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Business Law and the Legal Environment for a New Century Alternate Edition
Quote of the Day
“The whole duty of government is to prevent crime and to preserve contracts .” Lord Melbourne, British Prime Minister
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Business Law and the Legal Environment for a New Century Alternate Edition
The Purpose of a Contract
Contracts exist to make business matters more predictable.
Judicial Activism vs. Judicial Restraint • Judicial restraint makes the law less flexible but more predictable.
• Judicial activism makes the law more flexible but less predictable.
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Business Law and the Legal Environment for a New Century Alternate Edition
Elements of a Contract
Agreement • One party must make a valid offer, and the other party must accept it Consideration • There has to be bargaining that leads to an exchange between the parties.
Legality • The contract must be for a lawful purpose.
Capacity • The parties must be adults of sound mind.
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Business Law and the Legal Environment for a New Century Alternate Edition
Contracts
Definition • A promise that the law will enforce. Development of Contract Law • Common law once required all contracts to be in writing, with a seal affixed.
• Later, some payment was required before a contract could be enforced.
• Mutual promises became enforceable in the 1600’s.
• By the 1900’s, courts began to consider the fairness of contracts before enforcing them.
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Business Law and the Legal Environment for a New Century Alternate Edition
Types of Contracts (or Agreements)
Bilateral vs.
Unilateral Express vs.
Implied Executory vs.
Executed vs.
Unenforceable vs.
Voidable vs.
Void Valid Bilateral and Unilateral Contracts • Bilateral : both parties make a promise.
• Unilateral : one party makes a promise that the other party can accept only by doing something.
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Business Law and the Legal Environment for a New Century Alternate Edition
Types of Contracts
(cont’d) Express and Implied Contracts • Express : the two parties explicitly state all important terms of their agreement.
• Implied : the words and conduct indicate that the parties intended an agreement.
Executory and Executed Contracts • Executory : when one or more parties has not fulfilled its obligations.
• Executed : when all parties have fulfilled their obligations.
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Business Law and the Legal Environment for a New Century Alternate Edition
Types of Contracts
(cont’d) Valid, Unenforceable, Voidable, and Void Agreements • • Valid : satisfies the law’s requirements.
Unenforceable : when the parties intend to form a valid bargain but some rule of law prevents enforcement.
• Voidable : when the law permits one party to terminate the agreement.
• Void : one that neither party can enforce, usually because the purpose is illegal or one of the parties had no legal authority.
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Business Law and the Legal Environment for a New Century Alternate Edition
Promissory Estoppel
Even when there is no contract, a plaintiff may use promissory estoppel enforce the defendant’s promise if he to can show that: • The defendant made a promise knowing that the plaintiff would likely rely on it.
• The plaintiff did rely on the promise; and • The only way to avoid injustice is to enforce the promise.
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Business Law and the Legal Environment for a New Century Alternate Edition
Quasi-contract
Even when there is no contract, a court may use
quasi-contract
to compensate a plaintiff who can show that: • He gave some benefit to the defendant.
• He reasonably expected to be paid for the benefit and the defendant knew this; and • The defendant would be unjustly enriched if she did not pay.
The damages awarded are called
quantum meruit
, meaning that the plaintiff gets “as much as he deserved.”
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Business Law and the Legal Environment for a New Century Alternate Edition
Sources of Contract Law
Common Law Uniform Commercial Code • UCC Article 2 governs the sale of goods. “Goods” means anything moveable, except for money, securities, and certain legal rights.
• In a mixed contract, Article 2 governs only if the primary purpose was the sale of goods.
Restatement (Second) of Contracts
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Business Law and the Legal Environment for a New Century Alternate Edition
“If you understand the contract issues that courts scrutinize, the agreement you draft is likelier to be enforced. You thus achieve greater control over your affairs -- the very purpose of a contract.”
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Business Law and the Legal Environment for a New Century Alternate Edition