Podcast
Questions and Answers
Under what condition might a court decline to enforce an agreement, even if it appears to meet the basic requirements of a contract?
Under what condition might a court decline to enforce an agreement, even if it appears to meet the basic requirements of a contract?
- If the agreement requires a party to violate public policy or commit an illegal act. (correct)
- If the agreement was made without the advice of legal counsel.
- If the agreement is not written in formal, legal language.
- If the court deems the agreement to be of little value to society.
In the context of contract law, what critical element distinguishes a valid offer from a mere expression of interest or an 'invitation to treat'?
In the context of contract law, what critical element distinguishes a valid offer from a mere expression of interest or an 'invitation to treat'?
- A statement that the offer is non-negotiable.
- The inclusion of emotional appeals intended to persuade.
- A firm declaration of intent to be bound by the terms if accepted. (correct)
- The complexity and detail of the proposed terms.
An art collector, renowned for their expertise in Renaissance paintings, contracts to purchase a painting described as a 'genuine Leonardo da Vinci' from a seller who also believes in its authenticity. Later, scientific analysis reveals the painting is a high-quality forgery. Which of the following legal principles is most likely to apply regarding the contract's enforceability?
An art collector, renowned for their expertise in Renaissance paintings, contracts to purchase a painting described as a 'genuine Leonardo da Vinci' from a seller who also believes in its authenticity. Later, scientific analysis reveals the painting is a high-quality forgery. Which of the following legal principles is most likely to apply regarding the contract's enforceability?
- Unilateral Mistake, voiding the contract if the seller intentionally misrepresented the painting.
- Frustration of Purpose, excusing the buyer from performance because the painting's value is significantly diminished.
- Caveat Emptor (Buyer Beware), placing the responsibility on the buyer to have verified the painting's authenticity before purchase.
- Mutual Mistake, potentially voiding the contract because both parties shared a fundamental, incorrect assumption about the painting's authenticity. (correct)
In contract law, how does the concept of 'consideration' primarily function to ensure fairness and prevent unjust enrichment?
In contract law, how does the concept of 'consideration' primarily function to ensure fairness and prevent unjust enrichment?
A software company includes a clause in its standard end-user license agreement (EULA) stating that the company is not liable for any damages resulting from the use of its software, regardless of the cause. If a user suffers significant financial losses due to a known bug in the software, what is the most likely legal outcome regarding the enforceability of this liability waiver?
A software company includes a clause in its standard end-user license agreement (EULA) stating that the company is not liable for any damages resulting from the use of its software, regardless of the cause. If a user suffers significant financial losses due to a known bug in the software, what is the most likely legal outcome regarding the enforceability of this liability waiver?
A renowned architect enters into a contract to design a museum, specifying the use of a rare type of marble known for its unique aesthetic qualities. Unexpectedly, the only quarry supplying this marble closes due to a natural disaster. What legal doctrine is most relevant in determining whether the architect is excused from fulfilling the contract?
A renowned architect enters into a contract to design a museum, specifying the use of a rare type of marble known for its unique aesthetic qualities. Unexpectedly, the only quarry supplying this marble closes due to a natural disaster. What legal doctrine is most relevant in determining whether the architect is excused from fulfilling the contract?
In a scenario where a contract for the sale of goods includes both express warranties and implied warranties, and these warranties conflict, which of the following principles generally dictates which warranty takes precedence?
In a scenario where a contract for the sale of goods includes both express warranties and implied warranties, and these warranties conflict, which of the following principles generally dictates which warranty takes precedence?
What is the key distinction between 'substantial performance' and 'perfect tender' in the context of contract execution, particularly under the Uniform Commercial Code (UCC)?
What is the key distinction between 'substantial performance' and 'perfect tender' in the context of contract execution, particularly under the Uniform Commercial Code (UCC)?
A contract clause stipulates that in the event of a breach, the breaching party will pay a fixed sum of $1 million, regardless of the actual damages incurred. Under what legal principle might a court refuse to enforce this clause?
A contract clause stipulates that in the event of a breach, the breaching party will pay a fixed sum of $1 million, regardless of the actual damages incurred. Under what legal principle might a court refuse to enforce this clause?
