elements of a contract

elements of a contract - ELEMENTS OF A CONTRACT age 18,...

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Unformatted text preview: ELEMENTS OF A CONTRACT age 18, contract {£1 a at the opt-ion: ems-infant: ( A "voidable" contract is not the same as a "void" contract. A "void" contract is unenforceable because it lacks a necessary element.) b. Sufficient mental capacity - able to understand the significance ofa contract Ex: Alcohol intoxication Mental illness - but one may have "lucid intervals" and affirm the contract. ( A "lucid interval" means a temperary restoration to sanity.) l _ subjee—t matter 3’ - A contract may not involve illegal activity or be again-it public policy. Ex: Contract to kill someone Gambling contracts 3- gagg- a. Must express intention to enter into a contract b. Must be certain and definite as to essential terms c. Must be communicated to the offeree An offerereates power of acceptance in the ofl‘eree. An offer creates liability (in the part ofthe offeror. 4% a. Must be unconditional and absolute b. Must meet the conditions ofthe offer c, Must be communicated to the offeror before the. offer is revoked or. expires An offer can be terminated via: a. EXpress refusal to accept b. Counteroffer c. Conditional acceptance Ex: I accept, provided my loan is approved. 370 cdnfiactsmax ' For a valid otTcr and acceptance: - There must be a "meeting ofthe minds“. i.c., there must be a mutual understanding ofthe same bargain at the same time. - Courts typically use an objective standard to verify the valid offer and acceptance - See Lucy v. Zehmer (p. 31) - Minority View: Some courts verify the valid offer and acceptance through individual feelings and emotions. - The parties must exchange something of value - May be money. labor, goods, or a promise to do or not to do something Lucy v. Zehmer (p. 31) FACTS - Suit concerns validity ofa "contract" to sell a farm - Lucy was Pf(buyer); Zehmer was Df (seller) - "Memo" was written and negotiated over drinks - Zehmer claims he was joking and had no intentions ofselling his farm; claims he was drunk - Lucy offers "memo" as valid "contract" - Contract language read," We hereby agree to sell to W.O. Lucy the Ferguson Fann complete for $50,000, title satisfactory to buyer." Signed by: AH. Zehmer Ida S. Zehmer LEGA L lSSU ES - Was there consideration? -'a "promise for a promise" is consideration - Was there "delivery" of the contract? . : "delivery" is not an element (but acceptance must be conveyed) - Holding: Court used "reasonable standar " and stated an uncxpressed stateof mind is irrelevant in the law ot'contracts; i .e., "look to the outward expression of a person as manifesting his intention [toagrec to a contract]..." L Court ordered "Specific perfonnance" of the centract - Dfs had to deed their land to Pf OFFER . - - An offer may prescribe time, place, and manner of acceptance; or offer will expire after a reasonable time (when no time, place, or manner restrictions are involved) - lfoffer has no time, place, or manner specifications, acceptance is valid when received by offeror. 3.0 contractsmax - i.e., Acceptance is effectiVe -But use of the mails must be a reasonable method of acceptance. - Mailbox rule also applies to fax transmissions, computer transm' sions, etc. ‘ 1s avmds the dilemma of offers and revocatons crossing in the mail. Sufficiency ofAcccptancc Braun v. Camas Prairie R. Co. (p. 32) FACTS Braun's cattle were killed by Df‘s locomotive Negotiations for settlement included: Feb l0th letter - Railroad claims agent offered $400 settlement Mar. 4th letter - Atty for Pf accepted $400 settlement, but suggested that 5500 would be more fair. Mar.lOth letter - claims agent attempted to withdraw $400 offer, because statute oflimitations had run. LEGAL lSSUES — Was the Mar. 4th letter a valid acceptance? ~ Holding: (l) Acceptance must be absolute, unqualified, and unconditional. (2) Acceptance must meet the conditions of the offer. (3) Acceptance must be properly communicated to the offeror. - Court held that atty's letter constituted sufficient acceptance; i.e., Atty complaincdtbut put no conditions on acceptance. TYPES OF CONTRACTS Express- An actual agreement between the parties with stated and specific terms, either .K oral or in writing. Implied - A contract discerned or inferred from the actionsor c'onductof the parties. There are 2 types ot‘implied contracts: - ' ' - (a) "lmpli‘ed-in-‘factu contracts _ . Example: Painter contracts to paint A's barn. Painter mistakenly paints B's barn, while B sat idly by. Because of B's_conduct, courts find an "implied contract" between the painter and B. (b) “lmplied-in-law" or "quasi-contracts" Example: Painter contracts to paint A's barn. Painter mistakenly paints B's barn while B was on vacation. Because of B's "unjust enrichment" (if B was not required to pay any thing to A), the courts find a contract "implied in law" (or quasi—contract). 