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Week 4, LGS notes

by: Grant Logsdon

Week 4, LGS notes LGS 200

Grant Logsdon
GPA 3.74

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About this Document

This includes the second half of ch 9 and all of chapter 10
Legal Environment of Business
Charlye S. Adams
Class Notes
LGS, LGS 200
25 ?




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This 4 page Class Notes was uploaded by Grant Logsdon on Sunday February 21, 2016. The Class Notes belongs to LGS 200 at University of Alabama - Tuscaloosa taught by Charlye S. Adams in Winter 2016. Since its upload, it has received 14 views. For similar materials see Legal Environment of Business in Law and Legal Studies at University of Alabama - Tuscaloosa.


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Date Created: 02/21/16
Ch 9 Formation of Contracts  2/11/16  Sources of Contract law  ● Common law contracts­ real estate, service  ● Sale and lease contracts­ UCC  Definition of Contract  ● promise or set of promises, for the breach of which the law provides a remedy or the  performance of which the law in some way recognizes as a duty  ● If a party breaches the contract they will be penalized  Objective Theory of Contracts  ● Objective theory of contracts­ circumstances to determine intent of parties, would a  reasonable person intend to follow what is said in the contract  ● Facts include what the party said going into the contract, how the party acted or  appeared, circumstances surrounding the transaction  ● Pan Handle Realty, LLC v. Olins(2013)  Types of Contracts  ● Bilateral­ Offeree must only promise to perform (“promise for a promise”)   ● Unilateral­ Offeree can accept the offer only by completing the contract performance  (“promise for an act”revocation​offer cannot be revoked once the substantial  performance has begun ex: telling someone you will pay them $100 if they drive you to  the airport and paying them once the act is done  Formal vs. Informal Contracts  ● Formal­ must be in writing to be enforceable  ● Informal­ all other contracts  Express vs. Implied Contracts  ● express­ words (oral or written)  ● Implied­ conduct creates and defines the terms of the contrequirements­​  pl.  furnished good or service, pl. expected to be paid, and def. had a chance to reject and  did not  Contract Performance  ● Executed­ A contract that has been fully performed on both sides  ● Executory­ A contract that has not been fully performed on either side  Contact Enforceability  ● Valid­ agreement, consideration, contractual capacity, and legality  ● Void­ no contract  ● Voidable­  ● Unenforceable­              To Have a Valid Contract  Agreement  ● offer and acceptance  ● parties must show mutual assent to terms of the contract  ● once the agreement is reached a valid contract is formed  ● To have an agreement there must be:  ○ Intention­ contract is judged by what a reasonable person in the offeree's position  would conclude about the offer; reasonable person standard  ■ Intent may be lacking in expressions of opinion, statements of the future,  invitations to negotiate  ○ Definiteness of Terms­ identification of the parties, object or subject matter of the  contract, a court can supply missing terms if the parties intend to form a contract  ○ Communication­ offerees knowledge of the offer directly by the offeror or use of  Agents  ● An offer can be terminates prior to acceptance by:  ○ Action of the parties  ○ By law  ● Irrevocable offers­ courts are generally unwilling to allow revocation when the offeree  has changed position based on justifiable reliance on the offer  ● Termination  ○ Rejection  ○ Counter offer­ original contract is thrown out and a new one is made  ○ Lapse of time­some contracts are available only until a certain time or date  ○ Destruction of subject matter  ○ Death or incompetence of the Offeree or Offeror­ automatically terminates unless  it is an irrevocable offer  ○ Supervening illegality of the proposed contract­ legislation or court decision  automatically terminates offer or renders contract unenforceable  ● Acceptance  ○ Unequivocal Acceptance­ “mirror image” rule  ○ Silence As Acceptance­ offeree has a duty to speak, if they do not reject services  than silence results in an agreement  ○ Communication of Acceptance­  ○ bilateral contractcommunication of acceptance is necessary because of  mutual exchange of promises.Unilateral Contract:acceptance is evident and  communication is not necessary  ○ Mode and Timeless: in bilateral contracts acceptance is timely if made before  offer is terminatemailbox rule: acceptance is effective when offeree uses  authorization ,means of acceptance; if