A construction company signs a contract to build a skyscraper, but mid-project, new environmental regulations are enacted that require significantly more expensive materials and processes. Which contractual defense is most applicable if the company seeks to be excused from completing the project?
A construction company signs a contract to build a skyscraper, but mid-project, new environmental regulations are enacted that require significantly more expensive materials and processes. Which contractual defense is most applicable if the company seeks to be excused from completing the project?
Consider a scenario where a famous actor enters into a contract for a movie role, and the contract includes a 'pay-or-play' clause. Subsequently, the studio decides not to proceed with the movie. What is the primary implication of the 'pay-or-play' clause in this situation?
Consider a scenario where a famous actor enters into a contract for a movie role, and the contract includes a 'pay-or-play' clause. Subsequently, the studio decides not to proceed with the movie. What is the primary implication of the 'pay-or-play' clause in this situation?
In contract law, what is the fundamental distinction between 'assignment' and 'delegation,' and how do these concepts affect the rights and obligations of the original parties to a contract?
In contract law, what is the fundamental distinction between 'assignment' and 'delegation,' and how do these concepts affect the rights and obligations of the original parties to a contract?
A company selling specialized medical equipment includes a clause in its sales contracts that requires disputes to be resolved through binding arbitration in a remote country, where the costs of arbitration are prohibitively high for most buyers. Which legal concept might a court invoke to invalidate this clause?
A company selling specialized medical equipment includes a clause in its sales contracts that requires disputes to be resolved through binding arbitration in a remote country, where the costs of arbitration are prohibitively high for most buyers. Which legal concept might a court invoke to invalidate this clause?
What is the significant difference between 'liquidated damages' and 'consequential damages' in the context of remedies for breach of contract?
What is the significant difference between 'liquidated damages' and 'consequential damages' in the context of remedies for breach of contract?
A contract for the sale of land includes a clause stating 'time is of the essence.' What legal effect does this clause have on the parties' obligations?
A contract for the sale of land includes a clause stating 'time is of the essence.' What legal effect does this clause have on the parties' obligations?
A famous musician contracts to perform at a concert hall on a specific date, but a week before the concert, they suffer a serious and incapacitating injury. Which legal principle is most likely to excuse the musician from performing the contract?
A famous musician contracts to perform at a concert hall on a specific date, but a week before the concert, they suffer a serious and incapacitating injury. Which legal principle is most likely to excuse the musician from performing the contract?
How does the concept of 'accord and satisfaction' operate as a means of discharging contractual obligations, and what are its key requirements?
How does the concept of 'accord and satisfaction' operate as a means of discharging contractual obligations, and what are its key requirements?
In contract law, what circumstances typically justify the remedy of 'specific performance,' and why is it not routinely granted?
In contract law, what circumstances typically justify the remedy of 'specific performance,' and why is it not routinely granted?
A contract contains an integration clause stating that the written document constitutes the entire agreement between the parties. During a dispute, one party seeks to introduce evidence of prior verbal agreements that contradict the written terms. Which legal rule governs the admissibility of this evidence?
A contract contains an integration clause stating that the written document constitutes the entire agreement between the parties. During a dispute, one party seeks to introduce evidence of prior verbal agreements that contradict the written terms. Which legal rule governs the admissibility of this evidence?
What is the primary legal significance of classifying a contract as either 'executed' or 'executory'?
What is the primary legal significance of classifying a contract as either 'executed' or 'executory'?
A contract for the sale of a rare stamp collection specifies that the stamps must be delivered in 'mint condition.' Upon delivery, the buyer discovers that several stamps have minor imperfections that do not affect their overall value but technically violate the 'mint condition' requirement. Under the UCC, what options are available to the buyer?
A contract for the sale of a rare stamp collection specifies that the stamps must be delivered in 'mint condition.' Upon delivery, the buyer discovers that several stamps have minor imperfections that do not affect their overall value but technically violate the 'mint condition' requirement. Under the UCC, what options are available to the buyer?
Considering contract formation, under what specific circumstances would silence or inaction by an offeree be construed as acceptance of an offer?
Considering contract formation, under what specific circumstances would silence or inaction by an offeree be construed as acceptance of an offer?
What is the primary purpose of the Statute of Frauds, and what types of contracts typically fall within its scope?
What is the primary purpose of the Statute of Frauds, and what types of contracts typically fall within its scope?
