Presentation on theme: "Basic Contract Law for Paralegals Fifth Edition"— Presentation transcript:
1 Basic Contract Law for Paralegals Fifth Edition Jeffrey A. Helewitz
2 Chapter 1 OVERVIEW OF CONTRACTS In this chapter you will:Define a legally binding contractIdentify the six basic requirements to forming a valid contractExplain the concept of offer and acceptanceDefine and exemplify considerationClassify contracts into bilateral or unilateral agreementsUnderstand how a contract is createdExplain the difference between executory and executed contractsDifferentiate between valid, void, voidable and unenforceable contractsDiscuss various contractual provisionsKnow what is meant by the term contractual capacity
3 Contract DefinedA contract is a legally enforceable agreement that meets certain specified legal requirements between two or more parties in which each party agrees to give and receive something of legal value.
4 Elements of a Valid Contract OfferAcceptanceConsiderationLegality of subject matterContractual capacityContractual intent
5 Type of ObligationBilateral: a bilateral contract is a promise for a promise.Unilateral: a unilateral contract is a promise for an act.
6 Method of CreationExpress contract: mutual assent of the parties is manifested in words, either orally or in writing.Implied-in-fact contract: promises of the parties are inferred from their actions or conduct as opposed to specific words being used.Implied in Law contract (also known as quasi-contract): situations that look like a contract but are not because one of the requisite elements is missing.
7 Type of FormFormal: limited group of contracts that different states have declared valid and enforceable if certain statutory requirements are met.Informal: all non-formal contracts; agreements that meet all the requirements of valid contracts.
8 TimingExecutory contract: a contract in which one or both of the parties still have obligations to perform.Executed contract: a contract that is complete and final with respect to all of its terms and conditions.
9 EnforceabilityValid: an enforceable contract that meets all of the six requirementsVoid: a situation where there is no contract and the law therefore does not entitle the parties to any legal remedy.Voidable: a contract where a party to the agreement has the option of avoiding his legal obligation without any negative consequences, but who could, if he wished, affirm his obligation and thereby be contractually bound.
10 Summary Type of Obligation Method of Creation Form Timing EnforceabilityBilateralUnilateralExpressImplied in factImplied in law (quasi)FormalInformalExecut-oryExecut-edValidVoidVoidableUnenforceable
11 Chapter 2 OFFER In this chapter you will: Define offer Identify the three conditions necessary to create a valid offerExplain the concept of certainty and definiteness in the terms of an offerList the four required terms in a valid offerBriefly discuss what is the UCCDiscuss the impact of the UCC on traditional legal principles of a contractual offerKnow what is meant by an output contractApply basic concepts of an offer to contractual clausesDraft a basic offer that would meet legal standardsIndicate the difference between contracting with a member of the general public and a merchant
12 Offer DefinedAn offer is a proposal by one party, the offeror, to a second party, the offeree, manifesting an intention to enter into a valid contract.
13 Three Conditions for a Proposal to Qualify as a Contractual Offer The offeror must manifest a present contractual intent.The offer must be communicated to the offeree.The offer must be certain and definite with respect to its terms
14 Certainty and Definiteness in the Terms of the Offer Four essential elements for definite and certain terms:The price of the contractThe subject matter of the contractThe parties to the contractThe time of performance for fulfilling the contract
15 Uniform Commercial Code The Uniform Commercial Code (UCC) is a model law adopted in whole or in part by each state as a statutory enactment that, among other things, has codified certain contractual concepts with respect to the sale of goods.
16 Chapter 3 ACCEPTANCE In this chapter you will: Define acceptance Differentiate between an acceptance and a counter-offerDiscuss the mirror image ruleIndicate the effect of silence on an offerExplain who is capable of accepting an offerDiscuss the method of accepting a bilateral and a unilateral offerDiscuss the impact of the mailbox rule on the acceptance of a contractExplain the effect of the rejection of an offerDefine revocationDiscuss the effect of the termination of an offer on the parties ability to create a valid contract
17 AcceptanceAcceptance is the manifestation of assent in the manner requested or authorized by the offeror.
18 Varying the Terms of the Offer First, to be valid, the acceptance must parrot exactly the terms of the offer.Second, any variance in the terms of the offer creates a counteroffer, which rejects and therefore terminates the original offer.Third, if the variance is merely a term that is implicit in the original offer, that variance will not constitute a counteroffer.
