Project 2: Making Decisions That are Legal and Ethical

Learning Topic

Contract Formation and Execution

Transcript

Contract law is a component of civil law that concerns the legal principles governing the

exchange of goods or services between individuals or businesses. At its heart, contract law

involves how legally enforceable promises are formed and executed.

A promise is a declaration by a legal person (called the promisor) to perform or forbear

from performing specified act(s). The recipient of the promise (called the promisee), upon

a promise being made, has rights to expect (and often to demand) that the promise be

performed. Whether these rights to expect and demand performance are moral or legal

rights depends on whether the promise was made in the context of a valid and

enforceable contract. Only if the legal requirements of a contract are satisfied, or if other

legal remedies are available, will a promise be enforceable in a court of law.

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The law of contracts provides a means of distinguishing between types of promises that

create moral obligation (e.g., a promise to meet a friend for coffee) and those that also

create legal obligation (e.g., a promise to your bank to pay the mortgage acquired on your

home).

Within the United States, there are two major sources of domestic contract law: the

Uniform Commercial Code (UCC) and the common law. Depending on the subject matter

of the contract, such as if the contract involves the purchase of tangible personal property

("goods") or the hiring of an individual for employment ("services"), one will look to

specific sources of law to determine whether the legal promise is enforceable.

Contracts for the sale of goods are governed by Article 2 of the UCC. Most contracts that

are not for the sale of goods—such as contracts for employment, real property, insurance,

and so forth—are governed by the common law, which is generally summarized in the

Restatement of Contracts (Restatement).

Once one identifies the applicable source of the contract law—that is, whether the

contract is governed by the common law or by the UCC—then, one can determine if the

particular promise is valid and enforceable under the applicable rules contained in that

source of law. Although the UCC and the common law do overlap, there are many key

differences between the two sources of law as regards many areas of contract law,

including the formation and performance of a contract, the requirements for breach of a

contract, the enforceability of a contract, and the remedies available for the victim of a

breach.

The legal enforceability of a particular promise thus hinges on the rules contained in the

relevant source of law that are applicable to the subject matter of that particular promise.

The promise is, in many ways, the cornerstone of societal order. As stated by distinguished

jurist Roscoe Pound, the "social order rests upon the stability and predictability of

conduct, of which keeping promises is a large item" (Pound, 1959). Contract law provides

the mechanism for determining when a promise is valid and enforceable in a court of law.

Transcript

References

Pound, R. (1959). Jurisprudence (Vol. 3). Saint Paul, MN: West Publishing Co.

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Choose the best answer to each question:

Question 1

Which of the following is the inducement to enter into a contract that

involves providing something of value, often through providing a benefit,

or incurring a detriment?

offer

consideration

acceptance

rejection

Question 2

If mental capacity is absent when contracting, then—generally speaking—

what happens?

the contract is void

nothing happens

the contract becomes voidable

the contract is unenforceable

Question 3

Which type of contract must be in writing to be enforceable under the

statute of frauds?

a construction agreement for one month of

Check Your Knowledge

a contract for the sale of goods under $500

a contract for services that can be completed in less than one year

a contract for the sale of an interest in land

Question 4

Which of the following is the best definition of "undue influence"?

Undue influence arises when one party unfairly takes advantage of

another party by using a position of trust, influence, or confidence.

Undue influence means the use or threat of force to convince a

person to act according to one's wishes.

Undue influence involves an intentional misstatement of the

material (important) fact that induces one to rely justifiably to his or

her injury.

Undue influence is a rule requiring that certain contract be in writing

to be enforceable.

Question 5

An individual is relieved from her duty to perform a contract in which of

the following scenarios?

the contract is void

the contract is voida material breach by the other party

a waiver or release by the other party

all of these choices are correct

Resources

Contract Modification

(https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-

mba630/learning-resourcelist1/contract-modification.html?ou=770958)

Contract Law

(https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-

mba630/learning-resourcelist1/contract-law.html?ou=770958)

Licenses and Attributions

Business Law: An Introduction (https://thebusinessprofessor.com/business-law-an-

introduction/) , by TheBusinessProfessor.com, Jason M. Gordon & Colleagues has been

adapted with permission from Jason M. Gordon. © Business Professor, LLC.

The video What is a Contract? has been adapted with permission from Jason M. Gordon.

© 2016, Business Professor, Inc

The video Influential Sources of Contract Law

(http://thebusinessprofessor.com/influential-sources-contract-law/) has been adapted

with permission from Jason M. Gordon. © 2016, Business Professor, Inc.

© 2023 University of Maryland Global Campus

All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity

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