In the context of contractual interpretation, what is the 'contra proferentem' rule, and when is it typically applied?
In the context of contractual interpretation, what is the 'contra proferentem' rule, and when is it typically applied?
A contract for software development specifies that the software must perform 'substantially in accordance with the user manual.' What legal standard does this create, and how would a court likely interpret it in the event of a dispute?
A contract for software development specifies that the software must perform 'substantially in accordance with the user manual.' What legal standard does this create, and how would a court likely interpret it in the event of a dispute?
Under the principle of promissory estoppel, what conditions must be met for a promise to be legally enforceable, even in the absence of formal consideration?
Under the principle of promissory estoppel, what conditions must be met for a promise to be legally enforceable, even in the absence of formal consideration?
If a contract is found to be unconscionable, what remedies are typically available to a court?
If a contract is found to be unconscionable, what remedies are typically available to a court?
In the United States, what is the role of the Uniform Commercial Code (UCC) in governing contracts, and to what types of transactions does it primarily apply?
In the United States, what is the role of the Uniform Commercial Code (UCC) in governing contracts, and to what types of transactions does it primarily apply?
How does the mailbox rule affect the timing of acceptance in contract law, and what is a critical exception to this rule?
How does the mailbox rule affect the timing of acceptance in contract law, and what is a critical exception to this rule?
In what way does duress impact the validity of consent in contract law, and what distinguishes duress from undue influence?
In what way does duress impact the validity of consent in contract law, and what distinguishes duress from undue influence?
What is the key difference between a third-party beneficiary contract and an assignment, in terms of the third party's rights and how those rights are created?
What is the key difference between a third-party beneficiary contract and an assignment, in terms of the third party's rights and how those rights are created?
If a contract contains a provision that is illegal, how might a court respond?
If a contract contains a provision that is illegal, how might a court respond?
In what way does a force majeure clause operate in a contract, and what are the typical limitations on its application?
In what way does a force majeure clause operate in a contract, and what are the typical limitations on its application?
In determining whether an offer has been made, how do courts distinguish between a genuine offer and a mere invitation to treat?
In determining whether an offer has been made, how do courts distinguish between a genuine offer and a mere invitation to treat?
Under French civil law, what condition, in addition to capacity of the parties and consent, is essential for contract validity, reflecting a key difference from common law?
Under French civil law, what condition, in addition to capacity of the parties and consent, is essential for contract validity, reflecting a key difference from common law?
In the context of contract law, how does the concept of 'Consensualism' primarily influence the form a contract must take to be legally binding?
In the context of contract law, how does the concept of 'Consensualism' primarily influence the form a contract must take to be legally binding?
In the Carlill v Carbolic Smoke Ball Company case, what was the court's rationale for determining that the company's advertisement constituted a binding offer, not mere puffery?
In the Carlill v Carbolic Smoke Ball Company case, what was the court's rationale for determining that the company's advertisement constituted a binding offer, not mere puffery?
How did the court differentiate the Pepsi commercial from a contractual offer in the Leonard v. Pepsico case regarding the Harrier jet?
How did the court differentiate the Pepsi commercial from a contractual offer in the Leonard v. Pepsico case regarding the Harrier jet?
What is the legal effect of an attempted acceptance that does not mirror the terms of the offer, according to the mirror-image rule?
What is the legal effect of an attempted acceptance that does not mirror the terms of the offer, according to the mirror-image rule?
In the context of parties lacking capacity to contract, how does being 'adjudicated insane' differ legally from being intoxicated, regarding the validity of a contract entered into during such a state?
In the context of parties lacking capacity to contract, how does being 'adjudicated insane' differ legally from being intoxicated, regarding the validity of a contract entered into during such a state?
In contract law, what distinguishes 'fraudulent misrepresentation' from a 'mistake' as a basis for rendering a contract voidable due to a failure of genuine assent?
In contract law, what distinguishes 'fraudulent misrepresentation' from a 'mistake' as a basis for rendering a contract voidable due to a failure of genuine assent?
What critical factor differentiates a situation involving 'undue influence' from one involving 'duress' in the context of assessing the validity of assent in contract law?
What critical factor differentiates a situation involving 'undue influence' from one involving 'duress' in the context of assessing the validity of assent in contract law?
