1. Chapter 11: Nature and Terminology
Business Law
Text and Cases
The First Course
Fourteenth Edition
Miller
Chapter 11: Nature and Terminology

2. §1: An Overview of Contract Law (1 of 4)
Sources of Contract Law: Common law governs all contracts except sales and leases.
Sale and lease contracts are governed by the Uniform Commercial Code (UCC).
Function of Contract Law: To assure the parties to private agreements that the promises they make will be enforceable.

3. An Overview of Contract Law (2 of 4)
Promise: A person’s declaration that he will perform or refrain from performing some present or future act.
The promisor makes the promise and the promisee is the person to whom the promisor made the promise.

4. An Overview of Contract Law (3 of 4)
Definition of a Contract: A contact is an agreement formed by two or more parties who agree to a promise (or set of promises).
Contracts can be enforced in court.

5. An Overview of Contract Law (4 of 4)
Objective Theory of Contacts: The circumstances that determine the intent of the parties. Objective facts include:
What a party said when entering into the contract.
How the party acted or appeared.
The circumstances surrounding the transaction.
See CASE Pan Handle Realty, LLC v. Olins (2013).

6. §2: Elements of a Contract (1 of 2)
Requirements of a Valid Contract:
Agreement (Offer and acceptance).
Consideration (Legally sufficient and bargained-for).
Contractual Capacity (All parties must be competent).
Legal (Purpose of contract must be legal at time of execution).

7. Elements of a Contract (2 of 2)
Defenses to Enforceability:
Voluntary Consent: All parties must voluntarily consent to the contract.
Form: Some types of contracts must be in writing.

8. §3: Types of Contracts (1 of 8)

9. Types of Contracts (2 of 8)
Bilateral versus Unilateral Contracts:
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”).
Irrevocable: Offer cannot be revoked once performance has begun. 

10. Types of Contracts (3 of 8)
Formal versus Informal Contracts:
Formal Contract: A contract that requires a special form or method in order to be enforceable.  
Informal Contract: A contract that does not require a specified form or method of formation in order to be valid.

11. Types of Contracts (4 of 8)
Express versus Implied Contracts:
Express: The terms of the agreement (oral or written) are explicitly stated.
Implied (In Fact): Conduct creates and defines the terms of the contract.
A contract can be a mixture of an express and an implied contract—with some express terms and implied terms.

12. Types of Contracts (5 of 8)
Contract Performance:
Executed: A contract that has been fully performed by both (or all parties).
Executory: A contract that has not been fully performed by one or more parties.

13. Types of Contracts (6 of 8)
Contract Enforceability:
Valid: A contract with agreement, consideration, contractual capacity, form, and legality.
Voidable: A valid contract that can be legally avoided, canceled, or annulled by one of the parties. 

14. Types of Contracts (7 of 8)
Contract Enforceability:
Unenforceable: An otherwise valid contract that is rendered unenforceable by some statute or law.
Void: A contract with no legal or binding effect.

15. Types of Contracts (8 of 8)

16. §4: Quasi Contracts (1 of 2)
Quasi contracts (or contracts implied in law) are fictional contracts that the courts impose on the parties “as if” the parties had entered into an actual contract.
Quasi contracts are imposed in the interest of fairness and justice.
CASE in Point Seawest Services Ass’n v. Copenhaver (2012).

17. Quasi Contracts (2 of 2)
Limitations on Quasi-Contractual Remedy: The enriched party is not held liable in certain situations.
When an actual contract exists that covers the matter in controversy, the doctrine of quasi contract generally cannot be used.

18. §5: Interpretation of Contracts (1 of 7)
Plain language laws have helped to alleviate disputes on the legal meaning and effect of a contract.
“Plain Meaning” Rule: A court will enforce a contract according to its obvious terms when it is clear and unequivocal. 

19. Interpretation of Contracts (2 of 7)
Ambiguity: A contract is unclear or ambiguous when:
The parties’ intent cannot be determined from the contract’s language.
The contract lacks a provision on a disputed term.
A term is susceptible to more than one interpretation.
When there is uncertainty about a provision.

20. Interpretation of Contracts (3 of 7)
Extrinsic Evidence:
A court may interpret ambiguous terms against the party who drafted the term, or consider extrinsic evidence.
When a contract is clear and unambiguous, a court cannot consider extrinsic evidence.
CASE Wagner v. Columbia Pictures Industries, Inc. (2004).

21. Interpretation of Contracts (4 of 7)
Other Rules of Interpretation:
A reasonable, lawful, and effective meaning will be given to all of a contract’s terms as much as possible.
Contracts are interpreted as a whole.
Terms that are negotiated separately are given greater weight than standardized terms. 

22. Interpretation of Contracts (5 of 7)
Other Rules of Interpretation:
Words will be given their ordinary, commonly accepted meanings.
Specific wording given greater weight than general language.
Written or typewritten given greater weight than preprinted. 

23. Interpretation of Contracts (6 of 7)
Other Rules of Interpretation:
Ambiguous terms will be interpreted against the drafter.
Trade usage, prior dealing, and course of performance can be used to clarify the contract. 

24. Interpretation of Contracts (7 of 7)
Other Rules of Interpretation:
Express terms are given the greatest weight, followed by course of performance, course of dealing, and custom and usage of trade—in that order.