1. Legally Binding Agreements
CONTRACTS
Legally Binding Agreements

2. Intro to Contracts
A contract is an agreement between 2+ people to exchange something of value
Contract legally binds parties to do what they promise
Not always written
A party who fails to live up to such promise has breached the contract
When you buy something, a legal contract is formed

3. Elements of a Contract
Contract must have certain elements to be legally binding
There must be an offer by one party and acceptance by another
Offer must be directed at a specific person
Menu at restaurant is not an offer, but when you place your order AND they start cooking your food…
The law infers acceptance through certain actions

4. Elements of a Contract
For contract to be valid, there must be exchange of consideration
Something of value is given for something else of value
Does not need to be of same/similar value
Law allows people to make good AND bad deals
People entering into contract must also be competent to make contracts
Cannot be drunk, mentally ill
Agreements to do something illegal are not enforceable

5. Minors & Contracts Minors may make contracts
Generally, however, minors cannot be forced to carry out promises
May cancel or refuse to honor contracts
Major contracts usually require adult cosigner
Responsible for making payments if minor can’t or won’t

6. Minors & Contracts
Minors may, however, be held to contracts involving necessities
Food, clothing, shelter, medical aid
In most states, minors who continue to make contract once reaching age of majority is considered to have ratified (formally approved) the contract
Can no longer be cancelled

7. Written & Oral Contracts
Contracts may be written or oral (spoken)
Certain contracts MUST be in writing to be enforceable:
Sale of land or real estate
Sale of goods over $500
Agreements to pay another person’s debt
Agreements for services that will not be performed within one year from date of agreement

8. Written & Oral Contracts
Law favors written contracts
Oral contracts can be difficult to prove
Usually a good idea to get agreement down in writing
If written contract exists, courts won’t consider promises made prior to signing of contract

9. Illegal Contracts: Illegal products/services
Courts will not enforce contracts that are illegal or against public policy
Ex: Sale of illegal drugs

10. Illegal Contracts: Unconscionable Contracts
Courts sometimes find a contract is SO unfair, harsh, and oppressive that it should not be enforced
Contract is said to be unconscionable
More likely to find contract unconscionable when…
Consumer is presented with contract on “take-it-or-leave-it” basis
There is very uneven bargaining power between parties

11. Illegal Contracts: Fraudulent Contracts
Fraud is grounds for invalidation of a contract
False statement about an important fact made to persuade person to agree to contract
Ex: sports memorabilia salesperson fakes a famous baseball player’s signature
Salespeople may not lie about product’s feature but are not required to volunteer negative aspects of product unless asked

12. Breach of Contract
When one party fails to carry out its end of bargain, there is a breach of contract
Three remedies for breach of consumer contract:
Expectation damages
Rescission & restitution
Specific performance

13. Remedy #1: Expectation Damages
You can sue for expectation damages
Difference in value that would be expected if (1) breaching party fulfilled its promise & (2) value of what injured party actually received
Ex: If you order 10 books worth $10 each, but company only sends 6, expectation damages would be $40.
Difference in value between what was promised ($100) and what was received ($60)

14. Remedy #2: Rescission & Restitution
You may also ask court to cancel (rescind) the contract and order defendant refund any money already paid (restitution)
Releases you from any further contractual obligations, but plaintiff expected to return any benefit already received from contract
You order cookware set, but pan melts first time used. You may seek rescission & restitution, but will need to return set

15. Remedy #3: Specific performance
When suing for specific performance, buyer asks court to order seller to carry out specific terms of contract
Ex: You ordered a sweatshirt that was never delivered. Court could order company to deliver sweatshirt.