How does common law's requirement of 'consideration' ensure that contracts are fair and not merely gratuitous promises?
How does common law's requirement of 'consideration' ensure that contracts are fair and not merely gratuitous promises?
How does the principle of 'legal object' or 'legal purpose' restrain freedom of contract to ensure broader societal interests are not undermined?
How does the principle of 'legal object' or 'legal purpose' restrain freedom of contract to ensure broader societal interests are not undermined?
Flashcards
What is a contract?
What is a contract?
An agreement between parties creating enforceable promises or obligations, governed by law.
Everyday contracts
Everyday contracts
When you go to the supermarket to buy groceries, you enter into a contract with the supermarket to make payment of money in exchange for food and drink.
Basic elements of a contract
Basic elements of a contract
The essential elements for a legally enforceable contract in common law include mutual assent, adequate consideration, contractual capacity and a legal object.
Mutual assent
Mutual assent
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Consideration
Consideration
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Contractual capacity
Contractual capacity
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Legal object
Legal object
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Contract definition (French Civil Code)
Contract definition (French Civil Code)
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Three key parts (French Law)
Three key parts (French Law)
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Consensualism
Consensualism
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Bilateral contracts
Bilateral contracts
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Unilateral contracts
Unilateral contracts
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Company's defense
Company's defense
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Acceptance
Acceptance
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Acceptance – the mirror-image rule
Acceptance – the mirror-image rule
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Consideration (Common Law)
Consideration (Common Law)
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Legality
Legality
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Study Notes
- Introduction to Contract Law and IP Law
- Session 3
- 2024/2025
Table of contents
- Introduction to contracts
- Requirements and formation of a contract
- Definition of a contract
- Unilateral and bilateral contracts
- Main elements of a contract: capacity, consent, legality, and consideration
Introduction to contracts
- Consider questions to understand contracts
- What defines a contract?
- Why are contracts valuable?
- Importance of contracts in daily life and business
- Necessity of a written agreement for contracts
- Overall necessity of contracts
Everyday Contracts
- You engage in contracts regularly:
- Supermarket purchase: exchange money for goods
- Employment: perform work for salary
- Theater ticket: exchange money for a performance
- Business agreements: exchange money for customer order fulfillment (suppliers)
Requirements and Formation of a Contract
The definition of a contract
- A contract is an agreement between parties creating promises/obligations enforceable by law
- Basic elements for a legally enforceable contract include:
- Mutual assent consisting of a valid offer and acceptance is required under Common and French law
- Adequate consideration defined as a bargained-for exchange under Common law
- Contractual capacity consisting of the legal ability to enter into a binding agreement under Common and French law
- Legal object with a legal purpose that is not against public policy
Common Law
- Key elements for Common Law contracts:
- Capacity of the parties
- Mutual agreement (offer and acceptance)
- Consideration
- Legal purpose
Civil Law: (France)
- As defined in Article 1101 of the Civil Code, a contract is a concurrence of wills between two or more people to create, modify, assign, or terminate obligations
Three key parts
- Article 1128 of Civil Code - three conditions of contract validity:
- Capacity of the parties
- Consent of all parties (Offer + Acceptance)
- Defined and lawful subject matter
Validity comparison - Common Law versus Civil Law
- Common Law:
- Capacity of the parties to contract
- Mutual agreement (Offer + Acceptance)
- Consideration
- Legal purpose
- France(Civil Law)
- Capacity of the parties
- Consent of all parties
- Defined and lawful subject matter
Form of the Contract
- Contracts are legally binding, whether concluded orally or in writing
- Consensualism is a principle of contract law where contracts are legally binding whether concluded orally or in writing, without a pre-established format.
- Exceptions exits as some contracts need to be formalised in writing
- Some contracts need authenticated deed(land transfers, marriage contracts, etc.)
- For a solemn contract to be valid, it is subject to fulfilling formalities set by legislation, without which it is null unless regulated.
Unilateral and Bilateral Contracts
- Unilateral contract: the first party promises to perform some action in return for a specific act, although the second party is not promising to take any action. E.g., a reward
- Bilateral contract: one party offers to do something in exchange for an action promised by the other party (they exchange promises).
Carlill v Carbolic Smoke Ball Company (1891)
- Offers were established in Carlill v Carbolic Smoke Ball Company (1891).
