Unformatted text preview: Kulper - Econ 189 Kulper 1 The Purpose of a Contract
• Contracts exist to make business matters • Judicial Activism vs. Judicial Restraint
– Judicial restraint makes the law less flexible but more predictable. – Judicial activism makes the law more flexible but less predictable. Kulper - Econ 189 Kulper 2 • Agreement Elements of a Contract • Consideration • Legality – One party must make a valid offer, and the other party must accept it. – There has to be bargaining that leads to an exchange between the parties. – The contract must be for a lawful purpose. – The parties must be adults of sound mind.
Kulper - Econ 189 Kulper 3 • Capacity Contracts
• Definition • Development of Contract Law
– A promise that the law will enforce. – Common law once required all contracts to be in writing, with a seal affixed. – Later, some payment was required before a contract could be enforced. – Mutual promises became enforceable in the 1600’s. – By the 1900’s, courts began to consider the fairness of contracts before enforcing them.
Kulper - Econ 189 Kulper 4 Types of Contracts (or Agreements)
vs. Unilateral Bilateral Express Executory vs. Implied vs. Executed Valid vs. Unenforceable vs. Voidable vs. Void Kulper - Econ 189 Kulper 5 Types of Contracts (or Agreements) • Bilateral and Unilateral Contracts
– Bilateral: both parties make a promise (to do something) to each other. – Unilateral: one party makes a promise to the other that the other party can accept only by doing something specific.
Kulper - Econ 189 Kulper 6 Types of Contracts (cont’d)
• Express and Implied Contracts
– Express: the two parties to the contract explicitly state all of the important terms of their agreement. – Implied: the words and conduct of the parties indicate that the parties intended to make an agreement. (Demasse v. ITT Corp. – Changed Employee Handbook re layoffs)
Kulper - Econ 189 Kulper 7 • Executory and Executed Contracts Types of Contracts (cont’d) – Executory: when one or more parties has not fulfilled its obligations under the contract. – Executed: when all parties to the contract have fulfilled their obligations under the contract.
Kulper - Econ 189 Kulper 8 Types of Contracts (cont’d)
• Valid, Unenforceable, Voidable, and Void Agreements
– Valid: satisfies the law’s requirements. – Unenforceable: when the parties intend to form a valid bargain but some rule of law prevents enforcement. – Voidable: when the law permits one party to terminate the agreement. – Void: one that neither party can enforce, usually because the purpose is illegal or one of the parties had no legal authority.
Kulper - Econ 189 Kulper 9 Promissory Estoppel
• Even when there is no contract, a plaintiff may use promissory estoppel to enforce the defendant’s promise if he can show that: – The defendant made a promise knowing that the plaintiff would likely rely on it. – The plaintiff did rely on the promise; and – The only way to avoid injustice is to enforce the promise.
Kulper - Econ 189 Kulper 10 Quasicontract
• Even when there is no contract, a court may use quasicontract to compensate a plaintiff who can show that: – He gave some benefit to the defendant. – He reasonably expected to be paid for the benefit and the defendant knew this; and – The defendant would be unjustly enriched if she did not pay. The damages awarded are called quantum meruit, meaning that the plaintiff gets “as much as he deserved.”
Kulper - Econ 189 Kulper 11 • (Novak v. Credit Bureau Collection Service – medical center treats unconscious patient) • Common Law • Uniform Commercial Code Sources of Contract Law • Restatement (Second) of Contracts
Kulper - Econ 189 Kulper – UCC Article 2 governs the sale of goods. “Goods” means anything moveable, except for money, securities, and certain legal rights. – In a mixed contract, Article 2 governs only if the primary purpose was the sale of goods. 12 Meeting of the Minds
• The parties can form a contract only if they had a meeting of the minds.
– They must understand each other and intend to reach an agreement. – A judge will make an objective assessment of any disagreements about whether a contract was made whether or not a reasonable person would conclude that there was an agreement, based on the parties’ conduct.
Kulper - Econ 189 Kulper 13 An offer is an act or statement that proposes definite terms and permits the other party to create a contract by accepting those terms. Offer • Problems with Intent • Problems with Definiteness – Invitation to bargain is not an offer. – An advertisement is generally not an offer. – A letter of intent may or may not be an offer, depending on the writer’s intent. – The term of the offer must be definite.
(Baer v. Chase – Lack of agreement re The Sopranos)
Kulper - Econ 189 Kulper 14 • Termination by Revocation • Termination by Rejection Termination of Offers – Effective when the offeree receives it. – If an offeree rejects an offer, the rejection immediately terminates the offer. – If an offeree counteroffers, it is a rejection that immediately terminates the offer.
Kulper - Econ 189 Kulper 15 • Termination by Counteroffer • Termination by Expiration Termination of Offers (cont’d) • Termination by Destruction – When an offer specifies a time limit for acceptance, that period if binding. – If the offer specified no time limit, the offeree has a reasonable period in which to accept. – Destruction of subject matter terminates offer.
Kulper - Econ 189 Kulper 16 • The offeree must say or do something to accept.
– In a bilateral contract, the offeree generally must accept by making a promise. – In a unilateral contract, the offeree must accept by performing. – Requires that acceptance be on precisely the same terms as the offer.
Kulper - Econ 189 Kulper 17 Acceptance • Mirror Image Rule (Common Law) UCC and the Battle of Forms
• Under UCC §2207, an acceptance that adds additional or different terms may form a contract for sales of goods in certain cases.
– For a sale of goods, the most important factor is whether the parties believe they have formed an agreement. – New terms added by the offeree do not void the agreement if accepted by the offeror. – If terms are changed, a court will rely on general principles of the UCC to create a fair contract. – If a party wants to contract only on his terms, the agreement must clearly state that.
Kulper - Econ 189 Kulper 18 A Bargain and an Exchange
• Consideration means that there must be bargaining that leads to an exchange between the parties. someone might want to bargain for. • Consideration can be anything that • A promisor is the person who makes the promise, and promisee, the person to whom the promise is made.
Kulper - Econ 189 Kulper 19 A Bargain and an Exchange
“Bargaining is obligating yourself in order to induce the other side to agree.” • The thing bargained for canbe: – another promise. – an action without a promise. – a promise to do something or a promise to refrain from doing something. (Famous Case: Hamer v. Sidway)
Kulper - Econ 189 Kulper 20 A
A to give B a benefit Bargain B
B to give A a benefit Which There is consideration to support a contract between A and B, causes... when they bargain... and their bargaining causes BOTH parties ... OR OR
A to suffer a detriment AND B to suffer a detriment …to either give a benefit to the other or to Consideration supports a contract! suffer a detriment themselves.
Kulper - Econ 189 Kulper 21 Mutuality of Obligations
• Illusory Promise
– If one party’s promise is conditional, the other party is not bound to the agreement. (You Be the Judge: Culbertson v. Brodsky – Option contract to buy land) Kulper - Econ 189 Kulper 22 “If you understand the contract issues that courts scrutinize, the agreement you draft is likelier to be enforced. You thus achieve greater control over your affairs the very purpose of a contract.”
Kulper - Econ 189 Kulper 23 ...
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- Spring '08
- Kulper, ITT Corp., Development of Contract Law