1. © 2004 West Legal Studies in Business A Division of Thomson Learning 1 I. Introduction I. Introduction II. Elements of a contract II. Elements of a contract  A. AGREEMENT  B. CONSIDERATION  C. CAPACITY III. Defenses III. Defenses IV. Statute of Frauds and Parole Evidence Rule IV. Statute of Frauds and Parole Evidence Rule V. Assignment/delegation and Third Party Beneficiaries.. V. Assignment/delegation and Third Party Beneficiaries.. I. Introduction I. Introduction II. Elements of a contract II. Elements of a contract  A. AGREEMENT  B. CONSIDERATION  C. CAPACITY III. Defenses III. Defenses IV. Statute of Frauds and Parole Evidence Rule IV. Statute of Frauds and Parole Evidence Rule V. Assignment/delegation and Third Party Beneficiaries.. V. Assignment/delegation and Third Party Beneficiaries.. CONTRACTSCONTRACTS

2. © 2004 West Legal Studies in Business A Division of Thomson Learning 2 Contracts Outline I. Introduction I. Introduction  A. Definition of contract  B. Types of contracts II. Elements of a contract II. Elements of a contract  A. Agreement » 1.OFFER -(a) Requirements of: »(1) Serious proposal »(2) Definite terms »(3) Communication -(b) Termination of: »(1) Acts of parties »(2) Operation of Law.. I. Introduction I. Introduction  A. Definition of contract  B. Types of contracts II. Elements of a contract II. Elements of a contract  A. Agreement » 1.OFFER -(a) Requirements of: »(1) Serious proposal »(2) Definite terms »(3) Communication -(b) Termination of: »(1) Acts of parties »(2) Operation of Law..

3. © 2004 West Legal Studies in Business A Division of Thomson Learning 3 »2. ACCEPTANCE -(a) Requirements for acceptance of bilateral offer »(1) Unconditional »(2) Unequivocal »(3) Communication -(b) Requirements for acceptance of unilateral offer  B. Consideration  C. Capacity »1. Minors »2. Mental incompetency.. »2. ACCEPTANCE -(a) Requirements for acceptance of bilateral offer »(1) Unconditional »(2) Unequivocal »(3) Communication -(b) Requirements for acceptance of unilateral offer  B. Consideration  C. Capacity »1. Minors »2. Mental incompetency..

4. © 2004 West Legal Studies in Business A Division of Thomson Learning 4 III. Defenses III. Defenses  A. Legality  B. Mistake  C. Fraud  D. Undue Influence  E. Duress IV. Statute of Frauds and Parole Evidence Rule IV. Statute of Frauds and Parole Evidence Rule V. Assignment/delegation and Third Party Beneficiaries.. V. Assignment/delegation and Third Party Beneficiaries.. III. Defenses III. Defenses  A. Legality  B. Mistake  C. Fraud  D. Undue Influence  E. Duress IV. Statute of Frauds and Parole Evidence Rule IV. Statute of Frauds and Parole Evidence Rule V. Assignment/delegation and Third Party Beneficiaries.. V. Assignment/delegation and Third Party Beneficiaries..

5. © 2004 West Legal Studies in Business A Division of Thomson Learning 5 Definition of a contract What is a promise? What is a promise? »A promise is a declaration that something will or will not happen in the future. What is the difference between a promise and a contract? What is the difference between a promise and a contract? »A Contract is an agreement (based on a promise) that can be enforced in court. What law governs? What law governs? »Common law vs. UCC.. What is a promise? What is a promise? »A promise is a declaration that something will or will not happen in the future. What is the difference between a promise and a contract? What is the difference between a promise and a contract? »A Contract is an agreement (based on a promise) that can be enforced in court. What law governs? What law governs? »Common law vs. UCC..

