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Contracts What You Will Learn: • How to identify a contract’s elements • How to identify valid, void, voidable and unenforceable contracts • How to distinguish between express and implied contracts • How to distinguish between oral and written contracts Why It Is Important: Identifying a contract’s elements will help you manage your affairs in an intelligent and effective manner.
Understanding Contract Law • Many common daily activities are contracts • Fast food • Pumping gas • You create a contract anytime that you agree to exchange things of value
The Nature of a Contract A contract is any agreement enforceable by law. Contracts are based upon what the involved parties do and say to one another The Three Theories of Contract Law Equity Theory Will Theory Formalist Theory
1. Outside platform Atticus player Gregory (1) 2. Lad’s stratagems (1) 3. Desire Helvetica or Arial (1) 4. Actress Witherspoon’s sibs’ girls (2) 5. Church officer sneakin’ a look (2) 6. Dunce-cap-shaped Houston newspaper (3)
The Elements of a Contract Offer Acceptance Genuine Agreement Consideration Capacity Legality
Characteristics of a Contract Can be created in different ways and can assume diverse forms Valid, Void, Voidable or Unenforceable Valid – legally binding or good Void – has no legal effect Voidable – when a contract can be voided Unenforceable – a contract that the court will not uphold
Express Words of the contract are in words Implied Actions performed by the parties Oral or Written Contracts created by spoken word are oral contracts. One offers to do something and the other offers to do something in return Contracts are written in many cases Both parties know the exact terms Provides proof of the agreement Statute of Frauds requires certain contracts be written
Bilateral – two sided When the contract contains two promises Unilateral – one sided When a contract only contains the offer and the condition, but no acceptance Example are reward posters
Reviewing What You Learned • What are the elements of a contract? • What are the differences among valid, void, voidable, and unenforceable contracts? • What are the differences between express and implied contracts? • What are the differences between unilateral and bilateral contracts? • What are the differences between oral and written contracts?
1. Garden tilling tool misfortune (1) 2. Ornamental vase plant with fronds (1) 3. Master Skywalker’s fists (1) 4. Mostly stylishly attired (1) 5. Not as bright flash of hope (2) 6. Ill-tempered complainers’ sofas (2)
Offer and Acceptance What You Will Learn: • How to recognize the requirements of an offer • How to distinguish between an offer and an invitation to negotiate • How to recognize the requirements of an acceptance • How to distinguish between an acceptance and a counteroffer • How to recognize when an offer has terminated Why It Is Important: You need to know when an offer has been made and when an acceptance goes into effect to make sound contracts
Offerer is the party who offers the contract Offeree is the party to whom offer has been made • Requirements of an Offer • First element of a legally binding contract • Offers have three requirements • Made seriously • Definite and certain • Communicated to the offeree
Serious Intent Offer must be made in a serious manner An invitation to negotiate is often confused as an offer Price tags on items Signs in windows Exceptions do exist Advertisers must use phrases like: First come/first served Quantities limited Makes it an offer not a ITN
Definiteness and Certainty Terms must be clear and have NO doubt Tenant/landlord plumbing fix Job offer with “reasonable” commission Communication to the Offeree
1. Actress Blanchett dined (1) 2. Romantically see 6+2 people (1) 3. Dinner dish shipping box (1) 4. Terrific list of candidates (1) 5. Cargo condition after shipping (1) 6. Can’t stand dumbbells and barbells (1)
Requirements of Acceptance Acceptance is the second element of a legally binding contract Unconditional Acceptance Mirror image rule Counteroffer Exceptions to the MIR Personal property items Created by the UCC – uniform commercial code Non-merchants – non-regular sellers Sales between merchants or B2B sales
Method of Acceptance Time limits may be imposed as well Offers may be accepted by actions Cannot impose silence as means of acceptance
Termination of an Offer Revocation Offer taken off the table by offeror Rejection Offer rejected by offeree Counteroffer Negotiating over price – one contract ends and another one starts Expiration of Time Must accept offer before a set time passes Option contract Death or Insanity
Reviewing What You Learned • What are the requirements of an offer? • What is the difference between an offer and an invitation to negotiate? • What are the requirements of an acceptance? • What is the difference between an acceptance and a counteroffer? • When is an offer terminated?
