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Business Law- Contract

Chapter 9— the nature and origins of contracts

W HAT IS A CONTRACT?

Contract=K= a legally enforceable promise or set of promises.

Elements= offer+ acceptance+ consideration

Most contracts are not written, except real estate, stock, etc.

U NIFORM C OMMERCIAL C ODE (UCC)

a.Not really uniform because a lots of alternatives, different States look it in different ways, and

each States adopt portion of the UCC. Indiana did not adopt UCC.

b.UCC Article 2= applies to all contracts for the sale of goods. Does not cover service, real estate,

stock and bods.

c.If not UCC, then common law.

d.Software can be a good if it contains in a tangible medium and sold in a mass scal

e. Customized

software cannot be a sale of good.

C ONTRACTS FOR THE I NTERNATIONAL S ALE OF G OODS (CISG)

o International UCC

o Only apply to merchant

o Merchant- somebody usually deals in the good in questions. In UCC, merchants are expected to have higher standards. Both buyer and seller can be a merchant.

4T YPES OF C ONTRACTS BASED ON ENFORCEABILITY

1.Valid= meets all legal requirements, it is enforces in court.

2.Unenforceable=meets the basic legal requirements but will not be enforced sue to some other

legal rule—some contracts have to be written. Real estate contracts have to be written,

contracts have more than $500 value have to be written.

3.Voidable=lacks capability to fully bond to the contract. For example: Minors-under 18, legally

insane.

4.Void= contracts to do illegal act. Example: contracts to steal a car.

U NILATERAL VS.B ILATERAL

--- Unilateral= one party makes a promise

--- Bilateral= both parties make promise

E XECUTED VS.E XECUTORY

o Executed= all parties fully finish performed their duties under the contract

o Executory=not fully performed

o Partially executory= only finish some parts

C ONTRACTS’ AS THEY RELATE TO THE T ERM

?Express Contracts= the parties have directly stated its terms at the time the contract was formed

?Implied Contracts= when the surrounding facts and circumstances indicate that an agreement has in fact be reached.

D OCTNNES G IVING

1.Quasi Contract/ Quantum Meruit—deals with equity

?Elements= benifit6+ receive it+ fairness not to pay

?not an actual contract, but is a legal substitute for a contract formed to impose equity between two parties

?Always cannot get full amount asked for

2.Promissory Estoppel – promise

?Elements= promise+ reasonable reliance+ act of forbearance+ fairness

?Forbearance= not to do something. Act= to do something

o There are no similarities between quasi contract and promissory estoppel.

CIGS vs. UCC

Chapter 10—Creating a Contract Offers

W HO ARE THE P LAYERS?

1.Offeror= person making the offer, either buyer or seller. Has 2 powers:

a.make the offer

b.revoke the offer

2.offeree= the other party. Has 2 powers:

a.accept the offer

b.reject the offer

O FFER

Elements= intent + definiteness + communication

1.Intent= objective manifestations of willingness to be bond on a contract based upon the

offeror’s therm. In the contract law, the offeror is the master of the contract.

https://www.wendangku.net/doc/eb13141434.html,munication= the communication between offeror and offeree, both parties are willing to

be bond. The officious intermeddler cannot form a contract, and there is no offeree.

3.Definiteness= specify. The more specific the better.

Offer is effective when communicated with offeree.

S PECIAL R ULES WITH O FFERS (4T YPES)

1.Advertisements= not an offer, but a invitation to negotiate or to make an offer. It’s a business

rule. It’s an offer if highly specific, extraordinary and unfair without payment happened.

2.Auction = invitation to offer

?Item on stand = the item stand in the auction, whatever you want to sell

?Who can reject—who start the auction, the person who want to sell the stuff by auction

?Sold—accept the offer. The person who buys the stuff is an offeror, who sell it the offeree, because buyer offer the price and the seller accept the price and sell it.

?Exceptions→without reserve—not reserve right to reject, become an offer

3.Reward = offer for unilateral contract. It’s a promise to act.

4.Bids = advertising for bids. The person submits bids are made an invitation for offer

?Example: Kelley’s new building:

Property owner—Kelley is the offeror, listen to primes’ bids.

Prime contractor—offeree to Kelley’s bids, offeror to sub

Subcontractor—offereor to prime contractor.Sends in a bid and this bid is an offer to do

the job. Celling and painting for the building.

?Prime contractor use sub’s figure to bid, and Kelley accepted, it’s not an acceptance and the prime contractor can still reject the subcontractor’s offer.

H OW LONG DOES OFFER LAST?→5 WAYS TO TERMINATE

1.Terms= offeror write the terms in the offer, because offeror is the master of the contract.

https://www.wendangku.net/doc/eb13141434.html,pse=offer lasts for reasonable amount of time.

?Examples: short vs. long turnover: stock and bond are treated as short, usually within 24 hrs.

3.Revocation= generally can revoke any time prior to acceptance. (only offeror revokes)

? 3 exceptions (FOB)

i.Firm Offer

?Only under UCC—sale of goods

?Given by merchant

?Signed writing with promise to keep offer open. At least signed by

merchant

?Consideration (not necessary)

?Only good for up to 3 month

?No extra payment needed. Will get more customers, and customers’

loyalty.

ii.Options= contract for time

?You are paying for time

?The time period (negotiated) as long as both partied agree

?Verbal options are OK

?Offeree is still able to reject

?Money has to change hands

?Not under UCC

iii.Estappel = meet the criteria of PE.

?You get the thing or get compensation

4.Rejections- by offeree

?Expressed= stated directly rejection

?Implied= make counter offer

?Example: bargain. When you started bargaining, you started a new offer.

