Placeholder Image

Subtitles section Play video

  • >> All right, in the next few weeks,

  • we're gonna talk about contracts.

  • In chapter 7, we're gonna focus in on

  • the first two elements of contracts--

  • agreement and consideration.

  • Contract law is based on the common law,

  • which we've talked about already,

  • except for contracts for the sale of goods,

  • which are governed by statutory law,

  • specifically the Uniform Commercial Code, or the UCC.

  • The idea is that they would provide stability

  • and predictability for commerce.

  • Contract is a promise or set of promises for a breach

  • to which the law provides a remedy,

  • or the performance of which the law

  • in some way recognizes as a duty.

  • The Objective Theory of Contracts

  • is applied by the court,

  • and it looks to the circumstances

  • to determine the intent of the parties.

  • Rather, it looks at the objective facts,

  • including what a party may have said

  • when entering into the contract,

  • how the party acted or appeared,

  • and circumstances surrounding the transaction.

  • To have a valid, enforceable contract, you need an agreement,

  • which consists of an offer and acceptance, consideration,

  • which is a bargained for exchange of something of value,

  • contractual capacity, and legality.

  • Legality has to do with purpose of the contract.

  • It has to be legal at the time of execution.

  • There are a couple defenses up front to enforceability

  • of a contract, voluntary consent--

  • in other words, a person shouldn't be forced

  • to enter into the contract-- as well as the form.

  • Some contracts have to be in writing

  • under the Statute of Frauds,

  • which we'll talk about more later on.

  • There are different types of contracts.

  • A bilateral contract is a promise for a promise.

  • The only thing that the offeree has to do to form the contract

  • is to make a promise to perform.

  • And a unilateral contract,

  • the only way the offeree can accept the offer

  • is by doing the act that was requested in the offer.

  • In other words, a unilateral contract is a promise

  • for an act.

  • Formal versus informal contracts--

  • a formal contract is a contract

  • that has to be in writing to be enforceable.

  • All other contracts are informal.

  • Express versus implied--

  • "express" means expressed in words,

  • orally or written.

  • And "implied" means circumstances

  • imply that there's a contract.

  • Basically, requirements are that the plaintiff

  • furnished goods or services expected to be paid,

  • and the defendant had a chance to reject

  • those goods or services but didn't.

  • Executed verses executory contracts--

  • an executed contract is where all the parties

  • have done everything they're supposed to.

  • An executory contract, at least one of the parties

  • hasn't done at least one thing.

  • Talk about the three "V"s-- valid, void, and voidable.

  • A valid contract is an agreement, consideration,

  • contractual capacity, and legality.

  • In other words, a valid contract has all four elements

  • of a contract.

  • A void contract is really an oxymoron

  • in that it's not a contract to start with.

  • And a voidable contract is an unenforceable contract.

  • It's a contract that's valid to start with,

  • but one or both of the parties could back out of it.

  • Basically, an example that would be a valid contract

  • that a minor enters into is,

  • so therefore the minor could avoid it,

  • or that would be a voidable contract.

  • Quasi contract are contracts implied in law

  • is that you're gonna see this one

  • when there is no actual contract.

  • It's an equitable remedy,

  • which we've talked about earlier in the semester.

  • It's designed to prevent unjust enrichment

  • by one of the parties.

  • One example would be if there was a-- not a contract,

  • but somebody expected to get paid for their services,

  • then they would get compensated in quantum meruit.

  • In other words, they'd get the reasonable value

  • of their services.

  • There are limitations.

  • For example, if the other party was enriched,

  • but it was, for some unnecessary reason-- neglect, misconduct--

  • for example, if I provided something to another party

  • that they didn't ask for,

  • and they didn't have an opportunity to reject,

  • that would mean they necessarily are forced to pay for it.

  • Let's focus in on the element of agreement.

  • As we said earlier, that's offer and acceptance.

  • The requirements for an offer are a serious intent,

  • definiteness, and a communication of the offer

  • from the offeror to the offeree.

