Contract Law

1. Contract Law

2. The Big Picture The Legal System Criminal Law Civil Law Employment Law Consumer Law Tort Law Contract Law

3. Today’s Objectives • Identify the six elements of a contract. • Explain the effects of a contract on a minor. • Identify types of contracts. • Analyze the need for contracts.

4. THINKER QUESTION How many of you are currently subject to a contractual agreement? What are some examples of contracts?

5. Potential Contracts • Credit Card • Grocery store “club” card • Selling / buying something to a friend for money • Movie rental store agreement • College commitment or sports agreement • Part-time jobs • Email accounts, iTunes, etc.

6. What is a Contract?

7. The Nature of a Contract • A contract is any agreement enforceable by law. • Not all agreements are contracts.

8. What makes a contract? Six Elements of a Contract

9. Elements of a Contract • Offer • Acceptance • Agreement • Consideration • Capacity • Legality • In order to have a legally enforceable contract, all six elements must be present. • Do contracts have to be in writing to be enforceable by law?

10. Offer • Proposal to make a definite and certain deal with serious intent • Must be communicated to another person • Remains open until it is accepted, rejected, retracted, or expires • Counter-offers can be made and close the original offer

11. Acceptance • Acknowledgement by the offeree (person receiving the offer) that the offer is accepted unconditionally • Must be communicated to the offeror in a reasonable manner • May be spoken, written, or by action

12. Genuine Assent • Reached when a valid offer is met by a valid acceptance • The offer and acceptance together create genuine assent. • Genuine agreements cannot exist if there is fraud, misrepresentation, mistake, undue influence, etc.

13. Is it valid? Read each example and decide.

14. Jim negotiated a deal to re-roof his house with a carpenter. They did not sign a written agreement. The roofers showed up at the house on the agreed day, and another carpenter had already started work. Was there a contract?

15. Cheryl was fired from her job at the newspaper, and she sued because she thought there had been gender discrimination in her firing. Cheryl and the newspaper company agreed on the basic outline for a settlement, but before it was signed, she backed out and wanted to go to court. Should the settlement be binding?

16. An advertisement in a magazine promises, “Our product will clear up your acne or we will give you double your money back!” Jenny bought the product, ProAktiv, at a drug store and did not notify the company that she planned on taking them up on their offer. Does the ProAktiv have to pay Jenny double her money back if the product does not work?

17. The Other Elements

18. Capacity • Legal ability to enter a contract • Contracts can be disaffirmed by: • Minors • People with mental impairments • People under the influence

19. Consideration • Consideration is what is exchanged as a result of the contract. • May be money, property, or services

20. Legality • In general, a court will not help any party to an illegal contract. • Neither party can enforce the agreement. • Neither party can get help from the court.

21. Email Account Contracts

22. Yahoo! • Who is the offeror? The offeree? • What is the offer? • What is being offered? Key terms? • How does a user accept? • When does acceptance bind the user? • What is the consideration for each party? • Identify any other interesting parts of the contract.

23. Types of Contracts What kinds of contracts are recognized by law?

24. The Law Recognizes… • Express Contracts – written or spoken • Implied Contracts – comes from the actions of the parties • Executory Contracts – not fully performed • Executed Contracts – completed by both parties • Quasi-Contracts – missing an element, still enforceable • Sales Contracts – sale of property, rent, wills, estates • Employment Contracts – business organizations

25. Bilateral contracts – contract that contains two promises. • Unilateral contracts – Contract that contains a promise by only one person to do something, if and when the other party performs some act. Example: Reward • Mirror Image rule – terms stated in the acceptance must exactly mirror or match the terms of the offer.

26. Termination of an Offer • Revocation – the taking back of an offer by the offeror. • Rejection – is a refusal of an offer by the offeree that brings the offer to an end • Expiration of Time – if the offeror sets a time limit of the offer, it must be honored. • Counteroffer – is a response to an offer in which the terms of the original offer are changed.

27. Termination of an Offer • Death or Insanity – If the offeror dies or becomes insane before the offer is accepted, the offer comes to an end. Although death ends an offer, it does not end a contract, except for contracts related to personal services.

28. Why do we need contracts?

29. We need contracts… • Because they are important in a free-market economy • Because verbal (handshake) agreements are in decline • Because they have protective power • Because the court can intervene & enforce • Because of the litigious nature of society

30. Enforcing Contracts

31. Last Class… • Identify the six elements of a contract. • Explain the effects of a contract on a minor. • Identify types of contracts. • Analyze the need for contracts.

32. Today’s Objectives • Analyze agreements to determine if a valid contract exists. • Determine when a breach of contract occurs. • Identify defenses to contractual agreements. • Apply contract law to negotiation deals.

33. Breach

34. Breaching a Contract • If one party does not follow through with consideration in a contract, the other party doesn’t have to perform. • Failure to perform is called a breach.

35. Thinker Question! What happens when one party breaches a contract?

36. Enforcement • Damages – the party who is harmed can request money (equal to the amount lost from the breach) from the other party • Specific Performance – if it is still possible to perform the contract, the court can require the party to perform

37. Sam burned his hand on the stove. The burn was so bad that it permanently scarred his hand and made it difficult to grip things. A doctor told him that he could fix his hand with a simple “skin-grafting” procedure for $1200. After the surgery, Sam’s hand worked perfectly… but, he started growing hair out of the palm of his hand. He tried waxing it, but he couldn’t stop the hair from growing back. He decides to sue the doctor for giving him a hairy hand.

38. Defenses to Contracts Certain things can make contracts void, even though both parties agreed on the terms and there was valid consideration.

39. Unconscionability • If one party tricked another party into agreeing to an unfair contract, the court may not enforce it. • Example: businesses who try to trick poor or uneducated clients

40. Fraud or Duress • Lying or misrepresenting something in negotiations • Taking advantage of someone in a bad situation

41. A law,the Statute of Frauds • Requires that certain contracts must be in writing to be enforceable. • Contracts for Sale • Contracts for Lease • Contracts for a mortgage (real property) • Contracts longer than 1 year • Collateral contracts • Prenuptial agreements • Contracts for sale of goods valued at $500 or more

42. Explain the impact of • The Uniform Commercial Code on interstate commerce • Makes it easier to do business • Eliminates the need for the involvement of lawyers with regard to the various aspects of interstate business.