5.Operation of law → 2 ways to terminate offer before acceptance

a.Death

b.Destruction of subject matter

c.Intervening illegality—once there is acceptance, there is a contract.

?U NILATERAL CONTRACT R ULE

i.Traditional / old rule/ ted dibiase rule= not paid. Court like it.

ii.Quasi contract rule= benefit + knowingly received + unfair

iii.Reasonable time rule= once you started, you get reasonable amount of time to finish the job without offeror’s intervening.

iv.2nd restatement rule= once you begin performance, you created a legal fiction, the offeror cannot revoke. The contract becomes to a bilateral contract. Courts like it.

Chapter 11 Acceptance

W HAT IS AN ACCEPTANCE?

Elements: ICE = intent + communication + exactness

1.Intent= objective manifestations of willingness to be bond on a contract based upon the

offeror’s therm.

2.Exactness

?General rule= Mirror Image Rule= the offeree’s acceptance must reflect the offer’s all the materials term

?If acceptance term didn’t reflect offer’s term, it’s a counter offer, a rejection, a new offer

?What’s material? – Important, in US, means money. Some material change of

money: time, quality, quantity, shipping, tax. Color could be material change under

certain circumstances, like IU booked red shirts, but the vendor send out black shirts.

?If material alternation happened, there is no contract, only the original offeree

created a counter offer

Exception to Mirror Image Rule→ Battle of the forms (UCC2-207)

?It’s under UCC—has to be the sale of goods!

?There has to have the exchange of two forms, which are an offer form

and an acceptance form.

?If only one forms or no forms, then apply mirror image. Also, two forms

must be different

?In the battle of the form, the contract created when the forms are

exchanged.

?In the battle of the form, we are considering whether the offeree’s

terms will be added into the original form made by the offeror. The

basic rules are:

?Non-merchant rule (if one or both parties are non-

merchants):the terms in the original offer will becomes the

terms in the contract, and offeree’s term will not be added in.

?Merchants (if both parties are merchants): original offeree’s

terms will be added into the contract, unless:1) the offeror

st ated “no new terms” in the original offer. 2) the offeror react

to the additional term within a reasonable amount of time, and

3) materially alteration happened

?Materially alteration, the conditional acceptance contained in the

acceptance form, is the only way to make a counter offer!

?Though there have material change in two different forms, there still

have a contract when both parties change theirs forms.

?Under UCC, if both parties act like they are having a contract, then they

have contract no matter whether they reach the agreement or not. It’s

easier for the judge.

https://www.wendangku.net/doc/eb13141434.html,munications→ 3 ways

a.Stipulated= state the time, manner, place to acceptance. State everything clearly.

?Effective upon complete the stipulation→”jump through the hoop”

?Mandatory language→“MUST” “SHALL”

b.Authorized (2 types)

Mailbox Rule= effective when properly dispatched. Correct address, name, and number,

etc.

i.Express→“you may/can”

ii.Implied (3 ways)

1)Same way= whatever you received the offer, respond the same way

2)Trade usage= particular trade respond this way

3)UCC or 2nd Restatement= whatever reasonable under UCC, under the

certain circumstances

c.Unauthorized

“In Hand Rule”= effective when actually received

?Offeror can revoke any time before received

?If it’s not express or implied, it’s un authorized

?Rejection and revocations are effective when actually received! (in hand rule)

S ILENCE AS A CCEPTANCE

?Generally, silence is NOT acceptance

?EXCEPTION:

1.Offeree say “my silence is treated as an acceptance”

2.Past Dealing, often happened to small groceries. Like example in the textbook. A brings

potatoes to the local small groceries every potato seasons, and the grocery just take it and

sell them. This kind of silence is treated as acceptance.

3.Trade Usage, silence is in particular trades

4.Quasi Contract Rule= benefit + knowingly received + unfair not the pay

A CCEPTANCE BY S HIPMENT

?General Rule=when you ship the order, tell the buyer in a reasonable amount of time.

1.You must notify the buyer when you shipped the materials so that buyer will not go to another

vendor

2.“ASAP/immediately/promptly”= seller do not need to tell the buyer, but ship immediately. Don’t

have to invoice the buyer, but it’s a smart move to do so in case of conformation.

?Non-conforming Goods= Acceptance and breach the contract at the same time

Seller has now accept and breach the contract by doing the wrong shipment ?However, the seller can notify the buyer within a reasonable amount of time, making accommodation/counter offer. After the buyer received the shipment, it’s not in the re asonable amount of time

?The buyer ordered 25 MacBook. As the vendor, you only have 15Macbook and 10 IBM. You send out the first 15 MacBook, and tell the buyer you will sent them later. This is a new offer. (You

send all of the laptop you have, it’s also a new offer.)

I NCONSISTENT R ESPONDS

?Sent acceptance but reject at the same time

?Whichever get to offeror first is the final decision

?Meant to protect offeror

CHAPTER 12C ONSIDERATION

L EGAL V ALUE

o To do something you have no legal duty to do

o Not to do something you have legal right to do

G IFT/G RATUITOUS C ONTRACTS

A contract in which one party promises to do something without receiving anything in exchange. Therefore in such contracts only one person is benefited. The other party receives no profit or advantage or any advantage promised as a consideration for it. Gift is an example.

A DEQUACY OF CONSIDERATION

The court normally did not look at the case that lack of adequacy of consideration, except:

1.Nominal consideration—“$1” or “$1 and other valuable consideration”

2.Face value—exchange gum for gum

3.Gross inadequacy

P RE-EXISTING DUTIES

1.Promise not to commit crimes and torts

2.Public officials duties

3.Pre-existing contractual duties

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