3.0 contractsmax - This is a really a remedv to give "restitution" to the party that made the innocent mistake. I; l NOTE: Both are implied only when the mistake is honest. I STATUTE OF FRAUDS All states have adopted some version ofa "statute offrauds". ' _ u _ t I digl‘iéh‘étfiiute passed in 1677. ~ The purpose ofthe statute is to prevent enforcement of fraudulentloral contracts. Requires a contract to be in writing in 9 situations. '3 of those situations are: ‘ . » -_‘: ..»..«._~:?" I. _.:|. ~v. j A memorandum is sufficient to satisfy the Statute of Frauds if it: (1) Identifies the parties (2) Contains the "subject matter" ofthe contract (3) Contains "terms and conditions" ofthe agreement (4) is signed by the party against whom enforcement is sought. SUFFICIENCY OF A WRITING Sorrells v. Bailey Cattle Co. (p 38) FACTS - The Sorrells had paid money down to purchase land from Earnest Bailey, owner of Bailey Cattle Co. - - 2 writings were involved. (I) An "offer and acceptance" executed on 1 l/l'O/76 - contained sketchy description of 30 acres — signed only by Mr. Sorrells (2) A "purchaser's agreement" ' - was undated, with undated note-attached - signed by both Mr.-& Mrs. Serrells , - no identifiable land descn'ption _ - contained terms conflicting with lst _ _ _ document; e.g., added 9% interest on unpaid principal, had different dates for proof of marketable title, and reserved l/2 mineral rights ' LEGAL ISSUES — Arkansas Statute of Frauds required: -' written contract for sale of land - signature of party to be charged 1" adequate description ofland 3.0 contractsmax - Court stated that even ifread 2 writings together, the land description was inadequate for S/F Holding: - Can only consider 2 writings together when executed by same parties for samcpmosg - "incorporation by reference" requires one writing to incorporate or refer to 2nd within lst EXCEPTIONS TO WRITING REQUIREMENTS Generally, courts interpret the Statute ofFrauds narrowly. - This means courts will ofien allow oral contracts to be enforced, even when the contract is of the type that is normally required to be in writing. ' -Examplcs include: "Partial performance" of a contract - When one party to an unenforceable oral contract performs part of the contract, he may claim "promissory estoppel" as a defense against the Statute of Frauds. argument hat would make the contract unenforceable. - f. ‘ ‘~‘;<‘r'—‘;‘i~£ If: 5:5 ' ’6 ' i. amt I ._ _. - Example: Straatmann v. Straatmath (P. 42) Straatmann v. Straatmann (p.42) FACTS - Father and son had oral agreement stating that if son stayed on farm, then» son would receive all the farm equipment and livestock when father retired and US of the land at father's death. _ - Son stayed on farm and continued to assist mother even after father's death. — Son received cattle and equipment when father retired; father died 1 yr later - Son and nephew began fighting & mother sided with nephew _- Mother quitclaimed farm to 4 daughters _ I - Mother 'sued son for-recovery of farm equipment & damages for son's conversion of cattle - ' . _ . . - Son counterclaimed for specific performance under the oral contract LEGAL ISSUES - Who owned the farm equipment and whether mom could divest son of his future interest in the land depended upon the validity of the oral contract. - Contract involved the sale ofland. so contract was the type that is required to be in writing to be enforceable. - Court cited previous rulings that allowed oral land contracts to be enforced when they had been fu_lly_f1erformed by one party. 3.0 contractsmax HOLDING: Court allowed the oral contract to be enforced here even though the contract had only been partially performed. - i.e., the coufi allowed the defense of promissory estoppel NOTE: The court required the proofto rise to the level of "clear and convincing evidence". - This level of proof is greater than the "by a preponderance of the evidence" standard and less than the "beyond a reasonable doubt" standard. - Evidence at trial was that mother knew of the oral contract, even though it had been agreed upon 22 yrs. earlier; and the son's work was the consideration for the contract. What happens when one party states that the contract does not reflect the complete agreement of the parties? or What happens when one party states that the parties had a contemporaneous agreement contrary to the terms of the final written agreement? . ,. _.:.j ' ' . . . 4: —" rn'Bther words, the writing is the best evidence of the agreement between the parties - '. '1 2.....‘mtatastaaiat .. attaseaaitisfisaof new; ‘ ‘ ' "'"afiepafi‘teaasfia‘aattsstete= 'H‘ a Parol evidence - technically, means "oral evidence". _ . Generally, means any evidence not furnished by the document itself but derived ' from outside sources. ' Zummo Cattle Company (p. 45) illustrates the rule". Addition ofa "merger clause" in a contract will often help to avoid disputes such as in Zummo. . . . . .