Legal environment of business Paper
TonyZZ
contracts_1.pptContracts
A contract
is based
on promises
voluntarily
made
Do all
promises
give rise to
contractual
obligations?
- Offer
- Acceptance
- Consideration
- Capacity
- Legality
- Unilateral and bilateral
- Expressed and implied
- Valid
- Void and voidable
- Unenforceable
PROMISE
FOR AN
ACT
Reward is
an example
PROMISE
FOR A
PROMISE
ART AGREES TO PAINT HOUSE AND BOB AGREES TO PAY $1,000.
Bill and Linda meet at a party. He was
74, and she was 49. A month later, they
started to talk about marriage. Linda was
concerned about quitting her job, and Bill said he would give her whatever she needed. One day, she walked into the bathroom with a handwritten note containing financial terms for a marriage, and he signed it. They got married, but Bill filed for divorce 1 ½ years later.
What is the issue?
Does the contract given to and signed by the husband in the bathroom constitute a valid and enforceable agreement that was freely
entered into?
What kind of agreement was it, unilateral or bilateral?
It was unilateral because it was an agreement to marry.
How did the court rule?
To be enforceable, the agreement must be freely entered into without duress or undue influence. When marriage is contemplated, the parties must do so knowing of the assets of the other. In this case, the parties never disclosed their assets, liabilities or income. The husband also never had the chance to consult an attorney. Therefore, the agreement is not enforceable.
- Stated in direct
terms
- Can be written
or oral
I will sell you my sports car for $25,000
When you
go to the
doctor, you
impliedly
agree to pay
for services.
Plaintiffs cared for the decedent for
several months before he died. They
claimed they were promised payment
for services. Defendant maintains that
they are a family member so services
were gratuitously rendered.
Contract implied-in–fact is to prevent
unjust result. Normally, there is a presumption
that services rendered by a family member
are free. However, contract may be implied
when service are performed with expectation
of payment. In this case, plaintiffs can point
to no evidence that they agreed upon a
price with the decedent, what form
payment would take, or when payment
would be made, so a contract should
not be implied.
Satisfies all
requirements of
an enforceable
agreement
Binds one party
but gives the other
option to withdraw
Element of
contract has
no legal force
or effect
ILLEGAL
CONTRACT
Satisfies elements of
a valid contract but
won't be enforced
by court
Most contracts
are oral in nature
and can be enforceable.
The major problem with oral contracts is proving the existence of the agreement.
Oral contracts require the courts to assess the credibility of the parties.
Are agreements where
people pool their money
to buy lottery tickets
enforceable or illegal
betting contracts?
Two sisters signed an
agreement that they would
share the winnings in
a lottery. A winning ticket
was bought for $500,000 and
one of the sisters did not
get a share and sued.
What is the law
in Connecticut
on betting
contracts?
All wagers in which
the consideration
is money won or
bet shall be void.
What did
the plaintiff
argue?
The agreement was not a betting contract but a mutual agreement to share profits from legal forms of gambling.
What did
the court
say?
The law was not applicable to
this case because the parties
were not betting but promising to
share equally in the winnings
they received from
legalized gambling.
Proposal by one party to
another manifesting an
intention to enter into a
valid contract
- Intent to contract
- Terms must be definite
- Offer must be
communicated
This is an
objective
test
Plaintiff purchased 15 cans of Pepsi
and then borrowed $700,000
which he sent to Pepsi in exchange
for the jet. Pepsi sent the money
back claiming that their ad
was only a joke.
“No objective person could reasonably conclude that commercial actually
offered consumer a Harrier Jet. The possibility that it could be bought
for $700,000 was the first clue that
the deal was too good to be true.”
- Subject matter
- Quantity
- Price
Advertisement
at a stated price is
merely invitation
to negotiate
FRAUDULENT
ADVERTISING
IS ILLEGAL
How long does an offer stay open?
An offer can be revoked anytime before its acceptance, or it can terminated by its own terms.
I will give you 5 days
to make up your mind. At the end of that period, the offer
terminates.
An acceptance is
a manifestation
by the offeree to
be bound by the
terms of the offer.
Acceptance is valid
only when it has
been communicated
to the offeror and
is unconditional.
I can’t afford
$1,000 but I will
give you $800.
A counter offer rejects
the original offer and
becomes an offer that
the other person can
accept or reject.
The defendant refused to pay
on a life insurance policy
following a fatal car accident.
The carrier argued that a
contract was not formed
before the husband's death.
The defendant offered accidental death
insurance with a mortgage.
Once enrolled, the insured would
get a certificate that had an effective date.
The plaintiff mailed the form on April 5 and
was killed on April 22. Carrier argued that
form was only an offer to contract that
was accepted with the issuance of the
policy.
An insurance application is an offer which the insurer may accept or reject. In this case, however, a reasonable person would have thought that the enrollment form was the offer that she would accept by completing and mailing the form back. This was an enrollment form and not an application.
constitute
acceptance?
Can
CAN I MAIL YOU AN INSURANCE POLICY AND SAY “IF I DON’T HEAR FROM YOU, WE HAVE A DEAL”?
Offeror has no power to impose duty upon offeree to act.
