1 Chapter 9: Introduction to Contracts Contract law involves any agency, partnership, corporation, sale of personal property, commercial paper,

, and secured transactions. Contract: legal binding agreement that the courts will enforce Statue of Frauds (6) contracts that must be in writing - Oral (verbal) contracts Common Law: most contracts are primarily governed by state common law including contracts involving employment, services, insurance, real property, patents, and copyrights. The Uniform Commercial Code Governs in all states except Louisiana Governs all sales of goods Sale is a title transfer of the good and a good is the tangible personal property

Requirements for a Contract 1. Mutual Assent intend to enter into a contract; to manifest their intent or willingness to enter into a contract = (K). There are different ways to show mutual assent: a. Written K (agreement) b. Words, actions, behavior 2. Consideration Each side gave up something. Example: Someone sells their car to someone else and they agree on $50K. Consideration doesnt mean its an equal contract or fair. As long as they both give up something its a contract. 3. Legality of Object When you enter into a contract that involves illegal goods, the courts do not protect you. 4. Capacity do the people have the understanding that they are entering into a contract? Two groups of people that our legal system wants to protect: a. Mental incompetence b. Minors < 18 years old [age of majority where you can enter into a contract] i. When the minors are buying necessities, it is OK for them to enter into a contract ii. We do not allow minors to buy luxury goods State Common Law vs. UCC Uniform Commercial Code Exam # 2- create a chart with differences of State Common Law & UCC Differences: 1. Types of contracts covered

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Differences: 1. Types of contracts covered State Common Law 1a. Sale of Real Estate b. Insurance Contracts c. Employment of K d. Personal service K e. Intangible Assets (patents, trademarks, copyrights, licenses, franchise rights, etc) they all have value, they lack physical substance, and they have limited life 2. Yes, very rigid rules about price, quantity, delivery dates. Mirror image rule: if the contract is breached at all they can void the contract 3. Not Valid 4. No special rules for wholesalers/ retailers 5. Good faith means nothing UCC Uniform Commercial Code 1. Sale/Purchase of goods (personal tangible property)

2. Definiteness is it required?

2. Not required, allow flexibility

3. Output Required 4. Merchants when they are involved 5. Good faith honesty in fact

3. Valid Even though quantity is uncertain 4. We want more business, merchants to do business with each other 5. You must act in good faith

Classification of Contracts 1. Express Contracts vs. Implied Contracts a. Express written is a document they both signed b. Express oral/verbal contract c. Implied by our behavior & actions 2. Bilateral and Unilateral Contracts a. Bilateral a promise for a promise contract b. Unilateral a promise for an action 3. Valid, Void, Voidable, and Unenforceable Contracts a. Valid legally binding contract. It is enforceable promise or agreement. Each side has rights and obligations b. Void automatically cancelled c. Voidable

3 i. Minor buys $2,500 luxury goods in the Apple Store. That is a voidable contract. Sooner or later, each contract has to become valid or void. It cannot remain voidable forever. When the child turns 18 it becomes valid (ratification) The child can disaffirm the contract (voidable void) *6 Contracts [involve real property] must be in writing under the Statute of Frauds Equitable Remedies: (not very common judges are hesitant to impose them) 1. Promissory Estoppel noncontractual promise that binds the promisor because she should reasonably expect that the promise will induce the promisee to take action in reliance on it 2. Quasi Contracts Chapter 10: Mutual Assent Notes Manifested their intent to enter into a K. It could be written evidence, oral evidence, or implied evidence (based on behavior). Mutual Assent: an offeror makes an offer to the offeree. I accept your offer to buy your car for $40K acceptance, rejection [offeree] , revocation [ offeror ]. If the offeree makes a counteroffer if 37K. o Preliminary Negotiations -= the offerer must demonstrate intent to enter into the contract o Advertisements - is an invitation to the customer to make an offer; it is an invitation, the store people dont owe the customers anything based on their advertisements o Auctions auctions with reserve invitation to audience to make an offer; auctions without reserve acceptance for the item sold Definiteness: offers terms must be clear enough to provide a court w/ a basis for giving an appropriate remedy. Open terms UCC provides standards by which the courts may determine omitted terms, provided the parties intended to enter into a binding contract. The code provides missing terms in case the contract forgets to say where the place of delivery, time or price is. Any specification must be made in good faith honesty in fact. And commercial reasonableness judgment of reasonable persons familiar w/ the business transaction. Output contract: an agreement of a buyer to purchase the entire output of a sellers factory. Requirements contract: an agreement of a seller to supply a buyer with all his requirements for certain goods. Duration of Offers

