CHAPTER 9 & 10 FINAL.docx

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MGMT 644

CHAPTERS 9 and10 Contracts Part One Chapter 9 - Contracts: - Contracts provide means for individuals & businesses to sell & otherwise transfer property, services, & other rights. Parties voluntarily enter into contracts. - “Contract between parties is the law between them & the courts are obliged to give legal effect to such contracts according to the true interests of the parties.” - Most contracts are performed without the aid of a court system because the parties feel a moral duty to perform as promised.  Terms of contract = become Private Law between parties. Restatement of K’s - Definition – Promises that courts can enforce contract when breached, and that courts recognize duty. Parties to a K - Offeror - makes an offer to enter into contract - Offeree - offer is made to them; rejects or accepts contract Sources of Contract Law: basically common law. Each state might have different laws. Some states have status to deal with certain types of contracts. Objective Theory of Contracts: Uses a reasonable person standard; would a reasonable person have believed that the two parties reached a contract. E-contracts: This is contract law that handles issues involving e-commerce, e-contracts, and e-licenses. These contracts can be formed through the use of e-mail. (The sale and lease of goods, the sale of services, and the licensing of software over the internet) Classification of K’s - Bilateral K’s: contract entered into by way of exchange of promises: a promise for a promise. Most contracts are this. No act of performance is necessary to create a bilateral contract. - Unilateral K’s: offeror’s offer says do something, offeree accepts the offer by performance of the act. There is no contract until offeree performs the requested act. “Promise for an act”. Ex: finding a cat for a $1000 reward; no promise involved. Can be revoked before contract is completed. - Substantial Performance: if offeree has already both accepted & started the offer and if you have already started performing then the offeror can’t withdrawal the offer. You can’t say no after certain period of time. Formal and Informal Contracts Formal contracts require a special form or method of creation. They require specific words. Most common types are: negotiable instruments (check: pay to order of), letters of credit (back guarantees the payment of buyer who purchases goods on credit if buyer does not pay for the goods), a recognizance (someone agrees to pay a sum of money if another person does not pay it (bail bond), contracts under seal (wax seal placed on contract). Informal contracts are not formal contracts. Valid informal contracts are fully enforceable & may be sued upon if breached. Types of K’s Valid: most contracts; meets all essential elements to establish a contract; a contract that is enforceable by at least one of the parties. Contract must: (1) Consist of an agreement between parties (2) Be supported by legally sufficient consideration (3) Be between parties w/contractual capacity (4) Accomplish a lawful object Void: as if there was no contract at all; usually illegal contracts. Ex: contract to commit a crime is void. If contract is void neither party can is obligated to perform contract or can enforce it. Voidable: one of the parties can get out of the contract.  If the contract is avoided, both parties are released from their obligations under contract. If the party with the option chooses to ratify the contract, both parties must fully perform their obligations.  Minority people, kids, insane persons, intoxicated persons, persons acting under duress, undue influence, or fraud; and in cases involving mutual mistake can get out of the contract if he wants to but adult can’t get out of it. Unenforceable K’s: There is some legal defense to the enforcement of the contract. If a contract is required to be in writing under the Statue of Frauds but is not, the contract is unenforceable. Parties may voluntarily perform a contract that is unenforceable. Look at book example! Executed v. Executory K’s  Executed contracts are fully executed on both sides; this is a completed contract and nothing else needs to be done. Example: Elizabeth has fully paid for the car and ace motors has delivered it; contract is complete.  Executory contracts are contracts that have not been fully performed by either or both sides. Example: Elizabeth signs a contract to purchase a car from ace motors. She has not yet paid for car & ace motors has not yet delivered car to her. This is an executor contract because neither party has performed duties owed under contract. Most contracts are executor at once until solution occurs. Express and Implied K’s - Express K’s -either in writing or oral; actual agreement between 2 parts is expressed. Most contracts are this. - Implied in fact K’s – implied from conduct of the parties: following elements must be established to create an implied in-fact contract: (1) Plaintiff provided property or services to defendant. (2) Plaintiff expected to be paid by defendant for property or services & did not provide the property or services gratuitously. (3) De
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