  • In terms of intent, a contract is judged by

  • what a reasonable person in the offeree's position

  • would conclude about the offer.

  • And here are some things that are not offers--

  • expressions of opinion,

  • statement of some future intent to enter into a contract

  • is not an offer,

  • preliminary negotiations or invitations to negotiate,

  • and advertisements.

  • Typically, you know, for example if I advertise to sell my truck,

  • and a hundred people responded,

  • I wouldn't be bound to sell it to all of them.

  • It would be an invitation for them to negotiate.

  • An agreement to agree can, under the modern view,

  • be enforceable if the parties intended to be bound.

  • A preliminary agreement can be binding if the parties

  • had agreed upon all the essential terms.

  • The offer has to be definite.

  • The terms expressed or implied need to identify the party,

  • the object or the contract, consideration to be paid,

  • and things like the time of payment, delivery, performance.

  • An offer can require specific terms

  • to make the contract definite,

  • and a court can supply missing terms if the parties intend

  • to form a contract.

  • The offer needs to be communicated to the offeree.

  • The offeree's knowledge of the offer can be either direct

  • or through an agent.

  • And an offer is terminated by the actions of the parties

  • or by operation of law.

  • One of the things the offeror could do is revoke the offer.

  • And the offer can be withdrawn any time

  • prior to the acceptance, unless it's irrevocable.

  • And typically, the offer is effective when the offeree

  • or the offeree's agent receives it.

  • More on termination by action of the offeree.

  • The offeree could reject the offer.

  • That would be either expressed or implied.

  • The offer could be terminated by a rejection counter-offer.

  • So if somebody offered to sell you something for $100,

  • and you responded, "I wouldn't pay more than 50,"

  • that would be a rejection and potentially a counter-offer.

  • Mirror Image Rule says, under common law,

  • any change in the terms automatically terminates the offer.

  • So if I were to accept with different terms,

  • that wouldn't be a contract.

  • The offer could be terminated by operation of law

  • through lapse of time.

  • The offer might be open for a specific period of time.

  • Destruction or death--

  • destruction of the subject matter,

  • death of the offeror or offeree.

  • Or even some, what used to be legal,

  • now illegal purpose for the contract.

  • Acceptance is voluntary.

  • It's made by the offeree.

  • It shows their assent or agreement to the contract,

  • and specifically the terms of that offer.

  • This is the Mirror Image Rule,

  • that the acceptance mirrors the offer.

  • Silence can be acceptance.

  • In some cases, when the offeree has a duty to speak,

  • he takes the benefit of services with the opportunity to reject

  • and doesn't, that would be considered an acceptance.

  • Or that's the way the parties have done it in the past.

  • In a bilateral contract,

  • communication of the acceptance is necessary

  • because of the mutual exchange of promises.

  • Unilaterally, acceptance is evident, because it's an action.

  • You don't need to notify the other party.

  • Instead, your notice is your performance of the act.

  • In bilateral contracts, acceptance is timely.

  • If it's made before the offer's terminated,

  • there's the Mailbox Rule,

  • which basically says the acceptance is effective

  • upon getting into the mail.

  • Could be some issues with that, you know, if the other party

  • said the acceptance isn't effective

  • until it actually gets to them.

  • A party could specify how they want acceptance to be made.

  • And in that case, then it would be an acceptance

  • if it wasn't delivered in a way that was authorized.

  • Could be online offers.

  • If there is, then the seller's web site

  • should include a hyperlink

  • to the full details of the offer.

  • Here are some things to include pretty much in any contract,

  • but this can be an issue in online contracts as well--

  • how the other party would accept payment, return policy,

  • a disclaimer concerning the liability,

  • a limit on the remedies that the other party can invoke

  • if there's a breach of contract,

  • privacy policy, because you potentially are providing

  • identifying information over the internet,

  • and forum and choice-of-law clauses,

  • if there is a dispute where it would be settled

  • as well as which law of which particular jurisdiction

  • would apply.

