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Elements of a Contract

Capacity

Legality

  • Legal ability to enter a contract
  • Minors
  • Mentally Incapacitated
  • Intoxicated

  • Person serving a prison sentence lacks capacity

Offer

By: Jenny Phan

Business Law Honors

2nd Period

  • Proposal by one party to another with intent to create a logical binding agreement
  • Offeror- makes the offer
  • Offeree- the offer made to this person

Termination of an Offer

  • Revocation- taking back an offer by offeror
  • Rejection- refusal by the offeree
  • Counteroffer- any change in the terms of the offer
  • Death- offeror dies
  • Insanity- offeror is declared insane
  • Expiration of time- if the offer is put on a time limit and the offer has passed
  • Destruction of Subject Matter and Firm Offers
  • Option- the offeree gives the offeror something of value in return for a promise to keep the offer open for a set period of time
  • Firm Offer- written offer for goods that states the period of time during which the offer will stay open
  • No additional consideration is required
  • Maximum period of time is set by the UCC- 3 months
  • Offeror must be a merchant who deals in related goods of a daily
  • Illegal Contracts
  • Civil criminal
  • Agreements to commit a crime/tort are legal
  • Usury
  • State sets a max interest rate
  • Interest- fee the borrower pays to the lender for using money
  • Charging too high of an interest rate
  • Gambling
  • Legal gambling varies from state to state
  • Licensing
  • States require that persons in certain occupations obtain a license to practice that occupations
  • Public Policy
  • Agreements that unreasonably restrain trade
  • Agreements not to compete
  • Agreements for price-fixing
  • Agreements to eliminate competitive bidding or bid rigging
  • Agreements to induce breach of duty or fraud
  • Statutes of Frauds
  • Requires that certain contracts be in writing to be enforceable

Genuine Agreement (Assent)

  • Valid offer has been made by the offeror and a valid acceptance has been exercised by the offeree
  • Several causes for a genuine agreement to be lacking in a contract
  • Duress
  • Undue Influence
  • Unilateral of mutual mistake
  • Innocent misrepresentation
  • Fraudulent misrepresentation

Fraudulent Misrepresentation

Innocent Misrepresentation

  • Party to a contract deliberately makes an untrue statement of facts
  • Deliberate- done with or marked by full consciousness of the nature of effects; intentional
  • Deception- the fact or state of being deceived
  • Gain- to secure as profit or reward
  • In order to prove fraud, you must prove the above 3 definition

Consideration

Proving Fraudulent Misrepresentation

Unilateral Mistake

Materiality

Proving Fraudulent Misrepresentations

  • Innocent statement of supposed fact that turns out to be false
  • Statement must be one of fact
  • Statement must be material
  • Statement must be relied upon
  • Injured party has the right to rescind (take back) the offer
  • No rights to damage
  • Reasonable reliance
  • One party must reasonably rely on statement
  • Intentional or reckless
  • One party deliberately lies or conceals a material fact
  • One party recklessly makes a false statement of fact, without knowing whether it is true or false
  • Statement must be intended to induce party to enter into contract
  • Resulting Loss
  • Must cause an injury

Undue Influence

  • Statement would cause reasonable person to contract
  • If one party knows the other party would rely on the statement
  • If one party knows the statement is false
  • Untrue statement of fact
  • must be one of fact, not opinion
  • Active concealment
  • Silence- may stay silent about defects
  • Statement is about material fact
  • True statement is made false by subsequent events
  • One party knows the other party has made a basic mistaken assumption

Duress

  • Error on the part of once of the parties
  • Does not affect validity of the contract
  • Cannot get out of contract
  • Nature of the agreement
  • Signing a contract you don't understand or have not read
  • Signing a contract in a language you don't understand
  • Mutual Mistake (Bilateral Mistake)
  • Both parties are mistaken about an important fact
  • Impossibility of performance
  • Contract is impossible to perform
  • Contract is void
  • Subject matter
  • Either party can void
  • Existing law
  • Contract is valid
  • Parties are expected to know the law
  • Unfair and improper persuasive pressure within a relationship of trust
  • Must be able to prove
  • Relationship of trust, confidence, or authority
  • Unfair persuasion
  • Overcoming a person's free will by use of force or by threat of force or bodily harm
  • Threats of illegal conduct
  • Threats to report crimes
  • Threats to sue
  • Threats to sue made for purpose unrelated to the suit
  • Economic duress
  • Threats to a person's business or income

There are 6 elements of a Contract

Acceptance

  • Exchange of benefits and detriments by the parties to an agreement
  • Requirements of consideration
  • Must involve a bargained for-exchange (promise made in return for another promise
  • Benefits
  • Something that a party was not previously entitled to receive
  • Detriments
  • Any loss suffered; anything given up
  • Forbearance
  • Bit doing something that you have the right to do
  • Offer
  • Acceptance
  • Genuine Agreement/Assent
  • Consideration
  • Capacity
  • Legality
  • Unqualified willingness by the offeree to go along with the offer
  • Mirror Image Rule
  • Terms of acceptance must match exactly, the terms of offer
  • Any change means there is no acceptance

Methods of Acceptance

  • Bilateral
  • Unilateral
  • Silence

Silence

Unilateral

  • Does not represent acceptance
  • Offeror cannot word offer in a way that silence would be considered acceptance

Bilateral

  • Offeror promises something in return for offeror's performance and indicates that performance represents acceptance
  • Offer is accepted by offeree through communication of the promise to the offeror
  • Only requires giving a promise to perform not performance itself
  • Most offers are bilateral
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