1. Chapter 10 Contracts: Nature and Terminology BUSINESS LAW: Text & Cases — Legal, Ethical, International, and E-Commerce Environment11 th Ed. BUSINESS LAW: Text & Cases — Legal, Ethical, International, and E-Commerce Environment 11 th Ed. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.

2. 2 §1: Overview of Contract Law  Sources of Contract Law. –Common Law for all contracts except sales and leases. –Sale and lease contracts - Uniform Commercial Code (UCC).

3. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 3 Overview of Contract Law  A contract is a: –Promise or set of promises, –For breach of which, –The law provides a remedy, or –The performance of which the law in some way recognizes as a duty.  Objective Theory of Contacts. Circumstances to determine intent of parties.

4. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 4 §2: Elements of a Contract  Agreement (Offer and Acceptance).  Consideration.  Contractual Capacity.  Legality.  Defenses: –Genuineness of assent. –Form.

5. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 5 §3: Types of Contracts  Bilateral v. Unilateral. –Bilateral - Offeree must only promise to perform (“promise for a promise”). –Unilateral - Offeree can accept the offer only by completing the contract performance (“a promise for an act”). Irrevocable: Offer cannot be revoked once performance has begun. CASE 10.1 Ardito v. City of Providence (2003).CASE 10.1 Ardito v. City of Providence (2003).

6. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 6 Express vs. Implied-in-Fact  Express: Words (oral or written).  Implied In Fact: Conduct creates and defines the terms of the contract. Requirements: –PL furnished good or service –PL expected to be paid –DEF had chance to reject and did not. –CASE 10.2 Gary Porter Construction v. Fox Construction, Inc. (2004).

7. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 7 Contract Performance  Executed v. Executory. –Executed - A contract that has been fully performed on both sides. –Executory - A contract that has not been fully performed on either side.

8. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 Contract Enforceability  Valid. –Elements: Agreement, consideration, contractual capacity, and legality.  Void. –No contract.  Voidable (unenforceable). –Valid contract can be avoided or rescinded.

9. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 Contract Enforceability

10. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 10 §4: Quasi Contracts  Quasi Contracts are implied in law. –Fictional contracts created by courts. –Imposed on parties for the interest of fairness and justice. –Equitable remedies. –Quantum Meruit.  Limitations on Recovery.

11. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 §5: Interpretation of Contracts  Plain Meaning Rule: Courts give terms their obvious or ordinary meaning. –CASE 10.3 Wagner v. Columbia Pictures Industries, Inc. (2004).

12. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 12 Other Rules of Interpretation  Ambiguous Terms. If terms are ambiguous, court will attempt to interpret ambiguous contract terms in a reasonable, lawful, effective manner. –Contracts are interpreted as a whole. –Terms negotiated separately given greater weight. –Ordinary, common meaning given.

13. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 13 Interpretation of Contracts  Ambiguous Terms (cont’d) –Specific wording given greater weight than general language. –Written or typewritten given greater weight than preprinted. –Ambiguous terms interpreted against the drafter. –Trade usage, prior dealing, course of performance to allowed to clarify.