19 When Does Silence Constitute an Acceptance? if the offer was solicited by the offeree orthe contract is implied in fact
20 Principal-Agent Relationship An agent is one who acts for and in the place of another, known as the principal, in order to enter into contracts with third persons on the principal’s behalf.
21 Mailbox RuleThe acceptance of an offer of a bilateral contract is effective when properly dispatched by an authorized means of communication.
22 Termination of the Ability to Accept To terminate an offer by an act of the parties, either the offeree must reject the proposal or the offeror must revoke the offer.
23 Termination by Operation of Law Lapse of timeThe death or destruction of the subject matterThe death or insanity of the offeror or offereeSupervening illegality
24 Chapter 4 CONSIDERATION In this chapter you will:Define contractual considerationDiscuss the concept of mutuality of considerationDifferentiate between a benefit conferred and a detriment incurredExemplify what is not considered to be legally sufficient considerationExplain the pre-existing duty ruleDiscuss the impact of the UCC on traditional concepts of considerationExplain what is meant by the sufficiency of the considerationDefine promissory estoppelDiscuss accord and satisfactionIndicate how one becomes a guarantor
25 ConsiderationConsideration is something that has legal value.
26 Detriment as Consideration For a detriment to qualify as consideration, the person incurring the detriment must:give up a legal rightat the request of the other partyin exchange for something of legal value
27 What is Not Consideration Past consideration is no considerationMoral consideration is no considerationA gift can never be legal considerationIllusory promises are never considerationPromises to do that which one is already bound to do are not consideration
28 Circumstances under which a Preexisting Duty May Be Consideration If new or different consideration is givenThe purpose is to ratify a voidable obligationThe duty is owed to a third person, not the promiseeUnforeseen circumstances make the duty more difficult to fulfill
29 Does a Bad Bargain Matter? Caveat emptor: Let the buyer bewareCaveat venditor: Let the seller beware
30 Valid Accord and Satisfaction The requirements are:A valid contractA dispute between the parties with respect to that contract andAn agreement to compromise the dispute rather than sue
31 GuaranteesA guarantee is a written promise to answer for the debts of another that is enforceable against the guarantor.
32 Requirements for a Guarantee to be Valid A valid contract is entered into between two or more partiesThe guarantor creates the guarantee at the time the contract is executed andThe guarantee is in writing
33 Chapter 5 LEGALITY OF SUBJECT MATTER AND CONTRACTUAL CAPACITY In this chapter you will:Discuss the concept of the legality of the subject matterDefine malum in seDefine malum prohibitumList the sic types of contracts that come under the Statute of FraudsDiscuss what is meant by usuryExplain the concept of contractual capacityDifferentiate between infants and minorsKnow which types of contracts a minor cannot avoidDiscuss the effect of alcohol and drugs on a person’s contractual capacityApply the concepts of legality and capacity to your everyday life
34 Malum in SeContracts that violate public policy and are deemed bad in and of themselves.
35 Malum ProhibitumContracts that are not morally reprehensible or against public policy but are still minor violations of the lawa prohibited wrong, or something prohibited by statutory regulation.
36 Contracts that Violate the Statute of Frauds Contracts for an interest in realtyContracts that are not to be performed within one yearContracts in consideration of marriageGuaranteesSale of goods valued at over $500Executors’ promises to pay the decedent’s debts
37 Contractual CapacityThe parties’ legal ability to enter into a binding contractual relationship
38 Four Major Areas of Contractual Capacity AgeMental capacityAlcoholDrugs
39 Chapter 6 CONTRACTUAL INTENT In this chapter you will:Define what is meant by contractual intentDefine fraudDifferentiate fraud from misrepresentationExplain the concept of duressList the three types of duress that may be encountered in contract lawDiscuss what is meant by undue influenceDefine a contract of adhesionDiscuss the effect of a mistake on contract formationDiscuss the enforceability of contract entered into with a unilateral mistakeUnderstand how the concept of contractual intent may be applied to void contracts
40 Contractual IntentThe parties to the contract must actually intend to enter into a contract for the same bargain at the same time.
