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Contract Law

Contract Law. What is a contract?. A contract is an agreement between 2 or more people to exchange something of value. Examples Cell phone Hiring someone to work on your house Hiring a tutor for school Ordering food at a resturant. Elements of a Contract.

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Contract Law

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  1. Contract Law

  2. What is a contract? • A contract is an agreement between 2 or more people to exchange something of value. • Examples • Cell phone • Hiring someone to work on your house • Hiring a tutor for school • Ordering food at a resturant

  3. Elements of a Contract • All 4 elements are required for a valid contract • Offer – I will buy your bike for $20 • Acceptance – Okay • Mutual Agreement – both parties agree to everything about the contract • Consideration – something of value is exchanged

  4. Does a contract have to be in writing? • Most do not, however, having a paper document is better in case of future legal actions. (paper is proof) • Contracts that have to be in writing • Sale of real estate • Agreements to pay someone else’s debt • Agreements lasting longer than 1 year

  5. Contracts that aren’t contracts • Some contracts are never legally contracts (void) or can be terminated legally (voidable) • Contracts for illegal acts are void • Contracts which are unconscionable (heavily in favor of one party) are usually void • Most contracts with minors are voidable

  6. Exceptions for contracts with minors • Most contracts with minors are voidable at the discretion of the minor party • Exceptions • Contracts for necessities • Contracts for business purposes • If a contract has been ratified (minor turns 18 during term of contract) • Fraud on the part of the minor

  7. What makes a valid offer • Serious Intent – Must intend to enter a contract with someone • Ads are not offers, they are invitations to make an offer • Definite and Certain • Specific with regards to terms and conditions • Communicated to the Offeree • Person to whom the offer is intended receives the offer

  8. How to terminate an offer • Revocation – take back the offer before it is accepted • Rejection – the offeree rejects the offer • Counter Offer – roles are reversed and the offeree becomes the offeror • Time Expires – if a time limit is specified for an offer to be accepted. • Death or insanity of the offeror– if offeror dies or is declared insane before acceptance, then offer is terminated

  9. Acceptance • Mirror image rule – must accept the offer exactly as it is made or it becomes a counter offer. • Acceptance can be shown in multiple forms • Saying yes, I accept • Signing an agreement • Performing / upholding you part of the contract

  10. Mutual Agreement • If the offer is accepted then usually there is mutual agreement between the parties. • How do mistakes affect mutual agreement • Unilateral mistakes – one party makes a mistake • Can’t cancel the contract • Bilateral mistakes – Both parties make a mistake. Either party can usually cancel

  11. Other problems with mutual agreement • Fraud – deliberate misstatement of facts by on party • Party who was defrauded can cancel contract and sue for punitive damages • Innocent Misrepresentation – innocent mistake by one party • Party who was victim of mistake can cancel but can’t get damages • Duress – when one party is forced to agree to a contract • Contract is voidable • Undue influence – one party has special influence over the other party – contract is voidable

  12. Consideration • Consideration for a contract can take 3 forms • Giving up something of value • Money, items • Doing something you don’t have to do • Giving your time at work • Forbearance – giving up the right to do something you are allowed to due • Ie – give up the right to sue someone in exchange for some kind of settlement

  13. These aren’t consideration • Promise to make a gift • Promise to obey the law • Preexisting duty – it is something you are already required to do • Past Consideration • Illusory Promise – looks like a promise but really isn’t • Promise to attend a social function

  14. How a contract ends • Discharge by performance – everyone does what they are supposed to do • Discharge by agreement – both parties can agree to cancel or adjust the contract • Discharge by Impossibility of performance – property is destroyed, death of one of the parties. • Discharge by operation of law – statute of limitations has expired, bankruptcy

  15. Other contract facts • Both parties must by legally competent to enter into a contract • The rights of a contract can be assigned to someone else and the oligations can be delegated to unless it would change the nature of the contract. • Promissory estoppel – courts will enforce a contract even without consideration.

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