2. What is a contract? What is the objective theory of contracts? What is a contract? What is the objective theory of contracts? What are the four basic elements necessary to the formation of a valid contract? What are the four basic elements necessary to the formation of a valid contract? What is the difference between an implied-in-fact contract and an implied- in-law contract (quasi contract)?  What is the difference between an implied-in-fact contract and an implied- in-law contract (quasi contract)?  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2

3. How does a void contract differ from a voidable contract? What is an unenforceable contract? How does a void contract differ from a voidable contract? What is an unenforceable contract? What rules guide the courts in interpreting contracts? What rules guide the courts in interpreting contracts? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3

4. Sources of Contract Law. Sources of Contract Law. – Common Law for all contracts except sales and leases. – Sale and lease contracts - Uniform Commercial Code (UCC). Function of a Contract. Function of a Contract. – Provides stability and predictability for commerce. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4

5. Definition of a Contract. Definition of a Contract. – Promise or set of promises, – For breach of which, – The law provides a remedy, or – The performance of which the law in some way recognizes as a duty. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 5

6. Objective Theory of Contacts. Objective Theory of Contacts. – Circumstances to determine intent of parties. – Objective Facts include: What a party said when entering into the contract, how the party acted or appeared (intent may be inferred), and circumstances surrounding the transaction. Freedom of Contract and Freedom From Contract. Freedom of Contract and Freedom From Contract. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6

7. Requirements of a Valid Contract. Requirements of a Valid Contract. – Agreement (Offer and Acceptance). – Consideration: bargained-for- exchange. – Contractual Capacity. – Legality: purpose of contract must be legal at the time of execution. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7

8. Defenses to Enforceability of a Contract: Defenses to Enforceability of a Contract: – Voluntary Consent. – Form: some types of contracts must be in writing. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8

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10. Contract Formation. Contract Formation. – Bilateral - Offeree must only promise to perform (“promise for a promise”). – Unilateral - Offeree can accept the offer only by completing the contract performance (“a promise for an act”). Revocation of Offers: Offer for unilateral contract cannot be revoked once performance has begun. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 10

11. Formal versus Informal Contracts. Formal versus Informal Contracts. – Formal: must be in writing to be enforceable. – Informal: all other contracts. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11

12. Express: Words (oral or written). Express: Words (oral or written). Implied (In Fact): Conduct creates and defines the terms of the contract. Requirements: Implied (In Fact): Conduct creates and defines the terms of the contract. Requirements: – PL furnished good or service – PL expected to be paid – DEF had chance to reject and did not. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12

13. Contract Performance. Contract Performance. – Executed - A contract that has been fully performed on both sides. – Executory - A contract that has not been fully performed on either side. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13

14. Contract Enforceability. Contract Enforceability. – Valid: agreement, consideration, contractual capacity, and legality. – Void: no contract. – Voidable (unenforceable). – Valid contract can be avoided or rescinded based on certain legal defenses. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14

15. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15

16. Quasi Contracts are implied in law. Quasi Contracts are implied in law. – Equitable remedy created by courts, and imposed on parties in the interest of fairness and justice. – Quantum Meruit. Scheerer v. Fisher – CASE 9.1 Scheerer v. Fisher (2010). What are the elements of quantum meruit? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 16

17. Limitations on Quasi-Contractual Remedy: enriched party is not held liable in certain situations dealing with benefit is conferred unnecessarily, negligently or by misconduct. Limitations on Quasi-Contractual Remedy: enriched party is not held liable in certain situations dealing with benefit is conferred unnecessarily, negligently or by misconduct. When an Actual Contract Exists: ordinarily no quasi-contract. When an Actual Contract Exists: ordinarily no quasi-contract. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 17

18. “Plain Meaning” Rule: courts will enforce contracts whose meanings are clear from the face of the instrument. “Plain Meaning” Rule: courts will enforce contracts whose meanings are clear from the face of the instrument. If terms are clear an unambiguous, court will not admit “extrinsic” (external) testimony or evidence.  If terms are clear an unambiguous, court will not admit “extrinsic” (external) testimony or evidence.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 18

19. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19

20. “Plain Meaning” Rule (cont’d). “Plain Meaning” Rule (cont’d). – However, if terms are ambiguous, court may admit “extrinsic” (external) evidence. Wagner v. Columbia Pictures Industries, Inc. – CASE 9.2 Wagner v. Columbia Pictures Industries, Inc. (2004). Should the court have admitted the extrinsic evidence? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 20

21. Other Rules of Interpretation. Other Rules of Interpretation. – Contracts are interpreted as a whole. – Terms that are negotiated separately given greater weight. – Words given ordinary, common meaning. – Specific wording given greater weight than general language. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21

22. Other Rules of Interpretation (cont’d). Other Rules of Interpretation (cont’d). – Written or typewritten given greater weight than preprinted. – Ambiguous terms interpreted against the drafter. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 22

23. Other Rules of Interpretation (cont’d). Other Rules of Interpretation (cont’d). – Trade usage, prior dealing, course of performance to allowed to clarify. U.S. Bank, N.A. v. Tennessee Farmers Mutual Insurance Company – CASE 10.3 U.S. Bank, N.A. v. Tennessee Farmers Mutual Insurance Company (2009). What does “increase of hazard” mean? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 23