41 Fraud Five elements of contractual fraud: The misrepresentation of a material factmade with the intent to deceive andrelied on by the other partyto his or her detriment
42 DuressDuress connotes some form of force or coercion exercised over one party to the contract in order to induce that party’s promise to contract
43 Forms of DuressPhysical duressEconomic duressMental duress
44 MistakeMistake occurs when one (or both) of the parties is under a misconception as to the subject matter of the contract.
45 Categories of MistakeMutual mistake: this type of mistake goes to a basic assumption of the agreement, the mistake has a material adverse effect on the parties, and the mistake was of the type that could not be foreseen.Unilateral mistake: concerns a situation in which only one party to the contract is mistaken because of some typewritten or computation error.
46 Chapter 7 CONTRACT PROVISIONS In this chapter you will:Distinguish between a covenant and a conditionList the most generally encountered contractual rules of constructionApply general contract rules of construction to analysis of contract provisionsList the types of contracts that are governed by the Statute of FraudsDefine an antenuptial agreementCategorize conditions by when they create or extinguish a contractual dutyCategorize conditions by the method whereby they have been createdDefine a condition subsequent, precedent and concurrentExplain the parol evidence ruleAnalyze contractual clauses to determine the parties rights and obligations
47 The Statute of FraudsThe statute of frauds required that, to be enforceable, the following six types of contracts had to be in writing:Contracts for an interest in real estateContracts in consideration of marriageContracts that are not to be performed within one yearGuaranteesContracts for the sale of goods valued over a specified amountExecutor’s promises to pay a decedent’s debts
48 CovenantAn unconditional, absolute promise to perform.
49 ConditionsSpecific promise made by the parties to the contract.
50 Categories of Conditions Conditions categorized by when they create, or extinguish, the duty to perform the covenantConditions precedentConditions subsequentConditions concurrentConditions categorized by how the parties have arrived at themExpress conditionsImplied-in-fact conditionsImplied-in-law conditions
51 Rules of ConstructionGuidelines that the courts use to interpret all contractual provisionsLengthy communications are viewed as a whole, and any inconsistent words are discardedContracts are to be interpreted according to business custom and usageWords are to be construed according to their ordinary meaningIf there is an inconsistency with words that are printed, typed, or handwritten, handwriting prevails over typing, and typing prevails over mechanical printing
52 Parol Evidence RuleOral testimony may not be used to vary the terms of a writing
53 Chapter 8 THE UNIFORM COMMERCIAL CODE In this chapter you will:Explain the background of the Uniform Commercial CodeDiscuss the basic guidelines to be used when applying the UCCIndicate the obligations imposed by Article I of the UCCDiscuss the concept of custom and usage as it applies to contractsDistinguish between contracts for goods and contracts for servicesDefine the UCC concept of merchantDiscuss the UCC express and implied warrantiesList and discuss conditional sales contractsList and discuss shipment contractsDiscuss the various remedies afforded parties under the UCCDefine a secured transactionIndicate the requirements to create a security interestDefine a financing statement
54 Uniform Commercial Code Major statutory basis of several important areas of contract law. The UCC was created to promote commerce and to establish certain basic guidelines for those parties involved in commercial transactions.
