1. Making a Contract Enforceable OBE 118, Section 3 Fall 2004 Was Consideration given? Was there Capacity to Contract? Legal Subject Matter? Was there Genuine Assent? Was the Statute of Frauds Satisfied?

2. Basic Elements of a Contract Agreement (or “Mutual Assent”) Consideration Capacity Legality Genuineness of assent Writing and Form

3. Reciprocal Consideration We call the requirement “reciprocal consideration” because for each promise there must be corresponding consideration that makes that promise enforceable Party A Party B

4. Consideration: Legal Value Dollar cost Doing or promising to do something that there was no prior legal duty to perform A legal detriment No requirement that each side give up something of equal value

5. Consideration Complications Pre-existing duty Unforeseen difficulties situations Past consideration Illusory promises

6. Promissory Estoppel Fact pattern: A party relies on a promise to their detriment but no consideration was given. Elements of Promissory Estoppel 1) A promise 2) Justifiable reliance on the promise 3) Substantial and definite reliance 4) Enforcing the promise serves the interests of justice Issue: Is there another means to enforce the promise?

7. Capacity Issues: 1) Minority 2) Mental Incompetence 3) Intoxication

8. Legality Legality is our fourth element of a contract and failure to meet this element often renders a contract void 1. Contracts calling for an illegal or tortious act 2. Contracts against public policy 3. Licensing Statutes

9. Illegal Acts Contracts calling for violation of federal or state statutes are void 1. Usury - often not a void contract 2. Gambling - void 3. Licensing statutes – void or voidable

10. Restraint of Trade Contracts that interfere with or inhibit free trade are usually against the public interest Violation of Antitrust Laws - Void Covenants Not to Compete A covenant not to compete can be valid and enforceable if it is reasonably limited in time, scope, and distance. 1. Part of a sale of a business 2. Part of an employment agreement

11. Genuineness of Assent Genuine Assent is our fifth element of a contract and requires that their be a true objective meeting of the minds.

12. The Defenses of Genuine Assent 1.Mistakes 2.Fraud 3.Undue Influence 4.Duress Many defenses make up this “element” Genuine Assent is our fifth element of a contract and requires that their be a true objective meeting of the minds.

13. Bilateral Mistakes Must be a bilateral mistake of a material fact! Bilateral: Both parties Material: Important and central to contract Fact: Not value, opinion, etc. EFFECT: Example: Different subject matter

14. Fraud 1)Misrepresentation of a material fact 2)Intent to deceive 3)Justifiable reliance 4)Injury from the reliance Fraudulent in the factum False statement to induce signing correct document Fraudulent Misrepresentation Tricked into signing wrong document Basic Elements to be ___________

15. Writing and Form Some contracts must be evidenced in writing to be enforceable. This is the last “element” of a contract. “_____________” 6) Executor of estate assuming debt personally 2) > 1 Year performance 3) Paying debt or performing duty of another 4) Sale of Goods >$500 5) Promises for marriage 1) Interests in land (sale, lease, mortgage, easement)

16. “Written Evidence” 1) “Signed” by party against whom enforcement sought 2) Contain essential terms of contract Parties Subject Matter Consideration Quantity

17. Parol Evidence Rule When a contract is expressed in writing, oral negotiations, promises, or terms prior to the writing are not usable to prove the contract’s terms 1) Later changes* 2) Evidence to show contract is voidable or void* 3) Unclear terms- to show meaning “Exceptions” 4) Incomplete contract- to fill gaps 5) Show obvious or gross clerical error

18. A Valid Enforceable Contract 1)Mutual Agreement 2)Consideration 3)Capacity 4)Legality 5)Genuineness of Assent 6)Writing