Contract Law: Types and Elements

Chapter 10: Contract Types

• A unilateral contract is formed when an offer can only be accepted through the offeree's performance.
• A bilateral contract is formed when a promise is exchanged for another promise.
• An express contract has terms explicitly stated in words, either orally or in writing.
• An implied contract is formed through the conduct of the parties involved.
• An executed contract is fully performed by both parties.
• An executory contract is not yet fully performed.

Elements of a Contract: Offer and Acceptance

• The offeror makes the offer, and the offeree receives it.
• Acceptance requirements depend on whether the contract is classified as bilateral or unilateral.
• A contract is bilateral if the offeree can accept by promising to perform.
• A contract is unilateral if the offer requires completion of the contract performance for acceptance

When is a Contract Created?

• Formal contracts require a special form or method of creation to be enforceable; negotiable instruments are an example.
• Informal contracts do not require a special form, with the possible exception of a written form.

Contract Validity

• A void contract is not a contract.
• A valid contract has the necessary elements to be enforced in court, meeting requirements for agreement, consideration, capacity, and legality.
• A voidable contract is valid but can be avoided by one or both parties.

Termination of an Offer

• Termination can occur by the actions of the parties or by operation of law.
• Termination by parties includes:
  • Revocation: The offeror withdraws the offer, which is allowed unless the offer is irrevocable.
  • Rejection: The offeree withdraws the offer.
  • Counteroffer: The offeree rejects the original offer while presenting a new offer.
• Termination by operation of law involves:
  • Lapse of time
  • Destruction of the subject matter.
  • Death or incompetence of either party
  • Supervening illegality.

Requirements for an Offer

• The offeror must intend to be bound by the offer.
• The offer's terms must be reasonably certain or definite.
• The offer must be communicated to the offeree.
• Expressions of opinion, statements of future intent, preliminary negotiations and invitations to bid is not intent.

Consideration

• Consideration is the value given in return for a promise or performance in a contractual agreement.
• Agreements lacking consideration include instances of preexisting duty, where a person is already legally obligated to perform an action.
• Past consideration, when a promise is made for actions or events that have already occurred, is not valid.
• Illusory promises arise when the terms of the contract contain such uncertainty of performance that the promise is illusory.

Contractual Capacity

• Contractual capacity refers to the legal ability to enter into contracts.
• Minors, intoxicated individuals, and those deemed incompetent may lack the capacity to enter a contract with the same legal standing as a person with capacity.
• Contracts contrary to public policy are not enforceable due to their negative impact on society.

Covenants and Online Acceptance

• Covenants not to compete are contractual promises where a party agrees not to compete with another for a set time and area.
• Online acceptance includes click-on agreements and shrink-wrap agreements.

Chapter 11: Voluntary Consent and Mistakes

• The voluntary consent of both parties is required to create a contract If voluntary consent is lacking, the contract can be voidable.
• Only a mistake of fact can make a contract voidable.
  • Unilateral Mistake: Made by only one party.
  • Bilateral Mistake: Made by both parties. Mistake must be about the same material fact
• Mistakes of value do not affect enforceability because value is subjective.

Fraudulent Misrepresentation

• Fraudulent misrepresentation has 4 elements:
  1. Misrepresentation of a material fact.
  2. Intent to deceive.
  3. Justifiable reliance on the misrepresentation by the innocent party.
  4. Harm to the party as a result of the misrepresentation, which allows for damages to be collected

Undue Influence/Duress

• Undue influence stems from relationships where one party dominates another, which means the contract lacks voluntary consent and is voidable.

Third-Party Rights

• Ordinarily, a party that isn't directly involved in a contract does not have rights under it
• An exception allows for the transfer of rights or duties through an assignment of rights or delegation of duties.
• Third-party beneficiaries can sue for contracted work
• For this to be viable, the original parties must intend to benefit a third party.

Damages for Breach of Contract

• A non-breaching party can sue for monetary damages
• Cover direct losses and costs with compensatory damages
• Cover indirect and foreseeable losses with consequential damages
• Punitive damages are to punish and deter wrongdoing
• Nominal damages are to recognize wrongdoing when no proof of monetary loss is shown

Equitable Remedies

• Equitable remedies are requested when monetary damages prove inadequate i.e. rescission, restitution, specific performance, and reformation

Conditions where performance is impossible

• When a condition is impossible, where a scenario has arisen which relieves the parties of their duty to preform

Discharge by Agreement and Performance

• A contract can be discharged by agreement between parties
  • Mutual Rescission: An agreement to cancel the contract, restoring parties to their original positions.
  • Novation: Substituting a new contract, often involving a third party, which terminates the rights of the old contract.
  • Settlement Agreement: A compromise resolving a dispute over existing obligations.
• Discharge by Performance happens when both parties fufill there duties
  • Complete performance requires that something is preformed entirely as agreed
  • Substantial performace means that something doesnt vary to much from what was required and is done in good faith

Chapter 12: UCC (Uniform Commercial Code)

• The UCC goal is to simplify and streamline commercial transactions.

