Introduction to Contracts - Lecture Notes | BLAW 3201, Study notes of Business and Labour Law

Download Introduction to Contracts - Lecture Notes | BLAW 3201 and more Study notes Business and Labour Law in PDF only on Docsity! CONTRACTS CHAPTER 9: INTRODUCTION TO CONTRACTS Development of the law of contracts:  Contract law is not static-it has and is undergoing enormous changes  Law usually recognizes contractual obligations whenever the parties manifest an intent to be bound. So even promises can be enforced  Parties can be excused from contract in cases of: fraud, duress, undue influence, mistake, unconscionability, or impossibility  20th century- limiting the absolute freedom of contract and relaxing the requirements of contract formation  Common law o Contacts primarily governed by State common law. o Restatements of the Law of Contracts. Known know as the Restatement, Second, Contracts or just Restatement-extensively relied upon / quoted in judicial opinions 70yrs  Uniform commercial code o Sale of personal property forms substantial portion of commercial activity o Article 2 of the Uniform Commercial Code governs sales in all states but Louisiana o A sale- passing of title to goods from a seller to buyer for a price (present and future) o Goods-moveable personal propery o Personal Property- any type of property other than an interest in real property (land)  Law Governing Contracts figure 9-1: If it’s a sale of goods and specific provision of UCC acceptable then UCC governs, if not General Contract law governs  Types of contracts outside the code-General contract law governs all contracts outside o Employment, service, insurance, or Real Property. Also intangibles such as patents Definition of a Contract  Contract- binding agreement that the courts will enforce. A promise or a set of promises for which the law gives a remedy, or the performance of which the law in some way recognizes a duty  Promise- a manifestation of the intention to act or refrain from acting in a specified way  If promises meet requirements of a binding contract, they will be enforceable  Breach-failure to perform properly  Remedies for breach include compensatory damages, equitable remedies, reliance damages, and restitution  All contracts are promises, but not all promises are contracts Requirements of a Contract  Mutual assent- parties to contract must manifest by words or conduct that they have agreed to enter into a contract. Offer and Acceptance  Consideration- each party must intentionally exchange a legal benefit or incur a legal detriment as an inducement to the other party to make a return exchange  Legality of object- purpose of contract can’t be criminal, tortuous, or against public policy  Capacity – Parties must have contractual capacity- adjudicated (judicially declared) incompetent have no legal capacity; minors, incompetent, or intoxicated have limited capacity Classification of Contracts  Standard classifications of contracts are: (contract can contain more then one of the following) o Express or implied contracts – express language or conduct that implies willingness  Fully Oral (exp), written (exp), or implied (imp); or partially 2 or more of each  Expressed contract is oral, written, or both  Implied or fact contract is one that is inferred from parties conduct (pay for a meal at a resturant) o Unilateral or bilateral contracts–  Unilateral- one side promises something (I’ll pay you $10 to mow my grass)  Bilateral- when other side agrees to said offer (I will mow it)  Promisor (makes promise), Promisee (person to whom promise is made) o Valid, void, voidable or unenforceable contracts –  Valid- one that meets all of the requirements of a binding contract. Enforceable  Void- agreement that doesnt meet all requirements of a binding contract (not valid)  Voidable- law permits one or more of parties to avoid legal duties. If void all parties freed  Unenforceable- one for which the law provides no remedy o Executed or executor contracts – pertain to the state or performance of a contract  Executed- contract fully performed by all parties (present tense is not a contract-filled)  Executory- one or more promises by either party underperformed (not yet filled) o Formal or informal contracts-  Formal- depends upon a particular form or mode of expression for its legal existence  Informal- all contracts not formal Promissory Estoppel  A doctrine enforcing some noncontractual promises  Requirements- a promise made under circumstances that should lead the promisor reasonably to expect that the promise would induce the promise to take definite and substantial action, and the promise does not take such action  Remedy- a court will enforce the promise to the extent necessary to avoid injustice Quasi contracts (not a contract but implied in law)  An obligation not based on contract that is imposed to avoid injustice. Neither expressed or implied promise o Ex: someone delivers $100 but gives it to wrong person, the person is not under contract to return it, but the giver is permitted to recover this money  Requirements- a court will impose a QC when, 1) plaintiff confers a benefit upon the defendant, 2) defendant knows or appreciates the benefit, and 3) defendants retention of the benefit is inequitable  Remedy- plaintiff recovers the reasonable value of the benefit she conferred upon the defendant CHAPTER 11: CONDUCT INVALIDATING ASSENT Duress  Any wrongful or unlawful act or threat that overcomes freewill of a party  Physical compulsion- compel assent by using physical force- VOID  Improper threats-use of improper threats or acts such as economic and social coercion – makes it VOIDABLE o Don’t have to be criminal or tortuous to be wrongful-need to be contrary to public policy/morally bad Undue Influence  Person in dominant position taking unfair advantage, by reason based on confidential relationship-Voidable o Using position of knowledge to take advantage of someone that may not be familiar with subject  Factors to see if it was fair: 1) dominant party made full disclosure of information known to them 2) whether the