- The company advertised their product claimed to prevent influenza if inhaled thrice daily for two weeks.
- They promised £100 to anyone who still contracted the flu after buying and using the smokeball as prescribed.
- £1000 was deposited in the bank to show "sincerity".
- Mrs. Carlill bought and used it, got influenza, but the company refused to pay her the £100.
Company's defenses
- The advertisement was an advertising "puff" with no intention to create legal relations.
- The advertisement couldn't be an offer because it was too vague, without a time limit for contracting influenza.
- There was no communication of acceptance, nor consideration supplied by the plaintiff.
- It was impossible to contract with the whole world.
The court rejected these arguments
- £1000 deposit indicated intention to meet claims and create legal relations.
- The plaintiff's use of the inhalant as prescribed was sufficient consideration.
- An advertisement can make an offer to the whole world, accepted by conduct responding to it.
Conclusions
- The case was a unilateral contract, where one party makes an offer that is accepted by the other by doing whatever is required.
- This is most frequently cited in common law and forms the foundation of contract law.
- A unilateral contract results when an offer is made to the public at large.
Contract types
- Bilateral: a promise in exchange for a promise
- Unilateral: a promise in exchange for an act
Elements of a Contract
- The capacity of the parties
Apple's Questionable Contract
- In 2012, parents of minors sued Apple for supplying game applications on iPhones with in-game currency purchases.
- Minors racked up bills from ranging $99.99 to $338.72 within 15 minutes of playing the games.
- Apple states contract was Terms of Service between parents and Apple; unauthorized log-ons are account holder's responsibility.
- Parents argued purchases by minors were separate contracts disaffirmable by a parent or guardian.
Possible Discussion Questions
- Are individual purchases made by minors separate contracts between Apple and the minors?
- Could the parents void these contracts, even if the purchases were contracts between the minors and Apple?
Capacity of the Parties
- Capacity is defined as one's legal capacity to contract as one who has the mental ability to understand his/her rights and obligations under a contract to presumably comply with the terms.
- Incapacity defined as a mental or physical defect prevents entering a legally binding contract.
- Nature/extent of defect: no capacity (attempted contract is void) or limited capacity (contract is voidable).
- One/both parties can withdraw from/enforce a voidable contract.
Voidable vs Void Contracts
- Limited capacity leads to a contract being voidable
- The person is:
- A minor
- Suffering from a mental deficiency that prevents them from understanding contracts
- Intoxicated
- No capacity means the contract is void
- The person
- Has been adjudicated insane or a habitual drunkard
- The person has had a legal guardian appointed to enter into contracts on his or her behalf
Case opener Wrap-Up
- US District Court for Northern District of California denied Apple's motion to dismiss the lawsuit.
- Complaint couldn't be dismissed as Apple's Terms of Service wasn't proven as a contract for all transactions.
- Apple construct a settlement for class action lawsuit that had to be court-approved which included providing notice to 23 million customers re: parental controls, $5 itunes credit and $30+ spenders given cash refund and Apple will pay $1.3 million in attorney fees.
Capacity of the Parties - Check your knowledge chart
- Chart showing different types of incapacity and whether the contract is valid, voidable, or void
Elements of a Contract
- Offer and acceptance (consent)
Mutual Agreement or Assent (Offer & Acceptance)
- Requires two parties of sound mind over the age of majority, thatvoluntarily agree to enter into an agreement under which each does or provides certain things for a contract to exist.
- Mutual assent manifests in the OFFER and ACCEPTANCE
The Offer
- Contract formation begins with a formal OFFER.
- Requirements:
- A clear intent to make a contract (INTENTION)
- It needs to be sufficiently definite, to determine intent (DEFINITENESS)
- Requires communication to the other party (COMMUNICATION)
Invitation to Treat
- Invitation to treat expresses willingness to accept offers or negotiate with examples including advertisements and negotiations.
- The Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953) case demonstrates this.
- Displayed items are an invitation to treat and not an offer to sell within self-service systems.
Invitation to Treat - Example
- A coffee shop that displays a price list of its coffee beverages which encourages customers to make offers to buy a coffee from the list
- The coffee shop has the choice to either accept and make a contract or refuse/decline the offer
The Problematic Promotion
Pepsi ran a promotion encouraging consumers to collect Pepsi points through consuming Pepsi products, and that they can redeem the points for merchandise with a minimum of 15 original Pepsi points.