6. © 2004 West Legal Studies in Business A Division of Thomson Learning 6 Types of Contracts Unilateral or Bilateral. Unilateral or Bilateral. Express or Implied In Fact. Express or Implied In Fact. Quasi Contracts - Implied in law. Quasi Contracts - Implied in law. Quantum Meruit: reasonable value of the benefit received. Executed or Executory. Executed or Executory. Valid, void, voidable, or unenforceable.. Valid, void, voidable, or unenforceable.. Unilateral or Bilateral. Unilateral or Bilateral. Express or Implied In Fact. Express or Implied In Fact. Quasi Contracts - Implied in law. Quasi Contracts - Implied in law. Quantum Meruit: reasonable value of the benefit received. Executed or Executory. Executed or Executory. Valid, void, voidable, or unenforceable.. Valid, void, voidable, or unenforceable..

7. © 2004 West Legal Studies in Business A Division of Thomson Learning 7 Offer Serious proposal and intent Objective manifestation theory. Objective manifestation theory. Offers made in anger, jest, or undue excitement. Offers made in anger, jest, or undue excitement. Expressions of opinion. Expressions of opinion. Statements of Intention or preliminary negotiations. Statements of Intention or preliminary negotiations. Advertisements, Catalogues, Price Lists, and Circular.. Advertisements, Catalogues, Price Lists, and Circular.. Objective manifestation theory. Objective manifestation theory. Offers made in anger, jest, or undue excitement. Offers made in anger, jest, or undue excitement. Expressions of opinion. Expressions of opinion. Statements of Intention or preliminary negotiations. Statements of Intention or preliminary negotiations. Advertisements, Catalogues, Price Lists, and Circular.. Advertisements, Catalogues, Price Lists, and Circular..

8. © 2004 West Legal Studies in Business A Division of Thomson Learning 8 Offer: Definiteness of Terms Terms (Expressed or Implied). Terms (Expressed or Implied).  Identification of the parties.  Object or subject matter of the contract.  Consideration to be paid.  Time of payment, Delivery, or Performance.  Quantity »Illusory »Requirement »Output.. Terms (Expressed or Implied). Terms (Expressed or Implied).  Identification of the parties.  Object or subject matter of the contract.  Consideration to be paid.  Time of payment, Delivery, or Performance.  Quantity »Illusory »Requirement »Output..

9. © 2004 West Legal Studies in Business A Division of Thomson Learning 9 Offer: Communication Offeree’s knowledge of the offer: Offeree’s knowledge of the offer:  Directly by the Offeror.  Use of mail.. Offeree’s knowledge of the offer: Offeree’s knowledge of the offer:  Directly by the Offeror.  Use of mail..

10. © 2004 West Legal Studies in Business A Division of Thomson Learning 10 Termination by Acts of the Parties Revocation of the offer by the Offeror: Revocation of the offer by the Offeror:  When can offer be revoked?  Exceptions: »Performance of unilateral offer »Option Contract »Firm offer under UCC »Promissory estoppel.  When is revocation effective? Revocation of the offer by the Offeror: Revocation of the offer by the Offeror:  When can offer be revoked?  Exceptions: »Performance of unilateral offer »Option Contract »Firm offer under UCC »Promissory estoppel.  When is revocation effective?

11. © 2004 West Legal Studies in Business A Division of Thomson Learning 11 Rejection Rejection  Rejection (expressed or implied).  Effective upon receipt. Counteroffer Counteroffer  Mirror image rule  UCC modification.. Rejection Rejection  Rejection (expressed or implied).  Effective upon receipt. Counteroffer Counteroffer  Mirror image rule  UCC modification..

12. © 2004 West Legal Studies in Business A Division of Thomson Learning 12 Termination by Operation of Law Lapse of Time. Lapse of Time. Death or destruction of the Subject Matter. Death or destruction of the Subject Matter. Death or Incompetence of the Offeror or Offeree. Death or Incompetence of the Offeror or Offeree. Supervening Illegality.. Supervening Illegality.. Lapse of Time. Lapse of Time. Death or destruction of the Subject Matter. Death or destruction of the Subject Matter. Death or Incompetence of the Offeror or Offeree. Death or Incompetence of the Offeror or Offeree. Supervening Illegality.. Supervening Illegality..