  • Click-on agreements.

  • There's a binding contract when a party clicks on a box,

  • indicating they accept or agree.

  • That could be through web site or software.

  • Law doesn't require that the party actually read

  • all of the terms, just that they had access to the terms.

  • Courts generally enforce click-on agreements,

  • as well as shrink-wrap agreements.

  • So you could have software inside of a box, sealed up,

  • and the parties agree, by opening the box

  • or installing the software, to the terms.

  • Basically they don't necessarily see the terms

  • in shrink-wrap agreement until afterwards.

  • And the court reasons that they still would have an opportunity

  • to reject it if they see the terms.

  • Browse-wrap terms.

  • It says, "Unlike click-on agreements,

  • "browse wrap-terms do not require assent

  • "and are usually unenforceable."

  • What that means is that these are over the internet,

  • and somebody would agree to terms,

  • and if it's not possible for them to see

  • what the terms their agreement is about beforehand,

  • then the court typically doesn't enforce that.

  • There's the E-SIGN law back in 2000,

  • it gives e-signatures and e-documents legal force.

  • So you can have documents that are electronic

  • that would be the same as paper in terms of enforceability.

  • For an e-signature to be enforceable,

  • the contracting parties must have agreed to use e-signatures.

  • And it doesn't apply to all documents.

  • UETA-- "Uniform Electronic Transaction Act"--

  • is it purposes to remove barriers

  • to forming electronic commerce,

  • not create new types of contracts.

  • And an e-signature could be anything

  • from electric sound symbol,

  • process associated with a record.

  • And a record is information that's inscribed

  • on a tangible medium or stored in electronic

  • or other medium that is retrievable in visual form.

  • UETA doesn't create new rules,

  • but rather enforces real world rules on electronic contracts.

  • It only applies to e-records and e-signatures

  • related to a transaction.

  • It doesn't apply to wills or testamentary trusts.

  • And it doesn't apply unless each party has previously agreed

  • to conduct electronic transactions.

  • But that could be implied by the conduct

  • of the parties or prior dealings.

  • E-SIGN explicitly refers to UETA and provides

  • that E-SIGN is preempted by state passing of UETA,

  • but the state law must conform to minimum of E-SIGN procedures.

  • Looking at consideration, a second element.

  • It must be something of legally sufficient value.

  • It could be a promise, performance,

  • or promise to forbear, not do something.

  • It has to be bargained-for-exchange.

  • It provides the basis for the bargain,

  • something that has legal value.

  • As we mentioned, that promise has to be legally detrimental

  • to the promisee or legally beneficial to the promisor.

  • Court typically doesn't get involved in the adequacy

  • or the amount of the consideration.

  • It doesn't really protect people who enter into unwise contracts,

  • pay too much for something,

  • unless they determine that it's shockingly inadequate.

  • This would be called "unconscionability."

  • Sometimes, something sounds like consideration but not really.

  • If somebody had a preexisting duty to do something,

  • they can't promise to do it again for more consideration.

  • There are some exceptions to that.

  • Past consideration-- if it was done for something

  • that was already paid for.

  • An illusory promise-- it sounds like a promise.

  • You know, "I promise to make a promise in the future."

  • It uses the word "promise" but it's really illusory.

  • It could be settlement of claims.

  • Accord and satisfaction is when you've got a creditor--

  • debtor, typically--

  • and the creditor agrees to accept something different

  • than the debtor originally promised to pay

  • to discharge the debt.

  • Could be a release, covenant not to sue.

  • And then promissory estoppel--

  • probably one of the hardest concepts in the chapter.

  • When somebody makes a promise,

  • and the other party relies, to their detriment--

  • and justifiably relies-- and that reliance is substantial,

  • then the court would enforce that.

  • Even in situations where the parties don't have a contract.

  • So that's the end of chapter 7.

>> All right, in the next few weeks,

Subtitles and vocabulary

Click the word to look it up Click the word to find further inforamtion about it