- A commercial showed three young boys sitting in front of a school staring at something overhead, builds to a crescendo by showing a Harrier Jet lands by the side of the school building and states: Now the more Pepsi you drink, the more great stuff you'r gonna get and follows with the teenager exclaiming "Sure beats the bus," as the commercial states "Harrier Fighter 7,000,000 Pepsi Points"
- John Leonard decided to accept Pepsi's offer of the Harrier fighter jet for 7 million Pepsi points and filled out an order form requesting the jet and submitted it to Pepsi, along with 15 Pepsi points and a check for $700,000 which then Pepsi sent a letter saying which states the item is not part of the Pepsi S collection and John sued for breach of contract.
wrap-up
- The court in the Pepsi case found that the commercial was not sufficiently definite to be an offer and that it reserved the details of the offer to a separate catalog with the commercial had no mention of the take to accept the alleged offer of the Harrier jet.
- Much also states that the court regarded the plaintiff's acceptance as offer which was an offer of Pepsi rejected but it should have indicated to plaintiff and and his family that Pepsi did not really intend to give the jet as the prize
THE ACCEPTANCE
- Acceptance defined as an act or implication providing an acceptance of an offer forming a binding contract with agreement to comply with the terms
Acceptance – the mirror-image rule
- The terms of acceptance must mirror the terms of offer
- If the terms of acceptance don't mirror terms of the offer, no contract is formed, attempt becomes in counteroffer
Disagreement Over an Agreement
- In 1989, Michael Jordan and Karla Knafel met and started a long-distance relationship.
- Knafel traveled to meet with Jordan unprotected sex.
- Knafel learned she was pregnant and informed Jordan he/they agreed that Jordan would pay her $5 million when he retired (in return, she wouldn't file paternity suit/keep their relationship secret).
- Baby was born in July 1991, Jordan paid hospital bills/medical costs with $250K for "her mental pain/anguish” with her keeping their relationship/paternity a secret.
- Upon Jordan's retirement from basketball, a lawsuit was filed. Jordan sought declaratory judgment/injunction against Knafel who filed counterclaim for Jordan's breach.
- Trial court dismissed claims, appellate court remanded Knafel's claim for breach of contract.
- Jordan argued agreement unenforceable as it was either fraudulently induced/based on error. Jordan produced the DNA: concluding he was not the father.
- Knafel's argument - paternity irrelevant (obstetrician said baby conceived while she was in Phoenix with Jordan; plus, Jordan entered agreement knowing she was having sex with others - still relevant).
Validity of assent
- If the assent is not genuine or legal, a contract is voidable.
- MISTAKE (unilateral, only under rare circumstances / mutual)
- FRAUDULENT MISREPRESENTATION (intentionally untruthful assertion by one of the parties about a material fact if justifiable reliance on the assertion by the innocent party)
- UNDUE INFLUENCE (therapist, guardian, attorney, etc...) where one person takes advantage of position of power over another
- DURESS (threat of physical harm / extortion to gain their consent to a contract
Case opener wrap-up
- Court rules in favour of Jordan with Knafel's fraudulent misrepresentation that Jordan was the child's father, or alternatively mutual mistake of fact - the settlement contract is voidable (unenforceable against Jordan).
Elements of a contract
- Consideration
Consideration
- Defined as what a person will receive for performing a contractual obligation:
- Dan agrees to purchase Mary's car for $ 1000.
- Dan's payment of $ 1000 is the consideration Mary gets.
- Title/car possession is what Dan will receive
The Customer
- Elements of the process
- Customer as the offeror who presents item at the till point, in essence the offer
- The shop (operating through an agent) shop assistance is the offeree
- With the shop accepting the money from the customer
- And the customer paying for the item is the consideration
Elements of the legal purpose of the contract
Legality
- Enforceable contract must have a legal exchange as its subject and ability to be performed legally.
- *Contracts contrary to the Law (unenforceable):
- Contracts to commit crime
- Usury: interest rate above lawful maximum
- Gambling which is only regulated
Legal and Certain Content
-
Need legal and certain content
-
Content is lawful when in respects public order
- Sets up possible and determined or determinable obligations
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