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Administrative Studies
ADMS 2610
Robert Levine

ADMS2610 Session 2 Chapter 7 (pg. 120-135) Law of Contract Contract - Is an agreement made between two or more persons that is enforceable at law - Freedom of contract, the general ability of the parties to create specific rights and duties that the courts will enforce o Create own laws that they are obliged to follow Historical Development of the Law of Contract - Is essentially an area of law relating to business transactions - Merchant Law o Decline of the feudal system - Ecclesiastic Law o Disputes arising out of informal contracts or agreements of a breach of a solemn promise - Manor Courts o Handled minor cases (breach of contract) th Damages were sometimes awarded for breach of the promise - 17 century development of the bargain theory of contract o Each party to the agreement derived some benefit from the agreement in return for a promise to do or give something in return  Formed the basis of contract law Elements of a Valid Contract - Requirements must be met for a contract to be enforceable by the courts - (1) An intention to create a legal relationship - (2) Offer: Offeror: Party who offers something for sale (person A) o Offeree: Party who takes the offer (person B) o Counter offer: when A offers another amount in response to B’s offer, ending the initial offer. o Revocation: offeror has the right to withdraw his offer, he can stop selling anytime BEFORE offeree accepts the deal. o Irrevocable: (this is a condition, if it exists then) offer could not be revoked or withdrawn before the time period. If this doesn’t exist then A can’t revoke before the period ends. o Lapse 1 and 2 : death of A or B before the transaction begins but after the deal has been promised, then either of them will not be held liable to take the offer o Lapse 3: for perishable goods (short life goods), the reasonable amount of time should be there for the deal to be accepted, before the good gets worse. o Condition Precedent: a certain condition (that seems like almost contract) has to be crystal clear. - (3) Acceptance (example: payment must be made with check, then it must be made with check, if no methods is specified then it can be any way) - (4) Consideration (payment for a lesser sum in satisfaction of a greater sum is no payment at all, there has to be a fresh consideration) - (5) Capacity to contract - (6) Legality - Certain types of contracts must be in writing - Needs these six elements in order to be valid and binding - Must be free from any form of mistake or misrepresentation or undue influence or duress - Intention to be bound (the assumption at law that strangers intend to be bound by their promises) Intention to Create a Legal Relationship - Concept of a contract is based on the meeting of two parties minds on the terms and conditions that will form their agreement with each other o Each will agree to do or not to do certain things in return for the promise of the other to do something - Essential element is a promise o Consensus ad idem (agreement as to the subject or object of the contract) o Parties must be of one mind and their promises must relate to that subject or object o Promise begins this process - First requirement for a valid contract must be the intention on the part of the promisor to be bound by the promise made o This intention to create a legal relationship is an essential element of a valid contract - Intention to create a legal relationship is a presumption at law o Creation of the intention would be difficult to prove o This presumes that the party intended to be bound by the promise shifts the burden to prove otherwise, if the intention did not exist o If intention is denied, courts will use the conduct of the party at the time that the statements were made as a test and asses such conduct and statements from the point of view of the “reasonable person” - Presumptions in Contract Law o Strangers intend to be bound by their promises o Family members and close friends do not intend to be bound in contracts o Both are presumptions that can be rebutted - Invitation to do Business o Advertisements are not offers o Invite offers that seller may accept or reject  Example: displays of goods in a self-serve shop was not an offer to sell the goods to the patron of the shop but a invitation to the public to examine the goods and if the patron desired, to offer to purchase the goods Offer - Nature of an Offer o The tentative promise made subject to a condition is not binding on the offering party (promsior or offeror) until the proposal is accepted o It is only valid when acceptance takes place that the parties may be bound by the agreement o Offer is the second element of a valid contract - Communication of an Offer o Offer (a tentative promise subject to a condition) o An offer must be communicated to the other party to be accepted o Cannot accept an offer you do not know of o Crossed offers – in the mail do not constitute a contract o Only person to whom offer is made may accept it o If acceptance takes place before the offer is made, the offeror is not bound by the promise (only true in cases of offers of reward)  Example: Jones lost a washer and put an advertisement in the newspaper offering $1000 reward for any information leading to the return of the cat. Later in the week, Smith finds an abandon washer on his farm property with a name and telephone number painted on the washer. Smith calls Jones about how it got there. Jones recovers the washer and says
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