Transcript CHAPTER 9
CHAPTER 9
Test review
PARTS OF A CONTRACT
Offer and Acceptance: Complete terms accepted
Genuine Assent: “Not” being forced or misled
into contract
Consideration: Both sides gain something
“Fair” not necessarily equal
Capacity: Understanding a contract and your
actions
Legality: Terms must be legal
Written: “Some” contracts must be written to
be considered valid
CONSIDERATION
Makes
serious transactions valid
Fair transactions for both sides
“Both” sides must gain something
from the contract
Creates actual contractual
agreements, rather than promises
or gifts
3 ELEMENTS OF CONSIDERATION
Give:
What each party
promises to do
Trade: Proof the promise
was actually traded
Legal Value: Worth
something in the eyes of
the law (Party got what
they expected to get)
GIFTS
Transfer
of ownership
without getting anything
back
Does NOT contain
consideration
Donor- person who gives
the gift
Donee- person who receives
the gift
FORBEARANCE
A
promise NOT to do something
you have a right to do
Asking a bank to not make you
pay a loan back while you are out
of work (Even though you can)
LEGAL VALUE
Defined
as a change in the legal
position of the parties as a result
of the contract (Property Rights)
Example: You go into a store and
buy a bag of grapes. You get the
grapes (Ownership rights) and
the store gets your money
(Ownership rights)
ADEQUACY OF
CONSIDERATION
Court
do NOT look at if the
considerations value was equal,
only if it was fair
Value is based on what the 2
parties negotiate
Courts look at if the parties got
what they expected
NOMINAL CONSIDERATION
A
token or small amount of
consideration give
Example: Give someone a $1 for a
$1000 car
Allows a contract to be created
ILLUSORY PROMISE
An
“Open Ended” promise, which
means either party can back out
at any time
Example: “If I get a chance to
help you fix your car, I’ll be there”
TERMINATION CLAUSE
A
Illusory promise
where only “1” side has
a right to back out
ONE side can back out
for any reason and at
any time
It is an Implied Duty,
that both sides will be
fair to the other
DIFFERENCE BETWEEN
Output contract
When a buyer agrees
to purchase
everything a company
produces
Example: McDonalds
buying the rights to
the only potato that is
used for their French
fries
Requirements Contract
When a seller agrees
to sell only to certain
types of companies
Example: Microsoft
sells its operating
system to only PC
based computer
manufacturers, like
IMB or Dell
DIFFERENCE BETWEEN
Existing Public Duty
Agreeing to
something you are
already obligated to
do by law
Saying “I won’t speed
again if you don’t
give me this ticket”
No consideration for
party since you are
already supposed to
do this
Existing Private Duty
Agreeing to
something that you
are already obligated
to do within the
agreement
Example: If you
already get an
extended warranty
with a purchase, the
store cannot ask you
to pay for it
SETTLEMENT OF A DEBT
Unliquidated
Debt: Parties do NOT
agree to a debt and its amount
Liquidated Debt: Parties agree that a
debt exists and to its amount, therefore it
must be paid
PAYING LESS THAN FULL AMOUNT
OWED
Accord
and Satisfaction: Paying less
than the full amount due in
exchange for an agreement NOT to
sue
Ex) Paying $600 on a $1000 debt in
exchange for an agreement that you
will not be sued (Released)
Release: When your obligation to
another party ends or you are “Let
out” of your contract early
PAST PERFORMANCE
You
cannot bargain using something
that has already occurred in a past
contract as part of a current contract
Example: If you deliver Pepsi to a
local grocery store and give the store
a 10% discount, you cannot bargain
with the store using this past offer as
the basis for why they should pay you
more in the future to make up for
that discount. It’s a completed
agreement.
PROMISSORY ESTOPPEL
An
exception to where mutual
consideration is needed to make a
contract valid
One party may intend a gift or an
open ended promise, but
sometimes the promise may be
enforceable
Used to stop people from being
taken advantage of
ELEMENTS
Rely
on the promise made
Acted in reliance of the
promise made
Suffered a “Substantial”
economic loss
Ask for the courts help
PROMISES TO CHARITIES
Usually
an open ended gift or a
pledge
“ONLY” way a pledge can be
honored is if the charity tells the
donor what the donation will be
used for
Pledge is enforced if a legal
detriment is taken on
STATUTE OF LIMITATIONS
Time
limit for filing a lawsuit
against another person
States usually give most people 3
years to file
Purpose is because evidence may
get lost over time
DIFFERENCE
Option Contract
Firm Offer
Giving
A
collateral to
leave an offer
open
Common Law
based
Non-Retail
written
agreement
Good for 3
months
UCC law based
Retail
MODIFICATION
To
change a contract
If you want to modify (Or change),
additional consideration must be
given to be allowed to make this
change
Example: If a car dealer wants to
sell you an extended warranty “After”
you agree to a car price, you will pay
extra to get the contract modified
Questions?