Workbook Exercises Terms – page 45 Judge – page 46 Concepts – page 47 & 48 Case – page 49 Self Assessment – page 52
Fraud and Misrepresentation What You Will Learn: • How to identify the elements of fraud • How to distinguish between fraud and concealment • How to distinguish between fraud and innocent misrepresentation • How to distinguish between the remedy available for fraud and the remedy available for misrepresentation Why It Is Important: Learning the elements of fraud may prevent you from being victimized or help you claim your rights if you are defrauded
Defective Agreements • Something goes wrong • What you thought was a valid contract is nothing of the such • Agreement is defective • Fraud • Misrepresentation • Mistake • Duress • Undue influence
Fraud Is the deliberate deception intended to secure an unfair or unlawful gain. You were talked into entering a contract Rescind the contract or sue for money damages Deliberate deception may lead to punitive damages Award money greater then the amount needed to pay back These 5 elements must be present to succeed in a fraud lawsuit
1. Atop a mafia Chief (1) 2. Imprison a Disney chipmunk (1) 3. Not so sharp actress Helen (1) 4. Computer nerd’s seven-day spans (1) 5. Cosmetics drastic reorganization (2) 6. More miserly snoozer (2)
False Representation of Fact Material Fact Is a fact that is important Matter to one of the parties Cannot be a promise of future actions or an opinion Not limited to oral or written statements Actions intended to deceive Concealment Is when chooses not to reveal important information Also called passive fraud or nondisclosure Hidden problems in a house
Representation Known to be False The party making the false representation must be aware that the representation is false Statement made without regard for the truth
False Representation Intended to Be Relied Upon The person making the misrepresentation must intend that the other party will rely on the information as part of negotiations False Representation Actually Relied Upon When someone uses misrepresented information as part of negotiating a contract Resulting Loss Actual monetary loss must have resulted
Innocent Misrepresentation Sometimes a person will make an innocent statement that turns out to be false. Honestly believed that statement was true at the time it was made. The law gives you the right to rescind the contract Damages not awarded
1. That guy’ll pass out poker cards (1) 2. Long, measureless history (1) 3. Superman’s last name lost money (1) 4. Movie intended for women (1) 5. Gridiron meeting in a rainwater pool (2) 6. Port-au-Prince native country (2)
Reviewing What You Learned • What are the elements of fraud? • What is the difference between fraud and concealment? • What is the difference between fraud and innocent misrepresentation? • What is the difference between the remedy available for fraud and the remedy available for misrepresentation?
Mistake, Duress, & Undue Influence What You Will Learn: • How to distinguish between unilateral and bilateral mistake • How to recognize the types of mistake that will allow rescission of a contract • How to recognize the requirements of economic duress • How to recognize the requirements of undue influence Why It Is Important: Recognizing how mistake, duress, and undue influence can affect agreements will help you make better decisions in such situations
Mistake • Unilateral Mistake • Is a mistake on the part of one of the parties to the contract • Reasonable expectations should not be blocked because of a mistake • http://public.findlaw.com/abaflg/flg-9-1b-10.html • Mistake as to the Nature of the Agreement • What exactly did you agree too? • If you don’t understand the language, bring someone who does and can explain it. • Mistake as to the Identity of a Party • Making the contract to the wrong person.
Bilateral Mistake Sometimes both parties involved in a contract make mistakes. Contract is voidable by either party Mistake as to the Possibility of Performance Something happens that will not allow the contract to be completed Mistake as to the Subject Matter When both parties are mistaken as to the identity of the subject matter Contract may be voided
Duress Influencing a person’s will by use of force or threat Physical or Emotional Duress Agreements made under duress are void or voidable Mob offering protection to merchants Threat made against the party of a member of their family Economic Duress Is the threat of a person’s business or income as establishment of a contract.
Undue Influence Is when one person used unfair and improper persuasive pressure to force someone else into a contract Ill health Old age Mental instability The stronger persons substitutes his will for the will of the weaker person
Reviewing What You Learned • What is the difference between unilateral and bilateral mistake? • What types of mistake will allow rescission of a contract? • What are the requirements of economic duress? • What are the requirements of undue influence?
1. Junk a baseball player’s headgear (1) 2. Funny Groucho dog talk (1) 3. Move a car that stopped running (1) 4. More adorable cheering fan (2) 5. Bottom scraping creamy chocolate treats (2) 6. Faster football punter (2)
Workbook Exercises Terms – page 53 Judge – page 54 Concepts – page 55 & 56 Case – page 57 Self Assessment – page 60
Contractual Capacity What You Will Learn: • How to explain the legal concept of minority • How to identify the rights of minors in relation to contract • How to identify contract that are voidable by a minor • How a person can ratify a contract made in minority • How to identify other, besides minors, who can rescind contracts Why It Is Important: Understanding the rights afforded to minors in contract law will enable you to exercise your rights and help others
The Requirement of Capacity • We’ve covered Offer, Acceptance, and Genuine Agreement • The fourth element is Capacity • Deals with minors and contracts they enter • The law permits minor to rescind their contracts • Its intent was to protect minors from dishonest adults
Minor’s Rights and Obligations Capacity is the legal ability to enter a contract. Rebuttable presumption The assumption that the other party is of legal age. Definition of Minority Legal Age Emancipation and Abandonment
Misrepresentation of Age When minors who lie about their age or use a fake ID They have committed fraud Some states allow minors to be sued for fraud while others do not. It is often considered a criminal offense to buy age-restricted products