Contracts Overview

Contracts

• Contracts are legally binding agreements between two or more parties.
• Essential elements for a valid contract include: legal capacity of the parties, consideration (exchange), mutual agreement (assent), and a legal purpose.
• Consideration is defined as any lawful alteration of responsibilities exchanged between parties, based on the idea of quid pro quo (something for something).
• A court generally does not evaluate the adequacy of consideration, except in cases where there is no consideration or where a lesser amount is exchanged for a larger amount.
• Illusory promises, doing what one is already bound to do, moral obligations, past consideration, and the statute of limitations are common issues related to the existence of consideration.
• Promissory estoppel can arise when a promise is made without consideration, preventing a person from going back on their promise even without a legal contract.
• Mutual agreement (assent) reflects a "meeting of the minds" through offer and acceptance.
• A valid offer must indicate a clear intent to form a contract, be sufficiently definite, and be communicated to the other party.
• An offer can remain open for a specified period or for a reasonable time.
• An offer can become invalid through rejection, counter-offer, death or incompetency of the offeror, or withdrawal.
• Acceptance must be clear, unqualified, and made in the manner required by the offer.
• A meeting of the minds occurs when a valid offer has been validly accepted, indicating that the intentions of both parties match.
• A counter-offer occurs when a response to an offer does not clearly meet the terms of the offer.
• Negotiation is the process of offer and counter-offer before a meeting of the minds.
• A contract with a legal purpose is essential for enforceability. Contracts violating public policy, restraining trade, or involving payments of bribes are unenforceable.
• A material mistake is a significant error in fact that can render a contract void ab initio (void from the beginning).
• A mutual mistake occurs when both parties are mistaken about the same material fact, rendering the contract void.
• A unilateral mistake occurs when only one party is mistaken about a material fact. The contract may still be binding unless the other party knew or should have known about the mistake.
• Fraud involves intentional misrepresentation of a material fact with the intent to deceive, leading to reliance and injury for the deceived party.
• Undue influence involves a superior position in a close or confidential relationship where one party exerts excessive influence over the other.
• Duress involves coercion or threats used to force someone into a contract.
• Unconscionability involves gross unfairness or inequality in bargaining positions.
• Contract discharge (ending or releasing) can occur through performance, agreement, or operation of law.
• Performance involves both parties fulfilling their obligations.
• Agreement-based discharge includes mutual rescission, accord and satisfaction, release, and waiver.
• Discharge by operation of law includes subsequent illegality, impossibility (force majeure), bankruptcy, and the statute of limitations.
• A claim in contract requires proof of: the existence of a contract, a breach of the contract, and damages as a direct or indirect result of the breach.
• The basic rule of damages in contract law is compensation, aiming to make the injured party whole for their loss.
• Limits to compensation include reasonable certainty, foreseeability, and the duty to mitigate damages.
• Liquidated damages involve compensation agreed upon in advance for potential loss.
• Punitive damages are intended to punish the breaching party, going beyond compensation.
• Specific performance involves a court order requiring a party to fulfill their contractual obligation, usually used in cases involving unique assets like land.
• A lawsuit involves a claim against someone in court.
• A breach is a violation of a contractual obligation.
• A plaintiff is the party initiating a lawsuit.
• A defendant is the party against whom a lawsuit is filed.
• A judge is a government official presiding over a court.
• Arbitration is an alternative to court proceedings, usually involving private processes without government involvement.
• Mediation is a process where a neutral person assists parties in reaching a settlement.
• Legislation refers to laws enacted by governments.
• Liability refers to the responsibility one party holds for another's actions.
• Damages refer to the financial compensation awarded to an injured party.

Agency Relationships

• Agency relationships involve one person acting on behalf of another.
• Common examples include employer/employee relationships, powers of attorney, and independent contractors.
• Agency relationships can be created through contract, conduct, ratification, estoppel, or necessity.
• Powers of attorney are legal documents that allow an agent to act on behalf of the principal, subject to specific local laws.
• Agents have a fiduciary duty to principals, requiring them to act in the principal's best interest.
• Agents must obey instructions, discharge duties with skill and care, avoid conflicts of interest, protect confidential information, notify the principal, and account for actions.
• Principals have duties to agents, including compensation, informing them of known risks, and providing necessary resources.
• Principals can be liable to third parties for the actions of their agents, both through actual authority and apparent authority.
• Principals are also directly liable for negligent acts of their agents in hiring, training, or supervising.
• Agents can be liable to third parties under certain circumstances, particularly with undisclosed principals.
• Agency relationships can be terminated through loss of legal capacity, frustration of purpose, subsequent illegality, impossibility of performance, or material breach.

Intellectual Property

• Intellectual property is intangible property arising from human creativity, including literary works, software, and inventions.
• Major forms of intellectual property include patents, copyrights, trademarks, and trade secrets.
• Patents provide temporary protection for inventions, designs, manufacturing processes, and chemical formulations.
• In the US, patents are typically granted for 20 years.
• Patents are not granted for natural processes, philosophical ideas, or abstract knowledge.
• Copyright protects original authorship and creation expressed in tangible form, including literary works, music, art, and photographs.
• Copyright protection lasts for the life of the creator plus 70 years in the US.
• Fair use, library and archive copying, and some educational use are exceptions to copyright infringement.
• Trademarks are distinctive symbols, words, numbers, or pictures used to distinguish brands.
• Trademarks must be protected against lapse through disuse and can be extended for multiple periods.
• Immoral, confusing, or merely descriptive marks are not eligible for trademark protection.
• Trade secrets are information not generally known, kept secret, and deriving economic value from its confidentiality.
• Trade secrets are protected as long as they are kept secret and maintain their economic value.

This quiz covers the essential aspects of contracts, including their definition and key elements such as legal capacity, consideration, mutual agreement, and legal purpose. It also discusses common issues related to consideration and the concept of promissory estoppel. Test your knowledge on what makes a contract valid and enforceable.