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Contract Law.docx

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Western University
Philosophy 2080
James Hildebrand

Contract Law • Contract = agreement that is legally enforceable o Most contracts are verbal – simple contracts • If there is an intended legal consequence of your agreement, implied or expressed, verbal or written – then the agreement is potentially a contract • Private law but parties to contract create their own legal rights & obligations • In tort law – court imposes rights and obligations after the fact • Legal issues are mostly about o Whether court will give effect to what parties have agreed to (have they successfully contracted) & whether the parties have done what they promised to do o Determining what the parties intended when they made their agreement – parties sometimes disagree with the precise meaning of the agreements they have made Terminology • Elements of a contract o Must be present to successfully form a contract • Intention to create legal relations o Not every agreement is a contract o Ex. If I promise to meet you for lunch & don’t - parties would not intend a legal consequence o Question of fact to be determined by the court, including relationships between the parties • Offer/Acceptance o In a contract, a party has to make an “offer”, and that offer has to be accepted o Party that makes the offer is called an offeror, & party who accepts is the offeree • Consideration o Thing of value that generally must be exchanged in a contract o You make a purchase, you give money for something/service in return  Both the money and the thing you received in return are consideration o Exchange of items of value is a reciprocal event • Consensus Ad Idem/Meeting of the Minds o Parties all have to know they are agreeing to something and what exactly they are agreeing to o Sometimes this will be a problem to sort out particular obligations courts will give effect to & sometimes a lack of a meeting of the minds will defeat the contract in its entirety • Capacity o A party must have legal capacity to contract o Ex.  Sometimes a person lacks capacity because they are too young  A person who is mentally infirm would lack capacity  Person who is bankrupt lacks capacity at law to deal with property once it has been transferred to trustee in bankruptcy • Legality o Subject matter of the contract and the nature of the contract must be legal o So you don’t see the courts helping drug dealers enforce their debts o Contracts restricting a party’s right to marry will be illegal • Specific Performance o Contractual remedy o While most times people are suing for monetary damages, occasionally they want to sue to compel other party to do what they promised o Only available when the plaintiff can prove monetary damages won’t be enough o Sometimes obtained in contracts for interests in land, because land is considered to be unique o Almost never granted in contracts for personal service: the court doesn’t like to force people to work together whose relationship is poor enough to be the subject of a law suit • Promisee o A person to whom a promise is made o Nothing to do with offeror or offeree o When one party sues another for breach of contract, the other party may say that the promise he made was a gratuitous promise, one unsupported by consideration o Person suing party in breach is alleging that defendant/promisor, did not do what he promised o Person doing the suing, or trying to enforce promise of other o Must prove that consideration moves from promisee to promisor, based on the promise • Simple Contract v. Formal Contract o Simple contracts need not be in writing – verbal o Formal contracts must be in writing • Terms: Warranties & Conditions o Terms of a contract are the respective rights & obligations agreed to by the parties o Warranty  Minor term of contract  Breach of which entitles innocent party to seek monetary payment or ddamages for the breach o Condition  More important term of contract  Breach of which entitles the innocent party to treat the contract as at an end (rescission) & seek to be returned to its original position • Breach of contract o Like it says, a party “breaches” or breaks its promises under the contract Contract as Promise: A Theory of Contractual Obligation • Contract embodies the liberal ideals of parties exercising their own free will • Contract is made possible because the institution of promise-keeping is invoked • Parties make up their own rights & obligations – state does not step in to judge bargains made • Critics say contract is just as state-imposed as tort law – any action for a breach of contract is just a tort case dressed up as a business transaction • Contract is the expression of the liberal ideal • Individual creating own rights & obligations freely • Giving up some of his or her rights as seems best to them • Respect for individuals freedom • Moral basis of contract is: promise • Criticisms o Invoke the authority of the state to enforce it o Contract law suit is just a claim for damages for a tort, and the only reason we call it contract is because we are dealing with a business transaction • 2 main criticisms: contract cases are decided as damages cases under the headings: benefit or reliance o Benefit: one party benefits at another expense, fairness requires to return the favor o Reliance: rely on someone to your disadvantage, fairness requires compensation • Promise requires only the enforcement of a promise (or monetary equivalent to performance) • Reliance requires a compensation of damages justification and reasoning • Contract sees individuals are the focus, tort law is the community judgment on an activity, the communal righting of a wrong • Contort o Proposition that contract law/enforcement is just another form of compensation for damages for breaking an agreement o Drop the fantasy that the parties created their own rights and obligations Contract as Promise: • Kant’s categorical imperative: o Use things as an end, but not people as an end, recognize dignity and autonomy of persons o Contract is a way we give up our autonomy to the ends of others and they to us, an act of will o Need to invoke “trust” to do this, use morality, morality gives trust its strength o Lies are immediate but promise is something in the future: so is contract o If we didn’t trust person to do what they promised - couldn’t enter into contracts with confidence o Intended to keep the promise but then changed my mind later on  Bought land told you I was building a house  Then sold it 1 month later to a gas station company  If I was negotiating to sell lot for a gas station at the time of my statement to you = wrong  If I wasn’t and I sold it later = no wrong – just changed my mind o My gain at your expense is not a wrong in itself  broken promise makes it a wrong o Just not doing my stated intention does not quite explain our legal problem o Have duty just because you could foresee (it was my intention) that you would rely on my promise and you would suffer harm if I broke it  only this wrong that allows you to get compensation of the harm caused by misplaced reliance o Not only foresee reliance but we invite it, we invoke trust, invite the benefit reliance o Bind our commitment to a future act o Still a missing element  Can’t say promise is binding because we are going to rely on it  still looking for why we can trust the statement and justify penalty for effects o Have to start with the assumption that promises have force generally  Can’t lie unless you know the language and convention that content will be truthful or false  Invoke game theory and rules here - see contract in the same way o Counting on mutual promises makes our activities (business ones) possible o Often not in pure self interest (as in profit interest) to perform promise at later date, but still obey promise: so individual self interest doesn’t explain promise and contract o Binds us into future, contract/transaction is not possible without being able to count on future performance o Future performance translated into present exchange Moral Obligation of Promise • Institution of promising: promise is not morally binding because its relied o
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