Contract Law
Definition of a Contract
  • an agreement (written, oral, or implied) between 2 or more parties that is enforceable in court
The Elements of a Contract
  • 6 essential elements must exist for a contact to be valid in court  (otherwise the contract is voidable)
    1. Capacity to Contract
      • ability of all parties to fully understand the terms of the contract and appreciate that failure to perform the contract terms can lead to legal liability
      • who lacks the capacity to contract?
        • minors
        • very intoxicated persons
        • the mentally incompetent
    1. Mutuality:  Offer and Acceptance
      • a meeting of the minds
      • is established when one party makes an offer and the other party accepts
        • the offer must be definite otherwise we have an invitation to negotiate
        • offer can either be accepted or rejected  (can make a counteroffer)
    1. Legality
      • the contract must have a legal objective
    1. Consideration
      • something of value exchanged for something else of value
      • consideration can take 3 forms:
        • a tangible item or a promise to give a tangible item
        • performance or a promise to perform
        • forbearance or a promise to forbear
    1. Proper Form
      • oral contracts are enforceable  --  proof problem
      • some contracts must be in writing  ==>  Statute of Frauds  (e.g., purchase real estate, contracts lasting longer than 1 year, prenuptial agreements, contracts to pay another person's debts)
      • Parol Evidence Rule  --  prevents parties from modifying written agreements with alleged prior oral agreements
    1. Genuine Assent
      • both parties enter the contract freely  (i.e., no parties were subject to duress)
      • Fraud  --  intentional untrue statement made for the purpose of misleading
      • Innocent Misrepresentation  --  untrue statement the speaker believes is accurate
      • Mistakes  --  some have legal significance, others do not
        • caveat emptor  ==>  let the buyer beware, no legal significance
        • 2 types of factual mistakes
          • Unilateral  --  usually does not cancel the agreement
          • Mutual  --  enables either party to cancel the agreement
Trade Usage
  • when there is ambiguity in the contract the court will use trade usage  (i.e., the practices adhered to in a particular industry) to clarify the terms
Breach of Contract
  • failure to perform as required by the contract
  • civil wrong
    • compensatory damages
      • entitled to the "benefit of the bargain"
      • generally not entitled to pain and suffering
    • punitive damages
      • must be wanton or malicious  ==>  not often awarded in these cases
    • specific performance
      • court orders the defendant to perform the act promised
  • must show:
    • the damages were foreseeable
    • prove to a reasonable certainty that the loss was the result of the breach
    • you have tried to mitigate the loss

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this page is maintained by Reed Fisher
last updated January 15, 2011