Business Law

Introduction to Contracts

Case Problem• Rosalie invited an acquaintance, Jonathon, to her

high school prom. Jonathon accepted the offer and eager to please Rosalie, spent lavishly

preparing for the evening. He got a haircut, he purchased a new jacket, new shoes, and flowers.

On the evening of the dance, Jonathon arrived at Rosalie’s house and found out that she had left for the evening. Jonathon is considering suing Rosalie

for breach of contract to recover his expenses.

• Does he have a case?

Contract Law

• Enforceable promises

• Some promises do not have legal obligations, rather moral obligations

• Promisor and Promisee

• Contract law is useful to assure that the parties keep their promises; gives an innocent party a legal remedy

Basic Requirements of a Contract

• Offer:

– A proposal made by the offeror to the offeree.

Basic Requirements of a Contract

• Acceptance:

– The offeree freely agrees to be bound by the terms of an offer.

Basic Requirements of a Contract

• Legality:

– Parties cannot enforce a contract that is illegal or deals with illegal activities.

Basic Requirements of a Contract

Mutual Assent:

– The valid offer and acceptance of the parties involved.

– Both parties genuinely consent to the offer and acceptance

Basic Requirements of a Contract

• Capacity:

– The parties involved have the legal ability to enter (understand) and make a contract.

– Must be competent parties

Basic Requirements of a Contract

• Consideration:

– The willful exchange of the promised– There is a value to the exchange

Defined

• Contract

– An agreement that can be legally enforced by two or more parties exchanging promises

• Promise

– A declaration that something either will or will not happen in the future

Bilateral versus Unilateral Contracts

• Two parties in a contract:– Offeror: the party who makes the offer– Offeree: the party to whom the offeror makes

the offer

– The acceptance of the offer by the offeree binds the contract

– Example: Apartment rental

Bilateral versus Unilateral Contracts

• Bilateral contract– Contract that includes a promise

in exchange for a promise– Binding agreement exists before

either party has to perform what they promised

– Example: You hire a painter to paint your home and agree to pay him $2500.

Bilateral versus Unilateral Contracts

• Unilateral contract– Contract that includes a promise to

exchange for an act– No contract exists until the person to

whom the offer was made decides to perform; if the person does not perform there are no legal consequences

– Example: You see a sign for a lost dog with an award of $100 for his safe return. You do not find the dog.

Express vs. Implied Contracts

• Express Contract– An agreement in which the terms are

fully and explicitly stated in words– Words can be oral or written

– Example: You offer to sell your snowboard to a friend for $300 over a phone conversation; they agree to the offer

Express vs. Implied Contracts

• Implied: – It is implied based on the

conduct/actions of the parties– Steps necessary for an implied contract

• The plaintiff furnished some service or property

• The plaintiff expects payment for that service or property—and it is known that payment was expected

• The defendant had a reasonable opportunity to refuse the services or property, but did not

Quasi Contract

• An obligation created by law—not a true contract

• Purpose is to prevent one party from being unjustly enriched at the expense of another