13. © 2004 West Legal Studies in Business A Division of Thomson Learning 13 Acceptance of Bilateral Offer Unconditional Unconditional Unequivocal Unequivocal  Silence as Acceptance »Offer limits acceptance to silence »Prior dealings »Solicited Offers. Communication Communication  Mail Box Rule.. Unconditional Unconditional Unequivocal Unequivocal  Silence as Acceptance »Offer limits acceptance to silence »Prior dealings »Solicited Offers. Communication Communication  Mail Box Rule..

14. © 2004 West Legal Studies in Business A Division of Thomson Learning 14 Acceptance of unilateral offer No notice of acceptance required No notice of acceptance required Must have knowledge of the offer Must have knowledge of the offer Complete or substantial performance required.. Complete or substantial performance required.. No notice of acceptance required No notice of acceptance required Must have knowledge of the offer Must have knowledge of the offer Complete or substantial performance required.. Complete or substantial performance required..

15. © 2004 West Legal Studies in Business A Division of Thomson Learning 15 ConsiderationConsideration Consideration Consideration  Detriment to the promisee »Promise to give up what he thought he had the legal right to retain »Liquidated vs. unliquidated debt -Accord and satisfaction  Bargained for exchange »Adequacy of consideration.. Consideration Consideration  Detriment to the promisee »Promise to give up what he thought he had the legal right to retain »Liquidated vs. unliquidated debt -Accord and satisfaction  Bargained for exchange »Adequacy of consideration..

16. © 2004 West Legal Studies in Business A Division of Thomson Learning 16 Agreements That Lack Consideration Preexisting Duty. Preexisting Duty.  Statute  Prior agreement »UCC modification Past Consideration.. Past Consideration.. Preexisting Duty. Preexisting Duty.  Statute  Prior agreement »UCC modification Past Consideration.. Past Consideration..

17. © 2004 West Legal Studies in Business A Division of Thomson Learning 17 Promissory Estoppel Promissory Estoppel and Detrimental Reliance.. Promissory Estoppel and Detrimental Reliance..

18. © 2004 West Legal Studies in Business A Division of Thomson Learning 18 MinorityMinority Dissaffirmance. Dissaffirmance. Ratification (express or implied) Ratification (express or implied) Necessities Necessities Contracts for Necessaries. Contracts for Necessaries.  May be disaffirmed by minor  Minor liable under quasi contract.. Dissaffirmance. Dissaffirmance. Ratification (express or implied) Ratification (express or implied) Necessities Necessities Contracts for Necessaries. Contracts for Necessaries.  May be disaffirmed by minor  Minor liable under quasi contract..

19. © 2004 West Legal Studies in Business A Division of Thomson Learning 19 Intoxication Mentally Incompetent Persons

20. © 2004 West Legal Studies in Business A Division of Thomson Learning 20 LegalityLegality Covenant not to compete Covenant not to compete  Secondary  Limited in time and location Licensing statutes Licensing statutes  Regulatory  Revenue raising.. Covenant not to compete Covenant not to compete  Secondary  Limited in time and location Licensing statutes Licensing statutes  Regulatory  Revenue raising..

21. © 2004 West Legal Studies in Business A Division of Thomson Learning 21 MistakesMistakes Mistake of Fact vs. Mistake of Value Mistake of Fact vs. Mistake of Value  Bilateral (Mutual)  Unilateral Mistakes Mistake of Fact vs. Mistake of Value Mistake of Fact vs. Mistake of Value  Bilateral (Mutual)  Unilateral Mistakes

22. © 2004 West Legal Studies in Business A Division of Thomson Learning 22 Fraudulent Misrepresentation Voidable by Innocent Party. Voidable by Innocent Party. Elements: Elements:  Misrepresentation of Material Fact.  Intent to Deceive.  Reliance on Misrepresentation.  Injury.. Voidable by Innocent Party. Voidable by Innocent Party. Elements: Elements:  Misrepresentation of Material Fact.  Intent to Deceive.  Reliance on Misrepresentation.  Injury..