- , . - Zummo Cattle Co. v. Millard (pl. 45) FACTS . - Millards were owners of feedlots - Millards had entered'into contract with. Zummo to feed Zummo - At issue is paragraph 8 of contract: "All death losses and mysterious disappearance of cattle will be at the expense of the feedlot." 3000 head of cattle for 3.0 contractsmax - Millard (i.e., the feedlot owner) argued that the parties had separately agreed to limit losses to industry standard ot‘3%; but that he had signed contract anyway to aid Zummo with financing. - Zummo argued that there was no modification ofthe contract._ —Trial court allowed Millard's testimony and limited losses to the 3%. LEGAL ISSUES - Zummo argues on appeal that the "parol evidence rule" prohibited Millard’s testimony at trial. - Appellate court held that Millard's testimony violated the "parol evidence rule" and was inadmissible; therefore judgment was reformed and Millard was liable for all losses. - Appellate court noted that contract language was clear on its face and that no fraud, accident, or mistake was alleged in the contract's execution. Typical Merger Clause " This writing contains the entire agreement of the parties and there are no promises, undertakings, or agreements of any kind pertaining to this contract other than stated herein." "Vii: _ “it, Faiii'iiiilii Bun are; . - A supervening illegality, e.g., a crop is made illegal ' " Afises when performance would require extreme and unreasonable difficulty not otherwise anticipated ' ' Ex: - Aerial applicator's plane is destroyed 'Ex: «Alfalfa to bcsprayed isdrowned by flood- Remedies for Breach of Contract » The breach must be "material" in nature before a. remedy will be allowed by a court of law. Minor deviations in performance of a contract will not destroy the contract. t: ‘ifiufficient to make the injured party "Wh0]e") -:may not be arbitrary 3.0 contractsmax -—generally, this amount is the difference between the contract price and the fair market value of the item covered by the contract -Must be specified in the contract ‘\ -—Enforceable only if: I) Damages are difficult to foresee 2) Amount specified is not excessive and/or a penalty 3) Amount is a reasonable estimate of probable loss Remedies for Breach of contract (cont) ; l -Annl contract and return parties to status quo Hf'ilfizpayment of benefits previously paid to avoid unjust enrichment. ' :Rw r'd'éd' When subject matter or contract is unique -Genera|ly, not awarded when money damages are adequate A failure to promptly seek a remedy for anothcr's wrongful breach will sometimes prevent enforcement of a favorable remedy. Remedies can be barred in the following ways: a) Statutes oflimitations - statutory time limits that bar a cause of action b) Lachcs - means a failure to exert one's rights in a timely manner; i.e., "sitting on one's rights" — This is a common law doctrine involving unreaéonablc delay, change in a party's position, and resulting prejudice to a defendant if a contract is enforced. . I CONTRACTS REvIEw " l. Certain elementsare necessary for a valid contract. Oral contracts can be enforCCable. Both express and implied contracts are enforceable. Certain contracts must be in writing. A written contract must contain minimum infomiatiOn. 13.0 contractstmax All negotiations are considered to be merged into the written contract. Performance under a contract is excused under certain circumstances. A party to a contract may seek one of several remedies if there is a material breach of the contract. 9 A delay in seeking a prompt remedy for breach of a contract may bar the remedy. *‘UNIFORM COMMERCIAL CODE 'CHAPTER 11 in TEXT) The UCC is a uniform body of law governing major commercial transactions, including. sales of farm products. Each state has adopted its own version of the UCC. - KY has adopted UCC in KRS chapter 355. UCC is divided into "Articles", each dealing with a particular type of transaction. - Article 2 deals with Sales. — Article 9 deals with Secured Transactions. ,4 on ract must e Signed by the party against whom enforcement is sought . . - Contract is enforceable even if it omits a term, but the contract is enforceable only up to the quantity of goods shown EXCEPTIONS T0 UCC'WRITING REQUIREMENTS - KRS 355.2-20l Subsection (2) - called "merchant's'exce tion" - where c613 rae involves specially manufactured goods - where contract is admitted in court proceedings - where payment or receipt of goods has occurred - where detrimental reliance has occurred, the courts generally allow the promissory estoppel defense contractsmax “ ...
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elements of a contract - ELEMENTS OF A CONTRACT age 18,...

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