Chapter 5- Intro to Contracts.docx

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Department
Marketing and Consumer Studies
Course
MCS 3040
Professor
Joseph Radocchia
Semester
Summer

Description
Chapter 5: An Introduction to Contracts Introduction to Contract Law - Contract: an agreement between two parties that is enforceable in a court of law - A contract is a deliberate and complete agreement b/w two or more competent persons, not necessarily in writing, supported by mutual consideration, to do some act voluntarily - A contract is enforceable in a court of law Elements of a contract  - An agreement: is composed of an offer to enter into a contract and an acceptance of that offer. The promises contained in the agreement are known as terms. There has been a “meeting of the minds” – that the parties have agreed on what their essential obligations are to each other - Complete: the agreement must be complete, that is, certain. - Deliberate: the agreement must be deliberate – both parties must want to enter into a contractual relationship. This matter is formally known as an intention to create legal relations. - Voluntary: the agreement must be freely chosen and not involve coercion or other forms of serious unfairness. - Between two or more competent persons: those who enter a contract are known as parties to the contract. There must be at least two parties to a contract, who must have legal capacity. General rule is that only parties to a contract can sue and be sued on it. - Supported by mutual considerations: a contract involves a bargain or exchange b/w the parties. – this means that each party must give something of value in exchange for receiving something of value from the other party. - Not necessarily in writing: general rule is that even oral contracts are enforceable, though it is preferable for negotiators to get the contract in writing. - For the most part, the rules governing contracts are based on common law - The common law refers to judge-made laws, as apposed to laws made by elected governments  this means that a judge resolving a contractual conflict will NOT rely on statute law to guide deliberations, but rather on what other judges have said in the past that resemble the current case - The past cases are known as precedents b/c they contact a legal principle found in a past situation similar to the one being litigated - Contracts are the legal cornerstone of any commercial operation - Contract law is facilitative: it allows participants to create their own rights and duties within a framework of rules that a judge will later enforce, if called upon to do so - Regardless of the context of the contract, every contract is subject to the same set of mandatory legal rules 1 Legal Factors in the Business Context: Creating the Contract Communication - Most contractual relationships begin with communication – through informal contact b/w individuals, or through a general inquiry - Communication is not just about discussing possibilities with the other side - Communication, in the form of contractual negotiations, is automatically laden with legal meaning  it is therefore important for the business person to know when simple business communications turn into legal obligations - First and foremost, contract law concerns itself with what the negotiators say and do, not with what they think or imagine. o Ex: If Anne makes what looks like an offer to purchase tracking, the other side is entitled to accept that offer whether it was intended as one or not - This is because contract law is governed by the objective standards test - Objective Standard Test: the test based on how a “reasonable person” would view the matter o Test asks whether a reasonable person, observing the communication that has occurred b/w the two negotiators, would conclude that an offer and acceptance has occurr
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