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WHAT IS A CONTRACT?

WHAT IS A CONTRACT?. An agreement that can be enforced in court; A promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law recognizes a duty. Contracts Defined. Key terms: Two or more parties Performance To refrain from performing

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WHAT IS A CONTRACT?

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  1. WHAT IS A CONTRACT? An agreement that can be enforced in court; A promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law recognizes a duty.

  2. Contracts Defined • Key terms: • Two or more parties • Performance • To refrain from performing • For legal purpose • Simply, a contract is a legally binding agreement between two or more parties who agree to perform or to refrain from performing some act now or in the future.

  3. Requirements? • Must it be in writing to be enforced? • Are there special words/forms needed to write a contract? • Must it be notarized? • Must it have a legal purpose? • Must it be voluntary? • Who can enter into a contract? • Must there be a time or event when completed?

  4. Parties to a contract: • Promisor – A person who makes a promise. • Example: I promise to paint your house for $3,500.00. • Promisee – A person to whom a promise is made. • Example: I promise to sell you my camper for $7,500.00.

  5. Parties to a contract: • Offeror – A person who makes an offer. • Offeree – A person to whom an offer is made.

  6. Example: I sell you my camper for $7,500. Promisor ----- promise to sell ----- Promisee Offeror Offeree Seller ----- promise to pay ----- Buyer

  7. TYPES OF CONTRACTS • Unilateral Contracts • A contract that results when an offer can be accepted only by the offeree’s performance. • Offeree’s performance is the consideration for the offeror’s offer. • Example: Smith says to Parker, “If you carry this package across the Brooklyn Bridge. I’ll give you $100.00.” Only on Parker’s complete crossing with the package does he accept Smith’s offer to pay $100.00. (If Parker does not cross, there are no legal consequences. • Example: Buying a winning lottery ticket.

  8. TYPES OF CONTRACTS • Bilateral Contracts • If to accept the offer, the offeree must only promise to perform, the contract is bilateral. No performance, such as the payment of money or delivery of goods. Need take place. • The contract comes into existence at the moment the promises are exchanged. • Example: Jeff offers to buy Ann’s digital camera for $200.00. Jeff tells Ann he will pay her next Friday; Ann accepts his offer and promises to give him the camera when he pays her on Friday.

  9. TYPES OF CONTRACTS • Express Contracts: • The terms are fully and explicitly stated in oral or written words. • Example: Written lease • Implied (Implied-in-fact) Contracts: • A contract that is implied from the conduct of the parties. Look for three elements: • 1) the plaintiff must have furnished some service or property • 2) the plaintiff must have expected to be paid and defendant knew or should have known that the payment was expected • 3) the defendant had a chance to reject the service or property and did not • Example: Tax accountant example

  10. Contract Enforceability Valid Contracts A contract that has the necessary elements of offer, acceptance and consideration; parties with legal capacity and for a legal purpose. Voidable Contracts A contract in which one of the parties has the option of avoiding (or enforcing) the contractual obligation. Void Contracts No contract exists; void ab initio (Latin- “from the beginning”) Unenforceable Contracts A contract that otherwise would be valid, except for a legal defense.

  11. ELEMENTS OF A CONTRACT • Agreement • Offer When is an offer made? • Acceptance When is acceptance? • Consideration

  12. Requirements of an Offer 1) Communication to the offeree 2) Definiteness of the terms 3) Intent to become bound; serious, objective intention Non-offers: Expressions of opinion Statements of intention Advertising Negotiations

  13. Contract Performance • Executory Contracts • A contract in which a party has material unperformed obligations. A contract that has not been performed by both parties. A contract that has been fully performed by one party but not by the other party is classified as an executory contract. (Although material, an obligation to pay money does not usually make a contract executory.) Executed Contracts A contract that has been completely performed by both parties. All parties have fulfilled their promises.

  14. What is a quasi contract? • Why is it important? • A fictional contract imposed by law (courts) • Implied by law • A legal substitute for a valid contract • A contract that should have been formed even though it was not • Example: Sprinkler System Case The defendant’s liability is equal to the value of the benefit – fair market benefit; not the “price” of the item or stated in the contract.

  15. AFFIRMATIVE DEFENSES • A defense used in civil and criminal law to limit or avoid liability or criminal culpability. (Must be raised by party asserting it.) • Example: Self defense • Example: Assumption of the risk • Example: Statute of limitations • Example: Estoppel • Example: Legality • Example: Capacity of one of the parties

  16. Acceptance of an Offer • 1) Unequivical • 2) By offeree or his/her agent • 3) Usually by same mode as the way an offer was made

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