments Transfer of contractual rights to a 3 rd party (assignee). The assignee has the right to demand performance from the other original party (Obligor) to the contract. Cannot assign rights for personal services or when obligor’s performance changes. 17

Delegation 18 Transfer of duties to a 3 rd party (Delegatee) by Delegator. Delegatee owes duty to original party in contract. Delegator is still liable for performance of duty.

Assignment vs. Delegation 19

Intended vs. Incidental Beneficiaries Intended Beneficiaries –Benefit is intentional –After rights vest, third party can sue Incidental Beneficiaries –Benefit is unintentional –Third party has no rights 20

Third-Party Beneficiaries 21

Contract Discharge 22

Seminar Scenario 23 Aaron, a college student, signs a one-year lease agreement that runs from September 1 to August 31. The lease agreement specifies that the lease cannot be assigned without the landlord’s consent. In late may, Aaron decides not to go to summer school and assigns the balance of the lease (three months) to a close friend, Erica. The landlord objects to the assignment and denies Erica access to the apartment. Aaron claims that Erica is financially sound and should be allowed the full rights and privileges of an assignee. Discuss fully whether the landlord or Aaron is correct.

Questions & Reminders Questions on Unit 5 material? Next Seminar: Unit 6, Wednesday, July 13 th Remember to complete all Assignments – Unit Review Quiz (Graded Automatically) – Discussion (See Discussion Board Posting Requirements) – Written Assignment – Case Analysis Office Hours: Thursdays 7-9PM (ET) Let’s review for the Unit 5 Review/Quiz Have a great week! 24