Introduction to Contracts - Law - Lecture Slides, Slides of Law

Download Introduction to Contracts - Law - Lecture Slides and more Slides Law in PDF only on Docsity! 9-1 Chapter Nine Introduction to Contracts 9 Nature of Contracts • Agreement- Legally Enforceable Promise • The law of contracts deals with the enforcement of promises • not every promises are legally enforceable • Contracts give us the ability to enter into agreements with others with confidence that we may call on the law-not merely the good faith of the other party-to make sure that those agreements will be honored • contracting lets us create a type of private law-the terms of the agreements we make-that governs our relations with others • Contracts facilitate the planning that is necessary in a modem, industrialized society • The central principle of contract law that emerged from this period was freedom of contract • contracts should be enforced because they are the products of the free wills of their creators, who should, within broad limits, be free to determine the extent of their obligations • However large organizations used to exploit their greater bargaining power by dictating the terms of their agreements • Contract law evolved to reflect these changes to increase in government regulation of private contractual relationships • Legislatures commonly dictate many of the basic terms of insurance contracts. Employment contracts are governed by a host of laws concerning maximum hours worked, minimum wages paid 9-2 Concepts/Types Bilateral vs. Unilateral • Unilateral: only one party makes a promise • Bilateral: both parties exchange promises and the contract is formed as soon as the promises are exchanged • Perks promises to give any customer a free cup of coffee if the customer buys 10 cups of coffee and has his "frequent buyer" card stamped 10 times • In this case, Perks has made an offer for a unilateral contract, a contract that will be created with a customer only if and when the customer buys 10 cups of coffee and has his card stamped ten times • If Perks Café promises to pay John Mall $1,000 a month if John Mall will promise to lease a kiosk in the mall to Perks for the holiday season, • Perks has made an offer for a bilateral contract because it is offering a promise in exchange for a promise Valid, Unenforceable, Voidable, Void • valid contract is one that meets all of the legal requirements for a binding contract; enforceable in court • An unenforceable contract is one that meets the basic legal requirements for a contract but may not be enforceable because of some other legal rule (statute of frauds, a rule that requires certain kinds of • contracts to be evidenced by a writing) • Voidable contracts are those in which one or more of the parties have the legal right to cancel their obligations under the contract (For example, a contract that is induced by fraud or duress is voidable (cancellable) at the election of the injured party ) injured party has the right to cancel the contract if he chooses • Void contracts are agreements that create no legal obligations and for which no remedy will be given. Contracts to commit crimes, such as "hit" contracts, are classic examples of void contracts 9-5 Concepts/Types Express/Implied • In an express contract, the parties have directly stated how the contract was formed. • However, the mutual agreement necessary to create a contract may also be demonstrated by the conduct of the parties. • When the surrounding facts and circumstances indicate that an agreement has in fact been reached, an implied contract (also called a contract implied in fact) has been created • When you go to a doctor for treatment, for example, you do not ordinarily state the terms of your agreement in advance, although it is clear that you do, in fact, have an agreement. What is that agreement?? • A court would infer a promise by your doctor to use reasonable care and skill in treating you and a return promise on your part to pay a reasonable fee for her services. Executed/Executory • A contract is executed when all of the parties have fully performed their contractual duties, and it is executory until such duties have been fully performed. • For example, Eurocars, Inc., orders five new Mercedes-Benz 500 SLs from Mercedes. Mercedes sends Eurocars its standard acknowledgment form accepting the order. • The parties have a (Valid, Unenforceable, Voidable, Void)? (Express/Implied) ? (Executed/Executory)? Contract • valid, express, bilateral contract that will be executory until Mercedes delivers the cars and Eurocars pays for them. 9-6 Status of apparent contract 9-7 Voidable (Valid unless and until it is repudiated by the plaintiff.) Status of apparent contract Void (Of no legal effect between the parties) Unenforceable (Valid on its face but has a technical defect. No legal action can be brought on it) Illegal (Breaks the law or contrary to public interest. Generally treated as void) “Noncontracts” • the law enforces an obligation to pay for certain losses or benefits even in the absence of mutual agreement and exchange of value. • Quasi-Contract: Requiring all the elements of a binding contract before contractual obligation is imposed can cause injustice in some cases. One person may have provided goods or services to another person who benefited from them but has no contractual obligation to pay for them because no facts exist that would justify a court in implying a promise to pay for them. • Jones paints Smith's house by mistake, thinking it belongs to Reed. Smith knows that Jones is painting his house but does not inform him of his error. Is this binding?? • There are no facts from which a court can infer that Jones and Smith have a contract because the parties have had no prior discussions or dealings. • however, enabling Smith to get a free paint job and Perkins to avoid paying for the goods he resold would unjustly enrich them at the expense of Jones and Thomas • The courts imply as a matter of law a promise by the benefited party to pay the reasonable value of the benefits he received. • This idea is called quasi-contract (or contract implied in law) because it represents an obligation imposed by law to avoid injustice, not a contractual obligation created by voluntary consent • In general, however, quasi-contract liability is imposed when one party confers a benefit on another who knowingly accepts it and retains it under circumstances that make it unjust to do so without paying. • So, if Jones painted Smith's house while Smith was away on vacation, Smith would probably not be liable for the reasonable value of the paint job because he did not knowingly accept it and because he has no way to return it to Jones 9-10 Promissory Estoppel • In numerous situations one person may rely on a promise made by another even though the promise and surrounding circumstances are not sufficient to justify the conclusion that a contract has been created because one or more of the required elements is missing. • Elements: A promise that the promisor should foresee is likely to induce reliance, reliance on the promise by the promisee, and injustice as a result of that reliance • in Ricketts v. Scothorn, a grandfather's promise to pay his granddaughter interest on a demand note he against him after she had quit her job in reliance on his promise • The Nebraska Supreme Court acknowledged that such promises were traditionally unenforceable because they were gratuitous and not supported by any consideration, but held that the granddaughter's reliance prevented her grandfather from raising his lack of consideration defense. • They said that persons who made promises that produced such reliance were estopped, or equitably prevented, from raising any defense they had to the enforcement of their promise 9-11 Assignment 5. Chow arranged through a travel agent to fly from Indianapolis to Singapore on June 27,1986. Singapore Air-flight to Los Angeles. Shortly before the trip, Chow's flight was rerouted so that he had to fly to St. Louis first and then to San Francisco. During the St. Louis stopover, the flight developed engine trouble, causing a substantial delay. TWA personnel assured Chow that if he missed his connecting flight, TWA would arrange for him to take the next Singapore flight out of San Francisco. After the engine problem was fixed, TWA delayed the flight's departure an additional two hours to board additional passengers. Chow was again assured that if he missed his scheduled flight, TWA would make arrangements for him. Chow missed his Singapore flight by minutes, and was housed overnight at TWA's expense in San Francisco after once more being assured that TWA would make arrangements to get him on the next Singapore flight. When he called Singapore Airlines the next morning to see whether TWA had made him a reservation, Chow was told that no arrangements had been made. When he contacted TWA, he was told TWA would make the arrangements immediately. After waiting several hours, Chow learned TWA had still not made the arrangements and was told that TWA could no longer help him. Because Singapore Airlines no longer had economy class seats available, Chow had to buy a business class seat at an additional cost of $928. When he filed suit against TWAfor that amount, TWA argued that the Conditions of Contract printed on Chow's ticket disclaimed any liability for failure to make connections. Did Chow have a valid claim against TWA? 9-12