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Chapter 9 Contracts: Nature and Terminology

Chapter 9 Contracts: Nature and Terminology . Introduction. Promise is a declaration that something will or will not happen in the future. What is a Contract? Contract is an agreement (based on a promise) that can be enforced in court. What law governs?

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Chapter 9 Contracts: Nature and Terminology

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  1. Chapter 9 Contracts: Nature and Terminology

  2. Introduction • Promise is a declaration that something will or will not happen in the future. • What is a Contract? • Contract is an agreement (based on a promise) that can be enforced in court. • What law governs? • Service contracts - common law of contracts. • Sale and lease contracts - Uniform Commercial Code (UCC).

  3. §1: Function of Contract Law • Designed to provide stability and predictability, as well as certainty, for both, buyers and sellers in the marketplace. • Necessary to ensure compliance with a promise or to entitle the innocent party to some form of relief.

  4. §2: Definition of a Contract • A contract is a: • Promise or set of promises, • For which breach of which, • The law provides a remedy, or • The performance of which the law in some way recognizes as a duty. • Objective Theory of Contacts. Circumstances to determine intent of parties.

  5. §3: Elements of a Contract • Agreement (Offer and Acceptance). • Consideration. • Contractual Capacity. • Defense: • Legality. • Genuineness of assent. • Form.

  6. §4: Types of Contracts • Bilateral v. Unilateral. • Bilateral - Offeree must only promise to perform (“promise for a promise”). • Unilateral - Offeree can accept the offer only by completing the contract performance (“promise for an act”). • Irrevocable: Offer cannot be revoked once performance has begun.

  7. Types of Contracts • Express v. Implied In Fact. • Express: Words (oral or written). • Implied In Fact: Conduct creates and defines the terms of the contract. Requirements: • PL furnished good or service • PL expected to be paid • DEF had chance to reject and did not. • Case 9.1: Homer v. Burman (2001).

  8. Types of Contracts [3] • Quasi Contracts - Implied in law. • Fictional contracts created by courts. • Imposed on parties for the interest of fairness and justice. • Equitable remedies. • Quantum Meruit. • Case 9.2:Industrial Lift v. Mitsubishi (1982).

  9. Types of Contracts [4] • Formal v. Informal. • Executed v. Executory. • Executed - A contract that has been fully performed on both sides. • Executory - A contract that has not been fully performed on either side.

  10. Enforceability • Valid. • Elements: Agreement, consideration, contractual capacity, and legality. • Void. • No contract. • Voidable (unenforceable). • Valid contract can be avoided or rescinded.

  11. §5: Interpretation of Contracts • Plain Meaning Rule: Courts give terms their obvious meaning. • Ambiguous Terms. If terms are ambiguous, court will attempt to interpret ambiguous contract terms in a reasonable, lawful, effective manner. • Contracts are interpreted as a whole. • Terms negotiated separately given greater weight. • Ordinary, common meaning given.

  12. Interpretation of Contracts • Ambiguous Terms (cont’d) • Specific wording given greater weight than general language. • Written or typewritten given greater weight than preprinted. • Ambiguous terms interpreted against the drafter. • Trade usage, prior dealing, course of performance to allowed to clarify. • Case 9.3:Dispatch Automation v. Richards (2002).

  13. Law on the Web • ‘Lectric Law Library on Contracts. • Legal Research Exercises on the Web.

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