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Chapter 7_updated - Chapter 7 Contracts Hua Sun Department...

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Chapter 7: Contracts Hua Sun Department of Accounting and Finance California State University, San Bernardino Feb 10, 2009 Hua Sun (CSUSB) Contracts Feb 10, 2009 1 / 38
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Announcement Mock midterm is now available online. Mini-project will be distributed on Feb 19 instead of Feb 12, and the due date will be March 10 instead of March 3. Real estate public talk: by Irene Ryn, Senior Associate Advisor at Sperry Van Ness. I Venue: Thursday (Feb 12th), 4pm at JB 140. Hua Sun (CSUSB) Contracts Feb 10, 2009 2 / 38
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What Is a Contract? Contract Promise do sth refrain from doing sth Promise: contractual obligation To perform a promise: tender Person who takes a part in a contract: party Valid contract Duty to perform (promise) . Breach of Contract Real estate lisitng agreement purchase contract Hua Sun (CSUSB) Contracts Feb 10, 2009 3 / 38
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What Is a Contract? Executory contracts: a contract is executory while some contract obligation is still to be performed Executed contracts: a contract is executed when all contract obligations have been performed I Note: The act of signing or performing a contract is also referred to as executing it. Hua Sun (CSUSB) Contracts Feb 10, 2009 4 / 38
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What Is a Contract? Express contract: an express contract is established by oral or written agreement Implied contract: an implied contract is established by the conduct of the parties (e.g., you enter a restaurant and order some food to eat without paying upfront) Hua Sun (CSUSB) Contracts Feb 10, 2009 5 / 38
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What Is a Contract? Bilateral contract: a bilateral contract means that both parties make a contract promise (as in a real estate purchase contract) Unilateral contract: in a unilateral contract, only one party promises and the promise is accepted by the performance of the other party (e.g., Michael loses his wallet and offers $100 for its return) Hua Sun (CSUSB) Contracts Feb 10, 2009 6 / 38
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What Is a Contract? Legal effects of contracts I Valid contract: a valid contract is created when all of the requirements are present I Void contract: void contract has no legal effect from its inception (as to do sth illegal, etc) I Voidable contract: a voidable contract may be disavowed by one or both parties, depending on the circumstances (e.g.,one party signs a contract when intoxicated, contract signed with misrepresentation, etc) I Unenforceable contract: an unenforceable contract is valid on its face but its enforcement would violate some law (such as an oral agreement when the law requires a writing) To make a contract valid: eligible; mutual consent; lawful object; consideration (obligation or payment) and correct in form (should it to be written?) Hua Sun (CSUSB) Contracts Feb 10, 2009 7 / 38
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Elements of a Contract Legal capacity to contract: both parties must have the capacity to contract. If both do not, contract may be voidable.
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