Legal Contact Act Business Law www.assignmentpoint.com

Chapter Objectives What is contract? The elements of contract. The types of contract. www.assignmentpoint.com

Contract act Law Governing Agreements Of Exchange A contract is defined as a legally enforceable promise or set of promises “A promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty.” A contract is an agreement that is enforceable by a court of law or equity. “ Contract law is the law governing agreements of exchange. www.assignmentpoint.com

Introduction Contracts are the basis of many daily activities. A contract is made when a business buys or leases property, hires employees, purchases equipment, inventory or raw materials, sells products or services, or sells its own stock. They provide the means for individuals and businesses to sell and otherwise transfer property, services, and other rights. Without enforceable contracts, commerce would collapse. Contracts are voluntarily entered into by parties. The terms of the contract become private law between the parties. www.assignmentpoint.com

Parties to a Contract Every contract involves at least two parties. Offeror – the party who makes an offer to enter into a contract. Offeree – the party to whom an offer to enter into a contract is made. Offeree Offeror Offer Offeror makes an offer to the offeree Offeree has the power to accept the offer and create a contract Acceptance www.assignmentpoint.com

Elements of Contract Essential elements Agreement, Consideration, Contractual Capacity Legality Other Elements Free Consent Possibility Certainty Written www.assignmentpoint.com

Agreement 1. Agreement - two parties must reach a common understanding or "meeting of the minds". Typically, the agreement is reached through a process of offer an acceptance. FACTS: Owen wrote to T and offered to purchase T’s land at a specified location for a sum of $6,000. T wrote back and replied: "It would not be possible for me to sell it unless I was to receive $16,000 cash. Owen then wrote T and indicated that he accepted the offer to sell for $16,000. T refused to sell the property to Owen and Owen sued for breach of contract. The issue in the case was whether there was a contract - had the parties reached a mutual understanding? www.assignmentpoint.com

Consideration 2. Consideration - the agreement must include a bargained for exchange of legal value. Promises that are made without an exchange do not create enforceable contractual obligations EXAMPLE: Your sister promises to loan you her car for Saturday evening for a night out. On Saturday evening she changes her mind and refuses to give you the keys. Can you successfully sue? No. Even if you were willing to sue your sister, the court would find no legal obligation on her part to loan the car. There is no enforceable contract because there was no exchange -- you did not promise to do anything for your sister. www.assignmentpoint.com

Contractual Capacity 3. Contractual Capacity - each of the parties to the contract must have the legal status or authority requisite to making contracts. Allen, who is 17 years old and has a good paying job (as a computer consultant for a local business) agrees to buy a car from S's Used Car's for the sum of tk 2,500. S gives Allen the keys and sends him home with the car. After thinking about it overnight, Allen changes his mind, returns the car to S's and refuses to pay. Can S successfully sue for breach of contract? www.assignmentpoint.com

4. Legality 4. Legality - the purpose of the contract must be one permitted by law. Contracts to commit illegal acts or accomplish purposes, which contravene public policy, are not legally enforceable B offers to buy cocaine from Carl for the sum of $500. Carl agrees to sell and takes B's money, but fails to deliver the drugs. Can B successfully sue to get her money back? www.assignmentpoint.com

Types of contracts Express and Implied Contracts Bilateral and Unilateral Contracts Executory and Executed Contracts Valid, Void, Voidable and Unenforceable Contracts, www.assignmentpoint.com

Unilateral Contract A unilateral contract is one where an offer is made that can only be accepted by performing a requested act. The unilateral contract involves an exchange of a promise for an act of performance. Only 1 promise, one party makes a promise that the other party can accept only by doing something. No contract is formed until the offeree performs the requested act. EXAMPLE: Dedra offers to pay Earl a $50 reward for finding and returning her lost dog. This is an offer for a unilateral contract because it can be accepted only by performance: locating and returning the dog. A contract is not created until the dog is found and returned. At that time a unilateral contract is formed and Dedra is obligated to pay the reward. If Earl does not find the dog, he is not liable and cannot be sued for breach of contract. Dedra may revoke the offer of a reward anytime before Earl begins to perform (starts looking for the dog). www.assignmentpoint.com