Sales and Goods

• A "sale" constitutes the passing of title to property from seller to buyer for a price.
• Goods must be tangible and movable
• The "predominant factor test" determines if a contract is primarily for goods or services.

Merchants

• A merchant deals in the specific goods involved or possesses specialized knowledge/skills.
• Lease contracts involve the transfer rights to possess and use goods for a period of time

Merchant's Firm Offer

• A firm offer by a merchant is irrevocable without consideration within a specified time
• A firm offer must be written and signed by the offeror.

Mirror Image Rule & UCC Transactions

• The mirror image rule requires that the acceptance terms match that of the offer
• Under the UCC; A contract is formed if the offeree's response indicates a definite acceptance of the offer, even if the acceptance includes terms additional to or different from those contained in the offer.

Statute of Frauds

• Sales contracts for goods at $500 or more need a writen record
• Lease contracts requiring total payments worth over $1000 need a written record.
• Exceptions to this include; specifically manufactured goods, admissions that a contract was made, partial performance of contract.

Unconscionability

• An unconscionable contract is one that is unjust and unfair to the point of being unreasonable to enforce it.
• Courts can refuse, enforce portions, or limit application of it.

Obligations

• Obligations of the seller and lessor include place of delivery and perfect tender rule.
• Obligations to a buyer and lesee include: payment, right of inspection, and acceptance.

Perfect Tender Rule

• The perfect tender rule specifies that a seller must deliver goods that conform to the contract.
• A tender of nonconforming goods automatically breaches the contract.
• The exceptions to this rule; A delivery being rejected because goods were nonconforming, or that the time for performance has not yet expired/

Remedies

• Remedies for breach include when a buyer is in breach the seller can: cancel contract, withhold delivery of goods, resell goods and sue to recover damages, Sue to recover the purchase price or lease payments due
• Remedies if one party doesnt deliver: include when buyer doesnt deliver: cancel contract, obtain goods that have been paid for, Sue to obtain specific performance if the goods are unique or damages, obtain cover to lease substitute goods, Sue to obtain damages, and reject the goods

Warranties

• There are 2 types of wartanties; express and implied

Express and Implied Warranties

• An express warranty is a promise made by the seller regarding product quality, description, or performance.
• They are related to the goods performance, conformity to seller affirmations, correspondence with descriptions, or alignment with samples/models.
• An implied warranty arises implicitly by law when a good is supplied, where by the sellor implies that the product is of good sellable quality

Chapter 14: Agency Law

• In terms agency law, there is independent contractor v employee.
• An independent contractor works for payment but isn't controlled by the employer.
• Criteria to determine employee status:
  • Is the worker engaged in an occupation of business distinct from that of the employer?
  • Is the work usually done under the employer's direction or by a specialist without supervision?
  • Does the employer supply tools at the place of work
  • For how long is the person employed?
  • What is the method of payment?
  • What degree of skill is required of the worker?

Forming Agencies

• Agencies are formed with consent and voluntary agreement from both parties.
• There are 4 ways in which an agency can be created:
  • Agency by agreement happens with implied or expressed agency agree upon by the principal
  • Agency by ratification happens when a non-agent makes a contract; and the principal affirms this contract, thus creating an agency
  • Agency by Estoppel, when a principal causes another person to be believed by a third party, and the third party deal with the supposed agent, then the agent agrees to hold the relationship.
  • Agency by operation of law: The court can find an agency relationship when there is no formal agreement

Duties of the Principal and Agent

• Duties of the Agent: Loyalty, Obedience, Accounting, Performance etc.
• Duties of the Principal: Compensation, Reimbursement and Idemnification, COorporation, Safe Working Conditions etc

Agents Authority

• Agents act with; Express authroity (authority that is direct), implied authority (authority that is reasonably necessary to carry out express authority), apparent authority (which arises as there is belief from a third party that the agent has authority)

Liability

• Liability in contracts depends on the principals classification as disclosed, partially disclosed, or undisclosed.
• Disclosed principal is one the third-party knows of. They know there identity and that the agent is acting on the principal's behalf
• Tort liability involves obvious agents and principals responsible for torts and crimes.
• Under respondeat superior, employers are liable for employee acts within the scope of employment.

Determining Scope of Employment

1. Whether the employee's act was authorized by the employer.
2. The time, place, and purpose of the act.
3. Whether the act was one commonly performed by employees on behalf of their employers
4. The extent to which the employer's interest was advanced by the act
5. The extent to which the private interests of the employee were involved.
6. Whether the employer furnished the means or instrumentality by which the injury was inflicted
7. Whether the employer had reason to know that the employee would do the act in question and whether the employee had ever done it before
8. Whether the act involved the commission of a serious crime.

Agency Termination

• Agency termination happens by action of parties
  • 1. Lapse of time
  • 2. Purpose Achieved
  • 3. Occurrence of A Specific Event
  • 4. Mutual Agreement
  • 5. At the option of one party
• Termination by Operation of Law
  • 1. Death or insanity
  • 2. Impossibility
  • 3. Changed Circumstances
  • 4. Bankruptcy
  • 5. War