55 Basic Guidelines of Article I The law of the state applies unless otherwise superseded by the UCCThe parties to a contract may, by their agreement, vary the provisions of the CodeThe UCC is to be liberally construed
56 Obligations Imposed by Article I To perform in “good faith”–honesty in factTo perform in a “reasonable time,” “reasonableness” to be determined by the facts and circumstances of each situationTo perform according to past business dealings and practices (custom and usage)
57 Basic Guidelines of Article II, Sales The type of contracts that are governed by the UCCSpecific contractual provisions regulated by the Code covering warranties and risk of lossCertain remedies that the contracting parties may be entitled to that differ from the general contractual remedies
58 Types of Contracts Covered by Article II Contracts for the sale of goodsContracts for the lease of goodsContracts between merchants
59 Remedies Available under Article II Remedies available to SellerWithhold deliveryStop deliveryReclaim goods from insolvent buyerRemedies available to BuyerCoverReplevinRevocationClaim goods from insolvent seller
60 Article II-A LeasesMany jurisdictions have added a new subsection to Article II to deal with the lease of goods.
61 Article IX Secured Transactions A secured transaction is any transaction, regardless of form, that is intended to create a security interest in personal property or fixtures, including tangible goods, intangibles, and documents.
62 Requirements to Create a Security Interest There must be a security agreementThere must be attachmentThere must be perfection
63 Chapter 9 THIRD PARTY CONTRACTS In this chapter you will:List the different types of third party contractsDiscuss third party creditor beneficiary contractsDiscuss third party donee beneficiary contractsDistinguish between an intended and an incidental beneficiaryDefine a contractual assignmentDiscuss the effect of an assignment on the original contracting partiesIndicate how a gratuitous assignment may become irrevocableDifferentiate between an assignment and a novationDistinguish a delegation from an assignmentExplain the effect of the UCC on third party contracts
64 Third Party Beneficiary Contracts Agreements in which the original intent of one of the contracting parties, when entering into the contractual agreement, is to have the promised-for consideration pass not to her, but to some outside person
65 Two Types of Third Party Beneficiary Contracts Third party creditor beneficiary contract: the purpose is to extinguish a debt or obligation owed to some third partyThird party donee beneficiary contract: the purpose is to confer a gift on a third person
66 Third Party Beneficiary Contracts Creditor BeneficiaryDonee BeneficiaryCreated to extinguish debtCreated to confer giftRights vest with detrimental relianceRights vest on knowledgeCan sue promisor or promiseeCan sue promisor onlyPromisor/promisee can defend by asserting any claim he has against the other contracting partyPromisor can defend by asserting any claim he has against promisee
67 AssignmentAn assignment is the transfer of a promisee’s rights under an existing contractAssignments come into existence after the original contract is createdA promisee may not assign his rights without the consent, express or implied, of the promisor
68 Chapter 10 DISCHARGE OF OBLIGATIONS In this chapter you will:List the methods whereby a contractual obligation may be dischargedDefine voluntary disablementDiscuss the concept of anticipatory breachUnderstand what is meant by tendering performanceDifferentiate between a material and a minor breachDefine mutual rescissionExplain the concept of impossibility of performanceExemplify frustration of purposeUnderstand which contracts are divisible contractsDiscuss the effect of discharge on the parties to the agreement
69 Methods of Discharge Impossibility of performance Excuse of conditions Supervening illegalityDeath or destruction of the subject matter or partiesFrustration of purposeExcuse of conditionsPerformanceBreach of contractAgreement of the parties
70 Chapter 11 REMEDIES In this chapter you will: Distinguish between legal and equitable remediesDefine compensatory damagesDiscuss when punitive damages may be soughtExplain what is meant by consequential damagesDistinguish between liquidated damages and limitation of damagesDefine injunctionUnderstand when specific performance may be sought as a remedyExplain the effect of rescission and restitution on a contractList the quasi-contractual remediesDiscuss the effect of waivers on a breach of contract
71 Legal RemediesLegal Remedies or damages are monetary awards granted to an injured party in a contractual dispute whenever money would be an appropriate method of rectifying the injury
72 Four Types of Damages Compensatory damages Punitive damages Consequential damagesLiquidated damages
73 Equitable RemediesEquitable remedies are designed to prevent unfairness and unjust enrichment. These are largely nonmonetary awards.
74 Categories of Equitable Remedies InjunctionsSpecific performanceRescission and restitutionReformationQuasi-contractual
75 Quasi-Contractual Remedies These are the only equitable remedies that involve a monetary awardQuantum meruit: the value of the service renderedQuantum valebant: the value of the property received