What is a contract? What is the objective theory of contracts? What is a contract? What is the...
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• What is a contract? What is the objective What is a contract? What is the objective theory of contracts?theory of contracts?• What are the four basic elements What are the four basic elements
necessary to the formation of a valid necessary to the formation of a valid contract?contract?• What is the difference between an What is the difference between an
implied-in-fact contract and an implied-in-implied-in-fact contract and an implied-in-law contract (quasi contract)? law contract (quasi contract)?
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2
• How does a void contract differ from How does a void contract differ from a voidable contract? What is an a voidable contract? What is an unenforceable contract?unenforceable contract?• What rules guide the courts in What rules guide the courts in
interpreting contracts?interpreting contracts?
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3
• Sources of Contract Law.Sources of Contract Law.–Common Law for all contracts except
sales and leases.–Sale and lease contracts - Uniform
Commercial Code (UCC).• Function of a Contract.Function of a Contract.–Provides stability and predictability for
commerce.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4
• Definition of a Contract. Definition of a Contract. –Promise or set of promises,–For breach of which,–The law provides a remedy, or–The performance of which the law in
some way recognizes as a duty.
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• Objective Theory of Contacts.Objective Theory of Contacts.–Circumstances to determine intent of
parties. –Objective Facts include:• What a party said when entering into the
contract, how the party acted or appeared (intent may be inferred), and circumstances surrounding the transaction.
• Freedom of Contract and Freedom Freedom of Contract and Freedom From Contract.From Contract.
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• Requirements of a Valid Contract.Requirements of a Valid Contract.–Agreement (Offer and Acceptance).–Consideration: bargained-for-
exchange.–Contractual Capacity.–Legality: purpose of contract must be
legal at the time of execution.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7
• Defenses to Enforceability of a Defenses to Enforceability of a Contract:Contract:–Voluntary Consent.–Form: some types of contracts must be
in writing.
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© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9
• Contract Formation.Contract Formation.–Bilateral - Offeree must only promise to
perform (“promise for a promise”).–Unilateral - Offeree can accept the offer
only by completing the contract performance (“a promise for an act”).• Revocation of Offers: Offer for unilateral
contract cannot be revoked once performance has begun.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 10
• FormalFormal versus versus InformalInformal Contracts. Contracts.–Formal: must be in writing to be
enforceable. –Informal: all other contracts.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11
• ExpressExpress: Words (oral or written).: Words (oral or written).• Implied (In Fact)Implied (In Fact): Conduct creates : Conduct creates
and defines the terms of the and defines the terms of the contract. Requirements:contract. Requirements:– PL furnished good or service– PL expected to be paid– DEF had chance to reject and did not.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12
• Contract Performance.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.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13
• Contract Enforceability.Contract Enforceability.–Valid: agreement, consideration,
contractual capacity, and legality.–Void: no contract.–Voidable (unenforceable).–Valid contract can be avoided or
rescinded based on certain legal defenses.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15
• Quasi Contracts are implied Quasi Contracts are implied in law.in law. –Equitable remedy created by courts,
and imposed on parties in the interest of fairness and justice.–Quantum Meruit.–CASE 9.1 Scheerer v. Fisher Scheerer v. Fisher (2010).
What are the elements of quantum meruit?
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 16
• Limitations on Quasi-Contractual Limitations on Quasi-Contractual Remedy: Remedy: enriched party is not held enriched party is not held liable in certain situations dealing with liable in certain situations dealing with benefit is conferred unnecessarily, benefit is conferred unnecessarily, negligently or by misconduct.negligently or by misconduct.• When an Actual Contract Exists: When an Actual Contract Exists:
ordinarily no quasi-contract.ordinarily no quasi-contract.
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• ““Plain Meaning” Rule: courts will Plain Meaning” Rule: courts will enforce contracts whose meanings enforce contracts whose meanings are clear from the face of the are clear from the face of the instrument.instrument.• If terms are clear an unambiguous, If terms are clear an unambiguous,
court will not admit “extrinsic” court will not admit “extrinsic” (external) testimony or evidence. (external) testimony or evidence.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 18
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19
• ““Plain Meaning” Rule (cont’d).Plain Meaning” Rule (cont’d).–However, if terms are ambiguous,
court may admit “extrinsic” (external) evidence.–CASE 9.2 Wagner v. Columbia Pictures Wagner v. Columbia Pictures
Industries, Inc.Industries, Inc. (2004). Should the court have admitted the extrinsic evidence?
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 20
• Other Rules of Interpretation.Other Rules of Interpretation.–Contracts are interpreted as a whole.–Terms that are negotiated separately
given greater weight.–Words given ordinary, common
meaning.–Specific wording given greater weight
than general language.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21
• Other Rules of Interpretation Other Rules of Interpretation (cont’d).(cont’d).–Written or typewritten given greater
weight than preprinted.–Ambiguous terms interpreted against
the drafter.
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• Other Rules of Interpretation Other Rules of Interpretation (cont’d).(cont’d).–Trade usage, prior dealing, course of
performance to allowed to clarify.–CASE 10.3 U.S. Bank, N.A. v. U.S. Bank, N.A. v.
Tennessee Farmers Mutual Insurance Tennessee Farmers Mutual Insurance Company Company (2009). What does “increase of hazard” mean?
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