Promise Vs Contract
Promise: An assertion that something will or will not happen in the future.
Contract: An agreement that can be enforced in court; formed by two or more competent parties who agree, for consideration, to perform or refrain from performing some legal act now or in the future.
In contract law, intent is determined by the objective theory of contracts, in which a party's intention to enter a contract is determined by objective fact interpreted by a rational person.
Requirements for a valid contract
1. Agreement: An agreement to form a contract involves an offer and an acceptance.
2. Consideration: Any promises made by parties must be supported legally for consideration.
3. Contractual capacity: Both parties must have the capacity to enter into it.
4. Legality: The contracts goal has to be legal.
Offer
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 intent
Intent within an offer:
- Price quote is not an offer, advertising is not an offer, placing an item up for auction is not an offer.
- Intent derived from a reasonable person.
- The terms of the offer must be definite
Termination of an Offer
• Termination by revocation: In contract law, the withdrawal of an offer by an offeror; unless the offer is irrevocable, it can be revoked at any time prior to acceptance without liability.
• Termination by rejection: If an offeree rejects the offer, the rejection immediately terminates the offer. A counter offers is a rejection; it terminates the offer
• Termination by expiration: When an offer specifies a time limit for acceptance, if no time is specified there is a reasonable time period to accept.
• Termination by operation of law: Qualifies if there is a lapse of time, destruction of the subject matter, death or incompetence of a party, legality issues.
Bilateral v. Unilateral Contracts
Bilateral contract: A promise for a promise. Must be accepted by making a promise.
• Two promises
• Promise for a promise
• Most contracts are bilateral
Unilateral contract: A promise for an act. Must accept by performing an act.
• Only one promise
• Once performance has been preformed the other obligator must fulfill his promise.
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.
Consideration
Generally the value given in return for a promise. The consideration must be something of legally sufficient value, and their must be a bargained for exchange. Can be anything someone might want to bargain for.
Express v. Implied-in-Fact Contracts
Express Contracts:
• Direct statements by the parties of the promises made.
• May be oral or written
• All important terms are expressly stated between the parties
Implied-in-fact contracts
• Actions and circumstances infer and define the terms of the contract
• May be words, conduct or gestures
• Implied at law
Elements of an offer:
1. A serious objective intent to become bound by the offer.
(Intent to be bound)
2. Reasonably certain or definite terms so that the parties can ascertain the terms of the contract. (Certain of terms)
3. Communication of the offer to the offeree, resulting in the offeree's knowledge about the offer. (Communication of offer)
Contract enforceability
Valid contract: A contract in which all legal elements of a contract are present. Enforceable at law.
Unenforceable contract: Cannot be enforced because of subsequent legality.
Voidable contract: Is legally valid, but may be rejected by one of the parties without incurring legal liability
Void contract: Contract in whose subject matter is illegal.
Contractual Capacity
• The capacity is the legal ability to enter a contract
• A voidable contract may be canceled by the party to the contract who lacks capacity.
• In some cases, lack of capacity creates a void contract.
Minors in Contracts
Disaffirmance: A minor generally may disaffirm a contract, that is, he may notify the other party he refuses to be bound by the agreement. The minor also has the option of filing a suit to rescind the contract, that is, to have a court formally cancel it.
Restitution: A minor who disaffirms a contract must return the consideration he has receive to the extent he is able.
Intoxication in Contracts
A person with mental illness or defect, who is unable to understand the nature and consequences of a transaction.
When an intoxicated person makes a contract it is voidable.
Restitution: A mentally infirm party who seeks to void a contract must make restitution.
Undue Influence/Duress
An unconscionable contract is one that a court refuses to enforce because of fundamental unfairness. Two factors decide unconscionability:
(1) Oppression: Meaning that one party used its superior power to force a contract on the weaker party
(2) Surprise: Meaning that the weaker party did not fully understand the consequences of its agreement
Mutual (bilateral) mistake
Occurs when both parties negotiate based on the same factual error. If the contract is based upon an important factual error the injured party may void the contract.
Ex: Sherwood v. Walker (1887)
Unilateral mistake
Sometimes only one party enters a contract under a mistaken assumption, a situation called unilateral mistake. In order to rescind a unilateral mistake a party must demonstrate: (1) enforcing the contract would be unconscionable or (2) the non mistaken party knew of the error.
Fraud/Misrepresentation
-Innocent Misrepresentation: Means the owner believes the statement to be true and has a good reason for that belief
-Fraudulent misrepresentation: Means the owner knows that the statement is false.
The Statue of Frauds
Contracts that must be in writing to be legally enforceable: EX: Any interest in land, cannot be preformed within a year, to pay the debt of another, to use his or her money to pay debts, made in consideration of marriage (prenupt), or for sale of goods over $500.