consideration was adequate, 3) whether the dependent party received competent and independent advice before entering agreement Fraud (2 types, in the execution and in the inducement)  Fraud in the Execution- misrepresentation deceiving other party as to nature of document (sign receipt that is really a hidden contract for something) – VOID  Fraud in the Inducement-“fraud” or “deceit” – renders contract VOIDABLE if below apply o False representation- positive statement or conduct that’s misleading. Concealment. The buyer is not responsible for sellers ignorance  Fiduciary-person in a confidential relationship who owes a duty of trust, loyalty, and confidence o Fact- an even that occurred or thing that exists, rarely will an opinion fall here o Materiality- something of substantial importance o Knowledge of falsity and intention to deceive-called scienter, includes actual knowledge, lack of belief in statements truthfulness, reckless indifference to its truthfulness. Seller must know of misrepresentation o Justifiable reliance- a defrauded party is reasonably influenced by the misrepresentation- party entered contract because of the types of fraud. If buyer knows there is fraud and still buys, his fault Nonfradulent Misrepresentation  False statement that induces another but is made without scienter  Negligent misrepresentation- false representation made without due care in ascertaining its truthfulness  Innocent misrepresentation-false representation made without knowledge of its falsity but with due care  To get relief from misrepresentation, all other elements of fraud must be present and misrep must be material Mistake  A belief that is not in accord with the facts  Mutual mistake- both parties are mistaken, renders contract voidable by either party  Unilateral mistake-only one of the parties is mistaken- relief granted if one party knows or should know mistake  Assumption of Risk of Mistake-party who assumes the risk of a mistake o Buying a ship at sea that may be “lost or not lost”  Effect of fault upon mistake- cant use not knowing as a reason to avoid unless the fault amounts to a failure to act in good faith. Does not apply to a failure to read a contract  Mistake in meaning of terms-both parties misunderstand meaning of one anothers manifestations-void contract CHAPTER 12: CONSIDERATION Consideration (class notes)  Primary but not only basis for enforcement of promises.  It is the price you pay to make a price binding. The inducement to make a promise enforceable  In form of a promise to act, or forbearance to act, creation, modification or destruction of a legal ration  Must be bargained for, something you exchange for a promise  Adequate, not concerned with sufficiency  Consists of legal detriment (acquiring new legal obligation-promisee) or legal benefit (acquiring new right) Legal Sufficiency  Legal benefit-promisor- means the obtaining by the promisor of that which he had no prior legal right to obtain  Legal detriment- promise 1) doing or not doing that which the promise was under no prior legal obligation to do  Adequacy- not required where the parties have freely agreed to exchange, nothing to do with legal sufficiency  Legal suffiency- 1) parties have agreed to exchange, 2)with respect to each party, legal ben or det was imposed  Unilateral contracts-must have legal det to promisee, and benefit to promisor  Bilateral contracts-both parties make promises o Mutuality of obligation-each promise is the consideration 4 the other. Consequence-both parties bound  Illusory Promises-statement in the form of a promise but there is no consideration or obligation on promisor o Example: Exxon says you can buy as many barrels of oil you want for $40. Company can decide to buy zero barrels, satisfying the contract though nothing was exchanged  Following are not illusory: o Output contract- agreement to sell all of output (could be more or less then they need) o Requirements contracts- agreement to buy all needs from one producer (as much as they need)  Act of Good Faith limitation-the Code-prevents output contractors from producing extreme amt. o Exclusive dealing contracts-grant to a franchisee or licensee by manufacturer; sole rights to sell in region o Conditional promise-one where the obligations are dependent upon the occurrence of a stated event  Preexisting Public Obligation- public duties are neither a legal detriment nor a legal benefit  Preexisting Contractual Obligation- performance of a preexisting contractual duty is not consideration  Modification of a preexisting (K)- common law-must be by mutual consideration; Code- no consideration needed  Substituted contracts-parties agree to rescind original contract for new one; needs consideration for both parts  Settlement of a Liquidated Debt-can only be legally cleared if promisee gets legal detriment from new deal o Liquidated debt- undisputed obligation of debt by a party  Settlement of Unliquidated Debt-payment of a lesser sum of money to discharge debt is legally sufficient consid. o Unliquidated Debt- an obligation disputed as to existence or amount Bargained-For Exchange  Mutually agreed up exchange  Past consideration- an act done before the contract is made is not a consideration  Third parties-are consideration because A promises B something, for B doing something for C Contracts Without Consideration (enforceable even without consideration)  Promises to Perform Prior Unenforceable Obligations o Promise to Pay Debt Barred by the Statute of Limitations- promise by debtor to pay the debt renews for a second statutory period o Promise to pay debt discharged in bankruptcy o Voidable promises- ex: minor has contract to pay once he is of age. When he is old enough he has to pay o Moral obligation-A does something for B, and B says they will pay them. Enforceable in some cases  Promissory Estoppel-stated above  Promises under seal-mostly abolished but some states still have- bind oneself by bond, deed, or solemn promise  Promises made enforceable by Statute o Contract modifications o Renunciation o Irrevocable offers CHAPTER 13: ILLEGAL BARGAINS