Unformatted text preview: Week Three
Chapter 4 - Contracts and the Hospitality Industry
*A business needs enforceable contracts to assure cash flow. A valid, enforceable contract generally requires.
*Offer and acceptance
*A required form, if applicable
*A contract can either be expressed or implied.
*Express Contract is where the contract and its terms are stated by the parties. An express contract can be a:
*Verbal contract (Oral, but not written or signed)
*Implied Contract, where the contract and its terms are created by law, due to the conduct of the parties.
*If the parties act like they have an agreement, a court can enforce the agreement
*Both kinds of contracts are interpreted by a court based upon what a reasonable person would believe the contract terms were.
*Question of fact for a judge or jury based upon evidence of writings or actions of the parties.
*A contract can either be valid; void; voidable; or valid, but unenforceable.
*Valid Contract: Binding and enforceable by either party
*Void Contract: No legal effect
*Does not exist as far as the law is concerned.
*Neither party can enforce it.
*Voidable Contract: A binding contract, though one of the parties has the right to reject or enforce it.
*The one with the right to reject is protected by the law, for some reason, i.e. they are a minor.
*The other party does not get a choice.
*Valid, but unenforceable
*A contract that has the elements of a valid contract, but there is some defect that creates a defense to enforceability.
*Example: Statute of limitations has lapsed a lawsuit based upon breach of contract.
lawsuit based upon breach of contract. *Breach of Contract
*A lawsuit to enforce a breached contract
*Generally the plaintiff must be a party to the contract.
*Strangers to a contract generally have no rights to enforce it.
*Parties to a contract must have capacity or they will be protected by the law, allowing them to reject their contract.
*A lack of capacity makes a contract voidable.
*Parties need both legal capacity and actual capacity.
*Legal capacity is concerned with a party who needs to be protected because the law says so – Minors
*Actual capacity is concerned with a party who does not understand the nature and consequences of their actions when they entered the contract.
*A minor must affirmatively reject their contract or it’s enforceable against them.
*If rejected, any remaining consideration must be returned to the other party.
*Rejection must occur before their 18th birthday, or within a reasonable time thereafter.
*If not rejected in that time, or if minor continues to perform after 18th birthday, contract becomes valid.
*Minor’s contract for necessities
*A minor can reject such a contract – it is voidable.
*If they reject, they are not liable for the contract price of what they received, but are liable for the reasonable value of the goods or services received.
*This theory of liability is call QuasiContract.
*A contract requires that an offer was made by a party to the contract. An offer must be:
*Sufficiently certain *Communicated to the offers (one receiving the offer)
*Advertisements and price quotes are usually considered invitations to negotiate and not offers they are usually communicated to the general public and not to specific offeree(s)
*If something is not an offer, it cannot be accepted to create a contract. *A contract also requires that the offer be accepted. The elements of true acceptance are:
*It is sufficiently definite.
*It is sufficiently certain.
*It is communicated to the offeror.
*It complies with terms of the offer.
*A rejection terminates the offer.
*A noncomplying acceptance is actually a counteroffer and also terminates the original offer.
*A contract requires consideration
*Consideration is a bargainedforexchange for value
*Each party gets something and each gives something
*If one party makes a promise to another, but nothing is promised in return, there is no consideration to support the promise.
*The unsupported promise is a promise of a gift.
*A promise of a gift is generally unenforceable.
*Consideration can take one of four forms
*A thing of value, foods, furniture, or money.
*A valuable service, repair, legal or catering service.
*A valuable forbearance – giving up legal right that one party already has, like a right to sue.
*A binding promise to do one of the 1st three at a future time.
*The promise must bind the promisor.
*A nonbinding promise may sound real, but when analyzed it is found to be illusory.
*A contract must be legal.
*If a contract or its consideration violates a law, the contract is void.
*Neither party can enforce it *A court may separate out the illegal part of the contract and enforce what is left, if enough of the contract remains.
*Some possible violations of law include:
*A contract that violates a criminal statute, such as a contract for drug dealing or illegal gambling.
*A contract that violates antitrust laws, such as to create a monopoly or pricefixing.
*A contract that violates public policy
*A contract that prohibits marriage (a fundamental right) is void.
*A noncompetition contract, where one party agrees not to compete in business with another party, can be void.
*A noncompetition contract will be enforceable if:
*1. It is part of a contract for sale of a business or if it is part of an employment contract, and
*2. The noncompetition contract is not overly restrictive in time, territory, or market.
*A contract requires genuine assent by the parties.
*They must have intended to agree.
*They entered the contract knowingly and voluntary.
*A lack of genuine assent can make the contract voidable.
*“Fraud” is an intentional misrepresentation of a material fact.
*Though there are exceptions, a statement of opinion is not fraud.
*The misrepresented fact must be important as to the contract and its value.
*Fraud is also an intentional tort.
*“Innocent misrepresentation of a material fact” also results in a voidable contract, since one of the parties is still deceived.
*“Duress” is where a contract is entered through force or threat of force.
*One party, the one deceived or forced into the contract, can reject the voidable contract.
*A contract entered due to “mutual mistake of a material fact” can be rejected by either party, as they never truly agreed on anything.
*Statute of Frauds – Some oral contracts must be evidenced by a signed writing to be enforceable in court. in court. *The general rule about oral contracts is that they are enforceable in court. *An exception to that rule is that some contracts are considered so important, complex or valuable that the law states they should be in writing.
*Contracts that must comply with the statute of Frauds:
*A contract for the transfer of an interest in real property. *Property can be real property or personal property.
*Real property is land and that which is in, over or attached to the land.
*Real property includes building and trees attached to the land as well as an easement to use another’s land.
*A lease of real property is not real property. It is personal property.
*Personal property is any property that isn’t real property and includes:
*Tangible personal property, such as furniture, jewelry, cars, food or beverages; and
*Intangible personal property, such as intellectual property or shares of stock in a corporation.
*Other contracts that must comply with the Statute of Frauds.
*A contract that cannot, by its terms, be completed within one year.
*The issue is not how long the contract lasts, but what are the terms of the contract.
*Example: A 3year car loan can be paid off within one year, but it is still a 3year contract.
*A contract for the sale of goods, valued in excess of $500.
*“Goods” are tangible personal property.
*This is a very low dollar amount which may cause a phonedin food or liquor order to be unenforceable. *Partial performance can create an exception to the Statute of Frauds.
*This means that even these oral contracts can be enforced without a writing if the agreement has been partially performed.
been partially performed.
*This exception requires that one or both of the parties has sufficiently performed the contract to prove to a court that there was a contract and prove the terms of that contract. *The Statute of Frauds requires evidence of a signed writing.
*The writing need not be a long, formal contract.
*The signatures don’t need to be original. They can be photocopied, faxed, emailed or electronic signatures.
*The writing must be signed, at least, by the defendant – the one being sued for breach of contract. *A contract that is vague by its own language may need to be interpreted by a court, if someone is suing to enforce it.
*Along with many other rules, an ambiguous contract is generally interpreted in a light least favorable to the party who drafted the contract.
*Clearly written contracts, which include all of the elements of a valid contract, are the best way to stay out of court.
*Contracts formed online, by clicking “I Accept” or otherwise, are generally valid and enforceable.
*A court may restrict the agreement to the terms that were readily accessible to the accepting party.
*Thus terms that were contained in a scrolling box, which did not need to be viewed or which were described in a separate webpage, might not be enforceable. ...
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This note was uploaded on 11/06/2011 for the course LAW 2010 taught by Professor Davidspatt during the Fall '11 term at Johnson & Wales University- Charlotte.
- Fall '11