RECORD CLUB
If a person makes
the highest
bid at an auction, is that
bid a mere offer or
an acceptance?
Well…it depends.
- With Reserve
- Without Reserve
2/1 make offer
2/2 receive offer
2/3 mail acceptance
2/4 mail revocation
2/5 receive revocation
2/6 receive acceptance
What is the effect of a fax
to the agent of a seller to the agent of the buyer when there is no record of the receipt for the transmission?
The agent for the buyer claims that he faxed an agreement
of sale to the seller but had no
proof that the transmission went through. The seller claims that he called and said
that he no longer wanted to sell the property.
What is
the law
on faxes?
Acceptance by telephone or
fax is governed by the same
rules as when the parties are in
each other’s presence. The
communication must be
substantially instantaneous and
the communication must
be two way.
For the communication to be two-way, one
party must be able to readily determine that
the offeree is aware of the communication. If
not, then the mailbox rule will apply. Since
there was no proof in this case that
the fax was sent, the burden is on the party
who sent the transmission to prove it. The
burden has not been meet in this case, so
there is no contract.
THAT SOMETHING
MUST HAVE
LEGAL VALUE
BENEFIT
CAN BE A
SERVICE
BENEFIT DOES
NOT HAVE
TO BE
ECONOMIC
- Illusory promise
- Moral obligation
- Past consideration
An illusory promise
is one in which the act of performance is left solely up to one party.
I will buy as many books from you
as I want at $10
a book.
A moral obligation is insufficient to support consideration.
A parent promise to give his son $1,000
out of love and affection.
Past consideration is a current promise to pay for something in the past.
Jim promises on his death bed to give John $10,000 for the help he has given over the years.
BUILDER AGREED TO DO
NOTHING MORE FOR
PROMISE TO PAY
MORE MONEY
Is the cosigner of a loan, primarily or
secondarily liable
in case of a default?
- Surety
- Guarantor
I will give
you $100 on
your birthday
Elvis agreed to pay for the divorce of the mother of his former girlfriend and to pay
off the mortgage on her home.
Plaintiff then filed for divorce and
agreed to give her husband the equity in
her house for his turning over the deed
to her. Presley then died before
paying the obligations and the Estate
refused to honor the agreement.
Why is Elvis’ promise to pay
the obligations of his mother’s girlfriend
supported by
consideration?
A promise which a person
should reasonably expect to
induce action or forbearance
on the part of the other and
which does induce such
action is binding if injustice
can be avoided only by
enforcement of the promise.
While Presley’s promise induced
the plaintiff to assume the
mortgage as part of the
settlement agreement, it was
not binding until approved
by the court. So, the plaintiff's reliance was not justified.
A party who does have capacity to contract but lacks mutual assent to bargain.
Mere psychological
or emotional problems are not enough.
CHILD MUST DISAFFIRM
WITHIN REASONABLE
TIME AFTER
REACHING MAJORITY
Milicic was an 18 year old basketball
player and the second round pick of the
Detroit Pistons. He entered into an endorsement contract when he was 16 whereby the defendant would pay Milicic money and products in exchange for endorsements. Four days after he turned 18, Milicic tried to buy out his contract, but the defendant refused. He then disaffirmed the contract and began returning everything he had received.
Pennsylvania allows minors
to disaffirm a contract unless
it is for a necessary as long
as it is done within a
reasonable time after
reaching majority.
Milicic was a child living
in a foreign country when
he signed the contract.
Minors should not
be bound by their
mistakes.
.
An illegal contract is
one that calls for the
performance of a
crime, tort or is against
public policy.
An illegal
contract is
void
Is an unlicensed
entity that performs
services without a
license void?
The person may
be precluded from
recovering a fee
for his services.
Farrell was an architect who worked on a condo project of the defendant for 25% of the profits. Some of the work was done in Michigan where he was licensed, and some of the work was done in Idaho were he was not licensed. Farrell was fired, and the defendant refused to pay him, claiming that the contract was illegal since Farrell was not licensed in that state.
Idaho does not allow a court
to aid a party to an illegal
contract. The state requires
an architect to be licensed
in order to practice in that
state.
.
Such statutes must be narrowly
construed. Since Farrell was not
licensed in Idaho before 2/17/04,
service rendered before then were
illegal. His services after getting
a license were legal, and he is
entitled to payment for them.
PROBLEM THREE - B
Estelle played in a tournament.
A hole in one was rewarded
with a car. Estelle’s ball was
rolling into the hole when a frog
jumped out and hit the ball. The
judge disallowed
the shot.
Contract says judge
shall be sole arbiter
of dispute
Contest rules say judge
makes final decision over
disputes, and he ruled the shot
no good. “In and through”
means “completely through.”
The decision of the judge is binding
unless fraud, gross mistake
or lack of good faith.
ELECTRONIC SIGNATURE IN GLOBAL
AND NATIONAL COMMERCE ACT
Electronic
signature
is valid
- Specially made goods
- Goods received by buyer
- Person admits oral contract
- Unjust enrichment
The purpose of the Code is to
make uniform laws involving
commercial transactions
involving sales, banking
and secured transactions.
The Code has
nothing to do
with real estate
transactions.
Article Two deals
with the sale
of goods.