23. © 2004 West Legal Studies in Business A Division of Thomson Learning 23 Nonfraudulent Misrepresentation Innocent Misrepresentation.. Innocent Misrepresentation..

24. © 2004 West Legal Studies in Business A Division of Thomson Learning 24 Undue Influence Voidable. Voidable.  Confidential or Fiduciary Relationship.  Relationship of dependence.  Influence or Persuasion.  Weak party talked into doing something not beneficial to him or herself. Presumption of Undue Influence.. Presumption of Undue Influence.. Voidable. Voidable.  Confidential or Fiduciary Relationship.  Relationship of dependence.  Influence or Persuasion.  Weak party talked into doing something not beneficial to him or herself. Presumption of Undue Influence.. Presumption of Undue Influence..

25. © 2004 West Legal Studies in Business A Division of Thomson Learning 25 DuressDuress Voidable. Voidable. Threatened act must be wrongful or illegal. Threatened act must be wrongful or illegal. Exceptions: Exceptions:  Threat to exercise legal rights (criminal or civil suit).  Economic.. Voidable. Voidable. Threatened act must be wrongful or illegal. Threatened act must be wrongful or illegal. Exceptions: Exceptions:  Threat to exercise legal rights (criminal or civil suit).  Economic..

26. © 2004 West Legal Studies in Business A Division of Thomson Learning 26 Statutes of Frauds To be enforceable, the following types of contracts must be in writing and signed: To be enforceable, the following types of contracts must be in writing and signed:  Contracts involving interest in land.  Contracts involving “One Year Rule.”  Collateral or Secondary Contracts to pay debts  Estate debts  Promise made in consideration of marriage.  Contracts for the sale of goods priced at $500 or more.. To be enforceable, the following types of contracts must be in writing and signed: To be enforceable, the following types of contracts must be in writing and signed:  Contracts involving interest in land.  Contracts involving “One Year Rule.”  Collateral or Secondary Contracts to pay debts  Estate debts  Promise made in consideration of marriage.  Contracts for the sale of goods priced at $500 or more..

27. © 2004 West Legal Studies in Business A Division of Thomson Learning 27 Writing requirement Writing requirement Parole evidence rule.. Parole evidence rule.. Writing requirement Writing requirement Parole evidence rule.. Parole evidence rule..

28. © 2004 West Legal Studies in Business A Division of Thomson Learning 28 Third Party Rights Only the Parties to a contract have rights and liabilities under the contract. Only the Parties to a contract have rights and liabilities under the contract. Exceptions: Exceptions:  Assignment or Delegation.  Third party beneficiary contract.. Only the Parties to a contract have rights and liabilities under the contract. Only the Parties to a contract have rights and liabilities under the contract. Exceptions: Exceptions:  Assignment or Delegation.  Third party beneficiary contract..

29. © 2004 West Legal Studies in Business A Division of Thomson Learning 29 No prior notice to or consent of obligator is required No prior notice to or consent of obligator is required No consideration required No consideration required No writing required (Equal dignity rule) No writing required (Equal dignity rule) Delegation: duties are not extinguishable.. Delegation: duties are not extinguishable.. No prior notice to or consent of obligator is required No prior notice to or consent of obligator is required No consideration required No consideration required No writing required (Equal dignity rule) No writing required (Equal dignity rule) Delegation: duties are not extinguishable.. Delegation: duties are not extinguishable..

30. © 2004 West Legal Studies in Business A Division of Thomson Learning 30 Third Party Beneficiaries Original parties to the contract intend at the time of contracting that the contract performance directly benefits a third person. Original parties to the contract intend at the time of contracting that the contract performance directly benefits a third person. Intended vs. Intended vs. Incidental beneficiaries (cannot recover).. Incidental beneficiaries (cannot recover).. Original parties to the contract intend at the time of contracting that the contract performance directly benefits a third person. Original parties to the contract intend at the time of contracting that the contract performance directly benefits a third person. Intended vs. Intended vs. Incidental beneficiaries (cannot recover).. Incidental beneficiaries (cannot recover)..