Chapter 6 Formation of Contracts.docx

6 Pages
Unlock Document

Management and Organizational Studies
Management and Organizational Studies 2275A/B
Susan Mc Grath

Chapter 6 Formation of Contracts Terminology: Bilateral contract: a contract in which there is an exchange of promises: both parties assume an obligation Contract: a voluntary exchange of promises creating obligations which, if defaulted on, can be enforced and remedied in the courts Consensus: factor in validity of a contract: both parties must objectively know and agree to its term Consideration: the price one is willing to pay for the promise set out in the offer Capacity: the freedom to enter into a contract, which is sometimes limited by law, as is the case, for example, with minors, the insane, the intoxicated, aliens, bankrupts, and Indians. Counteroffer: a new offer, proposal of which rejects and terminates the offer available until then Express contract: contract in which the parties have expressly stated their agreement, either verbally or in writing Gratuitous promise: a one-sided agreement that the courts will not enforce Illegal contract: one that is void because it involves the performance of an unlawful act Intention: desire or aim; parties must objectively intend an agreement to be legally binding; must intend to assume the obligations of the agreement Implied contract: one that is void because it involves the performance of an unlawful act Interim agreement: binding contract that will subsequently be put into a more formal document Invitations to treat: invitation to engage in the bargaining process Insanity: when a person cannot understand the nature or consequences of his acts Legality: one of the elements of a valid contract; the object and consideration of the contract must be legal and not against public policy Offer: a tentative promise to do something if another party consents to do what the first party requests Parol contracts: a simple contract that may be verbal or written but is not under seal Postbox rule: principle that mailed acceptance is effective when and where it is dropped into a mailbox Promissory estoppel: principle that when a gratuitous promise to do something in the future causes a person to incur an expense, the promisor may be held liable for those expenses if she fails to live up to the promise’ also known as equitable estoppel Quasi-contracts: contractual relationship involving a request for goods and services where there is no agreement on price before the serviced is performed; courts impose obligation to pay a reasonable price; also known as quantum meruit Quantum meruit: “as much as is deserved”; reasonable price paid for requested services; sometimes called a quasi-contract Revocation: withdrawal of an offer before acceptance (must be communicated to the offeree) Standard form contracts: contract with fixed terms prepared by a business Subject-to clauses: term making a contract conditional on future events Unenforceable contract: an otherwise binding contract that the courts will not enforce, such as a contract that does not satisfy the Statue of Frauds Unilateral contract: a contract formed when one party performs what has been requested by the other party; there is a promise followed by an act, but not an exchange of promises Valid contract: an agreement legally binding on both parties Void contract: an agreement that is not legally binding because an essential ingredient is missing Voidable contract: an agreement that has legal effect but that one of the parties has the option to end Summary Contracts - A contract is an exchange of promises enforceable in court - There are five essential elements of a contract: consensus, consideration, capacity, legality and intention Consensus - A contract requires a “meeting of the minds” - Offer- a tentative promise by the offeror contingent upon an acceptance by the offeree o All the essential terms of the contract must be contained in the offer o Non-essential terms will be implied by the courts o Invitations to treat are not offers o Offers must be communicated o The offer will end at a specified time, but it may be revoked earlier by notice to the offeree, unless an option agreement has been entered into o In the absence of a specified time limit, the offer will lapse after a reasonable time o A counteroffer, rejection, or the death or insanity of the offeror will also cause an offer to lapse - Acceptance- an indication of a willingness to be bound o Acceptance must be complete and unconditional o Acceptance must be communicated; effective when and where received o Postbox rule- an acceptance by mail (where reasonable) is effective when and where it is dropped in the mailbox Consideration - Consideration is the price paid for another party’s promise - Both parties must have experienced some benefit - Gratuitous promises are not enforceable - Consideration need not be fair - Consideration must be both specific and legal - Past consideration is no consideration - Agreement to accept less in full satisfaction of a debt may now be binding - Quantum meruit- when there is a request for services with no agreement as to the amount, a reasonable price must be paid - Promissory estoppel- a one-sided promise is generally not enforceable, but the promise may be used as a defence - When there is a seal, consideration is not necessary
More Less

Related notes for Management and Organizational Studies 2275A/B

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.