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Chapter 10 Outline

Chapter 10 Outline - Chapter 10 Contract Law Nature and...

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Chapter 10: Contract Law Nature and Terminology 1) Function of Contract Law: i) Provides an essential condition for the existence of a market economy. ii) Without a legal framework of reasonable assured expectations within which to make long-run plans, businesspersons would be able to rely only on the good faith of others. iii) Contract law is necessary to ensure compliance with a promise or to entitle the innocent party to some form of relief 2) Contract: a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty. i) 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) Elements of a Contract a) Agreement i) Includes a: (1) Legal Offer (2) And a Legal Acceptance b) Consideration i) Any promises made by the parties to the contract must be supported by legally sufficient and bargained-for consideration (something of value received or promised) c) Capacity i) Both parties entering into the contract must have the contractual capacity to do so; the law must recognize them as possessing characteristics that qualify them as competent parties d) Legality i) the contract’s purpose must be to accomplish some goal that is legal and not against public policy
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4) The Objective Theory of Contracts a) A party’s intention to enter into a legally binding agreement or contract is judged by outward, objective facts as interpreted by a reasonable person, rather than by the party’s own secret, subjective intentions. i) Objective facts include (1) what the party said when entering into the contract, (2) how the party acted or appeared and (3) the circumstances surrounding the transaction.
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