4 If not accepted then termination has to happen by 7 ways 1. Lapse of time 2. Revocation 3. Rejection 4. Counteroffer 5. Death or incompetency 6. Destruction of the subject matter 7. Subsequent illegality of the type of contract Acceptance of Offer manifestation of willingness to enter into a contract on the terms of the offer ; in all bilateral contracts communication of acceptance is mandatory. Effective Moment an offer, revocation, rejection, and counteroffer are effected when they are received. An acceptance is generally effective upon dispatch. Stipulated Provisions in the offer & authorized means any reasonable means of communication Chapter 11: Conduct Invalidating Assent Notes Duress: wrongful or unlawful act or threat that overcomes the free will of a party 2 types: (1) physical duress coercion involving physical force renders the agreement void (2) Mental or Emotional duress (improper threats) economic, social coercion render the contract voidable (either becomes valid or void) must look at the circumstances surrounding mutual assent Undue Influence - unfair persuasion of a person by a party in a dominant position based on a confidential relationship. Contract is voidable Fraud 1. Fraud in the execution not often; forge someones name void 2. Fraud in the inducement fraud or deceit intentional misrepresentation regarding the subject matter of a contract that induces the other party to enter into the contract; voidable a. False representation lying b. Of a fact not an opinion c. That is material fact d. Made with knowledge of its falsity and the intention to deceive and e. Which presentation is justifiably related on Mistake is not an excuse

5 Chapter 12: Consideration Consideration: the inducement to make a promise enforceable Each side suffered a legal detriment and you made some sort of legal sacrifice Doesnt mean both sides are happy or that it was a fair deal it just means both sides gave up something Consideration works more for 18+ not for minors Example Seller pants to the buyer Buyer gave $100 to the seller Output Contracts & Requirement Contracts are valid under the UCC but not valid under State Common Law Output agreement to sell all of ones production Requirements agreement to buy all of ones needs Contract Modifications UCC says that the contract for the sale of goods can be effectively modified w/o new consideration provided the modification is made in good faith. Consideration example John gives Mary engagement ring, 4 months later they break it off 1. Gift unconditional transfer works for Marys side (no strings attached) Donor & the Donee 2. Contract (works for Johns side) was it a contract? Cost-Benefit Analysis John is worth $30 million Mary is worth $2 million Golden rule pre-nub agreements (each side must be in writing and have their own lawyers) Chapter 13: Illegal Bargains License formal authorization to engage in certain practices 2 kinds of licenses: 1. Regulatory license measure to protect the public interest a. Doctors, lawyers, real estate brokers, accountants, dentists, etc 2. Revenue license measure to raise money Gambling is based on state laws --- wager is an agreement that one party will win and the other will lose depending upon the outcome of an event in which their only interest is the possible gain or loss.

6 Usury statutes is a law establishing a maximum rate of permissible interest for which a lender and borrower of money may contract. (a) a loan (b) of money (c) that is repayable absolutely in all events (d) for which an interest charge is exacted in excess of the interest rate allowed by law Restraints of trade are illegal based on the Sherman Anti-trust Act & the Clayton Act (example is monopoly, eliminating consumers choices and taking away the competition) Price-fixing: illegal because it is a restraint of trade and two situations where restraints of trade will be allowed Exceptions for Restraint of Trade 1. Sale of Business the promise by the seller of a business not to compete in that particular business in a reasonable geographic area for a reasonable period of time is enforceable. Covenant not to compete (restrictive covenant) the seller cannot open up a similar business within a certain distance

2. Employment Contracts a written employment contract prohibiting an employee from competing with his employer for a reasonable period following termination is enforceable provided the restriction is necessary to protect legitimate interests of the employer. Exculpatory Clauses -- A provision excusing one party from fault or liability -- Not every clause is valid -- Cannot say they are not responsible for any negligence Chapter 14: Capacity The law tries to protect 1. Mentally Deficiency court appointed legal guardian 2. Minors (< 18 years old) allowed to buy necessities, but not luxury goods $300 dividing line (less than) its a necessity When the minor buys luxury goods, it is a voidable contract. It has to become a valid contract or a void contract; when it becomes valid that is called ratification, when it becomes void its called disaffirmance

7 Liability for Misrepresentation of age requires the minor to restore the other party to the position he occupied before making the contract or allow the defrauded party to recover damages against the minor in tort. Liability for Tort Connected with Contract if a tort and a contract are so intertwined that to enforce the tort the court must enforce the contract, the minor is not liable in tort. When a minor commits an intentional tort, they become liable for the situation, whereas when the minor commits a negligent tort not so much. Intoxicated People Is not an excuse for entering into a contract.