LAWS-1030 Module 4 Capacity And Consideration PDF

LAWS‐1030 ‐ Module 4 Contracts in Society LAWS-1030 Professor Josh Haug 1 Concepts From Last Class… Deliberate Agreement… Acting deliberately means acting w Intent Intent...

LAWS‐1030 ‐ Module 4 Contracts in Society LAWS-1030 Professor Josh Haug 1 Concepts From Last Class… Deliberate Agreement… Acting deliberately means acting w Intent Intent is difficult to prove Consensus ad idem Agreement through Offer and Acceptance Offers should be conditional with clearly defined terms and conditions Acceptance is Unconditional Acceptance must be communicated in the manner identified in the offer 2 Remember… A Valid Contract is a deliberate agreement between two (or more) competent parties, supported by mutual consideration, to do some legal act voluntarily 3 1  LAWS‐1030 ‐ Module 4 Capacity and Consideration 4 Capacity… 5 Capacity Competent Parties The Legal Capacity to Contract 6 2  LAWS‐1030 ‐ Module 4 Capacity Not all persons in society may have the legal “capacity” to contract. Competency or capacity refers to having… The status in the eyes of the law The ability in the eyes of the law 7 Those with limited capacity include: Minors/Infants Intoxicated persons Insane or Mentally Handicapped persons Enemy Aliens Certain Corporations and Unions Bankrupts Incarcerated persons 8 Minors / Infants Are protected from contracts not deemed to be “for necessity” Create “voidable” contracts May repudiate their agreements within a “reasonable” time May ratify their agreements Parents may have some liability 9 3  LAWS‐1030 ‐ Module 4 Minors / Infants Some of the types of Contracts Minors can enter into are: Employment Bank Accounts Necessities (Lodging / Automobiles) – May not be voidable… 10 Intoxicated Persons Are protected from entering into contract (other than those for necessities) providing that: They repudiate their agreements within a “reasonable time” after sobering up The other party to the agreement knew or ought to have known of their condition. 11 Intoxicated Persons Must prove that they were intoxicated to the point that they were unaware of the legal consequences of entering into the contract It is rare that contract disputes are settled in favor of the intoxicated individual being released from the contract 12 4  LAWS‐1030 ‐ Module 4 Mentally Handicapped Persons Are protected from entering into contract (other than those for necessities) providing that: They repudiate their agreements within a “reasonable time” if possible The other party to the agreement knew or ought to have known of their condition. 13 Enemy Aliens It is illegal to contract with an “enemy” at a time of war Right to contract is “suspended” during hostilities, but may be reinstated following resolution Persons without legal status in the eyes of the law may be difficult to sue. 14 Corporations Corporations are “artificial persons” chartered by various levels of government Corporate charters may restrict contracting capacity 15 5  LAWS‐1030 ‐ Module 4 Corporations…continued… Most importantly: NOT everyone who works for a corporation, has the right or the legal capacity to BIND that corporation to contract! Make sure that those acting have the capacity to BIND 16 Bankrupts Persons who are considered as ‘undischarged bankrupts’ may be limited to the value of the contracts they may make. They must disclose this fact when dealing with another party 17 Bankrupts When you are "discharged from bankruptcy," you are released from your obligations and the bankruptcy process is complete. 18 6  LAWS‐1030 ‐ Module 4 Incarcerated Persons Simply may not have the ‘ability’ to carry out their contractual obligations – thus their capacity is limited. 19 Mutual Consideration… 20 Consideration in Contracts The Law holds that in order to have a promise considered as a contract, all (or both) parties must BENEFIT That ‘benefit’ may be Money Performance of a service A promise not to do something etc. 21 7  LAWS‐1030 ‐ Module 4 BUT…in all cases… The benefit must be: VALUABLE! 22 Mutual Consideration Is therefore defined as: “An exchange of value” The essential reason for entering into a contract! 23 BUT…what is “valuable”? Value is subjective; What is valuable to you, may not be valuable to me… 24 8  LAWS‐1030 ‐ Module 4 Value is Subjective The law allows the individual to determine “value” Bottom line is liquidity or monetary value. Act, Promise, even Forbearance! 25 Legality of Consideration Needless to say, an exchange of value must be legal, before it is considered to be ‘valuable’ October 17th… 2018… 26 Adequacy of Consideration Since “value is subjective”, the law allows us to make our own deals “The courts (law) will not make a person’s bargain for them” A person is free to make a good or a bad deal for themselves The law will not involve itself in matters of adequacy. 27 9  LAWS‐1030 ‐ Module 4 Caveat Emptor A Latin Phrase of Law meaning: “Let the buyer (or the seller) beware!” 28 Implications? Again…BE CAREFUL OF THE OFFERS YOU MAKE! If your offer contains a mistake in terms of value and it is accepted…you are obligated to meet your promise Example: a contractors bid! Or a house purchase! 29 Tense of Consideration With matters of tense, consideration must be something capable of being exchanged either at the time of the deal, or after the deal Things which have already taken place are not considered “valuable” in the eyes of the law The benefit is achieved. 30 10  LAWS‐1030 ‐ Module 4 Therefore: Present tense = valuable consideration Future tense = valuable consideration Past tense ≠ valuable consideration 31 The Effect of the law of Equity The law deems that it is not right to benefit from something without some form of valuable exchange. Therefore where no price is clearly determined, or in dispute, the law may impose a “Quantum Meruit” settlement 32 Quantum Meruit means: “as much as is deserved” or… The quantity (or amount) merited under the circumstances 33 11  LAWS‐1030 ‐ Module 4 Exception to the rule… Sealing a Contract Applying a seal to a document has historical roots, proving the authenticity of a document A seal to this day implies intent – even for a “gratuitous promise” 34 Seals… The act of sealing a contract is considered to be so deliberate as to preclude mutual consideration. Corporations can act only under seal – a corporate ‘signature’ – now typically a stamp to emboss corporate documents. Promises without consideration become Deeds or a ‘Specialty Contract’. 35 And just in case… Estoppel When someone relies on the promises or statements of another to their detriment and even without “privy of contract”, there may be a liability imposed on the person making the promise or statement. There are different types of Estoppel…. 36 12  LAWS‐1030 ‐ Module 4 Estoppel “A rule of law that when person A, by act or words, gives person B reason to believe a certain set of facts upon which person B takes action, person A cannot later, to his (or her) benefit, deny those facts or say that his (or her) earlier act was improper” http://www.duhaime.org/LegalDictionary/E/Estoppel.aspx 37 In summary… In order to have a contract, the parties to the agreement must be benefiting. A benefit may be a number of things, but mostly it must be valuable. Value is subjective, therefore the courts will not become involved in matters of adequacy. Consideration must be legal and not past- tense. 38 CAVEAT EMPTOR!!! http://www.clutch-parts.com/real-estate-principle-caveat-emptor-effects/ 39 13  LAWS‐1030 ‐ Module 4 Almost Home Time! Let’s review what we gone through so far… GO TO: www.kahoot.it Enter the PIN on screen 40 Wrap Up… 41 For Next Class Go to FOL: Review Reading Assignment #4 and answer questions Be prepared for Tutorial #4 42 14  LAWS‐1030 ‐ Module 4 Next Class Chapter 4 Tutorial 43 15