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Business_Law(3) - Business Law 2 Nature and Terminology of...

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Business Law 2 – Nature and Terminology of Contracts Promise – a person’s assurance that they will or will not do something Sources of contract law common law governs all contracts except when it has been modified or replaced by statutory law, such as the Uniform Commercial Code (governs sales and lease of goods) or by administrative agency regulations. Functions of contract law – to provide predictability and stability as well as certainty for both buyers and sellers. Deals with the formation and enforcement of agreements between parties. Creates an essential condition for the existence of a market economy. Definition of a contract – a promise or a set of promises fo the breach of whish the law gives a remedy, or the performance of which the law in some way recognizes as duty. It’s a legally binding agreement between two or more parties that agree to perform or refrain from performing some act now or in the future. In determini ng whether a contract has been formed, the element of intent is of prime importance. It is determined by what is called the objective theory of contracts , not by the personal or subjective intent of a party (the party’s intention to enter into a legally binding agreement is judged by outward, objective facts as interpreted by a reasonable person, rather than the person’s subjective intentions). Objective facts include 1. what the party said when entering into the contract 2. how the party acted 3. the circumstances surrounding the transaction . Elements of a contract: 1. Agreement – includes offer and acceptance 2. Consideration – legally sufficient and bargained-for consideration (something of value received or promised, such as money, to convince a person to make a deal) 3. Contractual capacity – must possess characteristics that qualify tem as competent parties 4. Legality – the contract’s purpose must be to accomplish some goal that is legal and not against public policy. Defenses to the Enforceability of a contract : 1. Genuineness of assent – the consent of both parties must be genuine; if a contract was formed as a result of fraud, mistake or duress, the contract may not be enforceable.
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2. Form – the contract must be in the form that the law requires (some contracts must be written to be enforceable) Types of contracts (can be distinguished by formation, performance and enforceability): 1. Formation (depends on what the offeree must do to accept the offer) a. Bilateral – if the offeree can accept simply by promising to perform (“a promise for a promise”) b. Unilateral – if the offeree can accept only by completing the contract performance (“a [promise for an act”) c. Express contracts – the terms of the agreement are fully and explicitly stated in words, oral or written d. Implied-in-Fact contracts – implied from the conduct of the parties; the conduct rather than their words defines the terms of the contract ( Requirements for implied-in fact: 1. the plaintiff expected to be paid for the
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