Bilateral Contracts A bilateral contract results from an offer that can be accepted by a promise of performance. The contract is formed at the time the promise is made, with performance to occur at some later point. 2 promises both parties make a promise. Dedra offers to pay Earl $50 if he agrees to spend all day tomorrow helping her search for her lost dog. Earl agrees. A bilateral contract is created when Earl agrees or promises to help. If Dedra finds the dog before tomorrow, she will still liable to pay Earl under their contract. Or, if Earl changes his mind and refuses to help, Dedra can sue him for breach of contract. www.assignmentpoint.com

Executory and Executed Executory: when one or more parties has not fulfilled its obligations. performance remains due from either party or both parties F telephones G and offers to buy G's baseball autographed by Mickey Mantle for the sum of $495. Ginger says "Sure, I'll sell it to you for that price." This contract is executory at the moment it is formed because F has not actually paid the $495 and G has not delivered the baseball. If Fred delivers payment to G, then he has performed but the contract is still executory because G has not Executed: when all parties have fulfilled their obligations. If you have fully performed, damages for the price of performance may be sought as a remedy Once F delivers payment and G delivers the baseball there is no further performance due under the contract and the contract is executed. www.assignmentpoint.com

Express Contracts and Implied Contract An Express Contract is one created with words. The words may be written or spoken. the two parties explicitly state all important terms of their agreement. An Implied Contract results from the conduct of the parties that can be reasonably interpreted as creating a contract. May be words, conduct, gestures .the words and conduct indicate that the parties intended an agreement www.assignmentpoint.com

A valid and unenforceable contract A valid Contract is one that is fully enforceable. In order to be valid, a contract must include all basic elements as discussed above. An unenforceable contract is one where the four basic elements are present, but some other legal defense prevents enforcement of the contract. www.assignmentpoint.com

A void contract A void contract is one that has no legal effect whatsoever. The courts will not allow any type of recovery where an agreement is found to be void. Contracts with an unlawful purpose are generally void. What if F telephoned J and offered to pay her $495 to steal an autographed baseball from G? Even if J agreed, the contract (or more appropriately "non-contract") is void because the object of the agreement is unlawful -- to engage in theft. If either party failed to perform, the other party would have no legal recourse. Even if one party fully performs, for example, F actually delivers the $495 to J the court would not offer any recourse to F when J failed to steal the ball. A void agreement is given absolutely no recognition by the courts. www.assignmentpoint.com

A voidable contract A voidable contract is one where at least one party may elect to avoid the obligation to perform under the contract. Contracts where one of the parties is lacking in contractual capacity and contracts, which are induced by improper circumstances such as duress or misrepresentation, are generally voidable. [ When a party chooses to avoid its contractual obligations, then both parties are released from their obligations under the contract. When that party elects instead to ratify the contract, then both parties are obligated to perform. www.assignmentpoint.com

FORMAL or SIMPLE Contract A formal contact must be written, signed showing an intention to be a deed & witnessed A simple contract must be a bargain and can be in any form, written, spoken or implied. www.assignmentpoint.com

Other Elements Free consent Written Possibility Certainty www.assignmentpoint.com

Quasi contract Quasi (means “almost”)--not a true contract Even when there is no contract, a court may use quasi-contract to compensate a plaintiff who can show that: He gave some benefit to the defendant. He reasonably expected to be paid for the benefit and the defendant knew this; and The defendant would be unjustly enriched if she did not pay. www.assignmentpoint.com

PERFORMANCE, BREACH, DISCHARGE OF CONTRACT DUTIES PERFORMANCE- Full and complete performance of the duties under a contract results in the discharge of liability under that contract. BREACH-A party who commits a minor breach of a contract is liable for damages caused by that breach, but is still entitled to the return performance from the other party. When a party commits a material breach, he is liable for damages and the other party is discharged from any obligation to perform. DISCHARGE OF CONTRACT DUTIES Contractual duties may be discharged in a number of ways other than performance. Duties may be discharged as a result of an agreement. www.assignmentpoint.com

Conclusion Contracts form legal relationships and duties between parties Not all promises are enforceable contracts-- Contracts must meet the requirements of a contract to create an enforceable promise www.assignmentpoint.com