Offeror says send a letter to accept an  offer then as soon as the oferee puts the letter in the mail then they accept and  offer an not be revoked  ○ Online Offers­sellers website should include hyperlink to page with full contract  ○ E­Signatures: electronic sound, symbol, or process attached to or logically  associated with a record and executed or adopted by a person with the intent to  sign the record  ● Consideration  ○ “Legally Sufficient Value”­ promise, performance, forbearance  ○ a “Bargained­for­exchange”­ Must provide basis for the bargain, Something of  legal value (a promise, or a performance) must be exchanged between the  parties  ○ Agreements that lack consideration  ■ Preexisting Duty: Exceptions.   ■ Unforeseen Difficulties.   ■ Recession and New Contract  ■ Past Consideration: no consideration because the bargained­for  exchange element is missing  ● Capacity­legal ability to enter into a contract  ○ Minors­ Generally, at 18 years, a person is emancipated, and has the legal  capacity to enter into any contract that an adult can; however, a contract entered  into by a minor is voidable at the option of that minor, and can be disaffirmed  ○ Intoxication­ lack of capacity at the time the contract is being made. Contract is  either voidable or valid, depending on circumstances  ○ Mental Incompetence­ ​oid if a person has been adjudged mentally incompetent  by a court of law and a guardian has been appoin​oidable if the person  does not know he or she is entering into the contract or lacks the mental capacity  to comprehend its nature, purpose, and consequencvalid when person is able  to understand the nature and effect of entering into a contract but may lack  capacity to engage in other activities (known as “lucid” intervals)  ● Legality  ○ To be enforceable it must be formed for a legal purpose  ○ A specific clause in a contract can be illegal, but the rest of a contract can be  enforceable  ○ A contract to commit a tortious act is illegal  ○ Contracts contrary to public policy are generally void  Statute of Frauds  ● To be enforceable the following types of contracts must be signed in writing  ○ contracts involving interest in land  ○ contracts involving “one­year­rule”­­­know for test  ○ collateral or secondary contracts  ○ promise made in consideration of marriage  Third Party Rights  ● Assignment: Landlord­­Tenant­­3rd Party  ● Sublease  ● Intended beneficiary  ● Incidental Beneficiary  ●   Ch 10: Contract Performance, Breach, and Remedies  2/18/16  Voluntary Consent  ● Mistakes  ○ Unilateral mistakewhen you say you want to sell your car for $25,000 but  accidently write $2,500 you cannot back out unless: the other party knows or  should have known it was a mistake, or if mistake was due to an inadvertent  mathematical and without gross negligence.  ○ Bilateral mistake when parties to a contract are mistaken as to the same  material fact; general rule: contract may be rescinded by either party  ○ Mistake of value­when a party later finds out that an object is of more value  than originally known then the original owner can not take it back  ○ Fraudulent Misrepresentation­ v​oidable by innocent party  ■ Misrepresentation of material fact  ■ intent to deceive  ■ reliance on misrepresentation  ■ injury to the innocent party  ○ Undue Influence­ ​ccurs when a party takes specific action to conceal a fact  that is material to the contract.  ○ Duress­ party who enters into a contract under fear or threat makes a contract  voidable, threatened act must be wrongful or illegal and render person incapable  of exercising free will  Performance and Discharge  ● Conditions of performance­ A possible future event, the occurrence or nonoccurrence of  which will trigger the performance of a legal obligation or terminate an existing obligation  under a contract  ● Conditions Precedent­ condition must be fulfilled before a party’s performance can be  required, requires absolute duty to perform  ● Discharge­ Both parties have a duty to fulfill their respective obligations by performing  the acts each party has promised  ●  Substantial Performance­ Enforcement of Contract: Party in good faith performs  substantially all of the terms Performance must not vary greatly from what was promised.  Performance must create substantially the same benefits, Measure of damages is cost  to bring object of contract into compliance. There is no exact formula.  ● Performance to the satisfaction of another­ most contracts will be analyzed under the  reasonable person standard; when contract requires personal satisfaction of another as  a condition, person to be satisfied must act honestly   


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