BUSINESS LAW
C H A P T E R 8 I N T R O D U C T I O N T O C O N T RAC T L AW
CONTRACT LAW
• A promise is a declaration by a
person (the promisor) to do or not to
do a certain act
• The person to whom the promise is
made (the promisee) has a right to
expect or demand that something either
will or will not happen in the future
DEFINITION OF A CONTRACT
• A contract (“K”) is a promise or a set of
promises for the breach of which the law
gives a remedy, or the performance of
which the law in some way recognizes as a
duty.
• Remedies: damages for failing to perform the
contractual promise or the party may be
required to perform the promised act (specific
performance)
SOURCES OF CONTRACT LAW
• Common law governs all contracts except
sales and leases.
• Common law governs contracts relating to
services (plumbing, drafting documents, driving
a car), real estate, employment, and insurance
• Sale and lease contracts are governed by the
Uniform Commercial Code (UCC).
OBJECTIVE THEORY OF CONTRACTS
• Objective Theory of Contracts: The
circumstances that determine the intent of
the parties to enter the contract
• judged by outward, objective facts including:
• What a party said when entering into the contract.
• How the party acted or appeared.
• The circumstances surrounding the transaction.
ELEMENTS OF A CONTRACT
• Requirements of a Valid Contract:
• (1) Offer and (2) Acceptance.
• (3) Consideration (Legally sufficient and
bargained-for detriment).
TYPES OF CONTRACTS - EXPLICITNESS
• Express: one in which the terms are spelled out
directly –parties are conscious that they are
making an enforceable agreement)
• Example: an agreement to purchase your neighbor’s car
for $5,500 and to take title next Monday
• Implied (in fact): one that is inferred from the
actions of the parties – parties have not
discussed terms but it is clear from the conduct
of both parties that they intended there be one
• Example: A deli patron who asks for a turkey sandwich
to go has made a contract and is obligated to pay when
the sandwich is made. By ordering the food, the patron
is implicitly agreeing to the price, whether posted or not.
TYPES OF CONTRACTS - EXPLICITNESS
• Quasi contracts (or contracts implied
in law) are fictional contracts that the
courts impose on the parties “as if” the
parties had entered into an actual
contract.
• Quasi contracts are imposed in the interest of
fairness and justice.
TYPES OF CONTRACTS -MUTUALITY
• Bilateral versus Unilateral Contracts:
• Bilateral: (“promise for a promise”)
offeree can accept by promising to
perform
• Ex: I offer to buy your iphone for $200 when I get paid
tomorrow, and you accept the offer and promise to give
me the iphone when I pay you tomorrow
TYPES OF CONTRACTS - MUTUALITY
• Unilateral: Offeree can accept the offer only by
completing the contract performance (“a
promise for an act”).
• Ex: If you drive my car from California to Florida, I’ll
give you $1,000
• Contests, lotteries and prizes
TYPES OF CONTRACTS -
ENFORCEABILITY
• Valid: A contract that has offer,
acceptance, and consideration and entitles
at least one of the parties to enforce it in
court.
• Valid contracts may be enforceable, voidable, or
unenforceable.
TYPES OF CONTRACTS -
ENFORCEABILITY
• Voidable: A valid contract that can be
legally avoided, canceled, or annulled by
one of the parties.
• Can also be ratified (made valid)
• Unenforceable: An otherwise valid
contract that is rendered unenforceable by
some statute or defense.
• Ex: Duress
• Void: A contract with no legal or binding
effect.
TYPES OF CONTRACTS - COMPLETION
• Executed: A contract that has been fully
performed by both (or all parties).
• Executory: A contract that has not been
fully performed by one or more parties.
CONTRACTS - PARTIES
• Every contract involves at least two
parties:
• The offeror is the party making the offer
• The offeree is the party to whom the offer is
made