ELEMENTS OF A CONTRACT

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ELEMENTS OF A CONTRACT

• BUSINESS LAW
• CHAPTER 5

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Objective 1 Assess Contractual Capacity

• Capacity - the legal ability to enter into a
  contract.
• Rebuttal Presumption With the assumption that
  another person has the capacity to contract,
  this law allows some people to say after the fact
  that they did not have the capacity to enter into
  a contract.

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Contractual Capacity Rules and Limitations

• According to the law, several types of people may
  have the right to disaffirm a contract
• People with mental impairments
• Minors
• Intoxicated Persons
• Other Limits on Capacity
• Convicts
• Aliens
• Citizens of other countries living in the U.S.

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Objective 2 Explain the Statute of Frauds
the Parole Evidence Rule

• Statute of Frauds a state law that requires
  that certain contracts be in writing.
• A contract can be a letter, a sales slip, an
  invoice, or several words placed on a check.
• A contract must identify the place, date,
  parties, subject matter, price and terms, and
  intent of the parties.

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Contracts That Must Be In Writing

• Statute of Requirements - Adds a requirement to
  the six elements, some contracts must be in
  writing to be enforceable.
• Contracts to Pay Somebody Elses Debt
• Contracts to Pay Debts of a Person Who Has Died
• Contracts Requiring More Than a Year to Perform
• Contracts in Consideration of Marriage
• Contracts for the Sale of Goods
• Contracts to Sell Real Property

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Special Rules for the Interpretation of Contracts

• The Parole Evidence Rule Says that evidence of
  oral statements made before signing a written
  agreement cannot be presented in court to change
  or add to the terms of that written agreement.
• The Best Evidence Rule Requires that the
  original written agreement be used as evidence in
  court.
• Real World Rules Read the Fine Print

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Objective 3 List Minors Contractual Rights
and Responsibilities

• Minors can disaffirm contracts even when they
  have used poor judgment.
• To Disaffirm a Contract to show the intent not
  to live up to the contract.
• Ratification the agreement to go along with a
  contract that could have been avoided.

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Minors Contractual Rights and Responsibilities

• Exceptions to the General Rule Minors are held
  to contracts for things required by law, such as
  car insurance.
• Minors as Drivers Minors must meet certain
  requirements before earning a license.
• Minors as Students Students may be searched in
  a school setting, students may not print certain
  matters in a school sponsored newspaper.

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Rights and Duties of Parents Guardians

• The law protects children from abusive parents,
  the state can act as a childs parents when
  natural or adoptive parents cannot or will not
  perform their parental duties.
• The law also states that both natural and
  adoptive parents must provide children with
  necessaries.

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Objective 4 Define Legality Illegality

• Effect of Illegality a court will not help any
  party to an illegal contract.
• Illegality in Entire Agreement if a contract
  cannot be divided, then anything illegal makes
  the entire contract illegal.
• In Pari Delicto and Divisible Contracts If the
  contract is divisible, the court may enforce
  parts of the agreement that are legal and cancel
  the parts that are not.

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Agreements That Break Statutes

• Laws that make some agreements illegal because
  they violate the states civil or criminal
  statutes.
• Civil Criminal Statutes
• Usury Statutes
• Gambling Statutes
• Sunday Statutes
• Licensing Statutes

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Agreements Contrary to Public Policy

• Public Policy a legal principle that holds that
  nobody should be allowed to do something that
  harms the public.
• Agreements that Unreasonably Restrain Trade
• Agreements Not to Compete
• Agreements for Price Fixing
• Agreements to Defeat Competitive Bidding

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Agreements Contrary to Public Policy

• Agreements to Obstruct Justice
• Agreements Inducing Breach of Duty or Fraud
• Agreements to Gve Up the Right to Litigate or
  Arbitrate
• Agreements Interfering with Marriage

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Business Law

• Chapter 5 - Consideration

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Objective 5 Analyze the Requirements for Valid
Consideration

• Consideration the exchange of benefits and
  detriments by the parties to a contract.
• A benefit is something a party receives in the
  agreement.
• A detriment is something a party gives up in the
  agreement.
• Forbearance not doing what you have the right
  to do.

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Requirements for Valid Consideration

• Each side in the agreement must give up something
  and get something in exchange.

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Characteristics of Consideration

• Bargained-for Exchange when a promise is made
  in return for another promise, or when an act is
  exchanged for an act or a promise not to act.
• Something of Value The law does not set value
  in a contract, all that matters is that both
  parties agree freely on the value and the price

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Characteristics of Consideration cont.

• Something of Value cont.
• Unconscionable contract an agreement in which
  the consideration is so out of line with the
  actual value of the subject matter and so unfair
  it shocks the courts conscience.
• Adhesion Contract a take-it-or-leave-it offer
  made by a party who holds most of the power in a
  bargaining session.
• Legality Unconscionability the law requires
  that the consideration that passes from one party
  to another be legal.

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Objective 6 Define the different types of
Consideration

• Money as Consideration
• Property and Services as Consideration
• A promise not to sue
• Charitable Pledges

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Problems with Consideration

• Disputed Amounts When the parties disagree on
  how much money is due Accord and Satisfaction is
  a legal way to settle contractual disputes by
  which one party agrees to accept less than the
  amount due as full payment.
• Undisputed Amounts If the parties have agreed
  to a set amount, then accord and satisfaction
  does not apply.

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Objective 7 List Exceptions to the
Requirements of Consideration

• Promises Under Seal
• Promises After Discharge in Bankruptcy
• Debts Ended by the Statute of Limitations
• Promises Enforced by Promissory Estoppel
• Promissory Estoppel the principle that a
  promise made witouth consideration may
  nonetheless be enforced to prevent injustice.
• Option

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Agreements Without Consideration

• Illusory Promises
• Future Gifts and Legacies
• Past Consideration
• Preexisting Duties
• Promise to Attend a Social Engagement

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Objective 8 Compare Unconscionability
Illegality

• Illegality - If consideration is illegal, the
  contract is void.
• Unconscionability consideration may be legal
  but unconscionable because the amount paid is so
  unfair that it shocks the conscience of the
  court.