2 CONTRACTS Introduction Agreement Consideration Remedies All with a splattering of legality, capacity, consent, legal requirements, & performance.

2Business Law and the Legal EnvironmentBusiness Law and the Legal Environment

CONTRACTS

• Introduction• Agreement• Consideration• Remedies

All with a splattering of legality, capacity, consent, legal requirements, & performance

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CONTRACTCONTRACT

A PROMISSORY AGREEMENT A PROMISSORY AGREEMENT BETWEEN TWO OR MORE BETWEEN TWO OR MORE PERSONS THAT CREATES, PERSONS THAT CREATES,

MODIFIES, OR DESTROYS A MODIFIES, OR DESTROYS A LEGAL RELATIONSHIP LEGAL RELATIONSHIP

Buffalo Pressed Steel Co. v Kirwan 138 Md. 60Buffalo Pressed Steel Co. v Kirwan 138 Md. 60

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CONTRACTCONTRACT

AN AGREEMENT BETWEEN TWO OR AN AGREEMENT BETWEEN TWO OR MORE PARTIES, PRELIMINARY STEP IN MORE PARTIES, PRELIMINARY STEP IN MAKING OF WHICH IS OFFER BY ONE MAKING OF WHICH IS OFFER BY ONE

AND ACCEPTANCE BY OTHER, IN AND ACCEPTANCE BY OTHER, IN WHICH MINDS OF PARTIES MEET AND WHICH MINDS OF PARTIES MEET AND

CONCUR IN UNDERSTANDING OF CONCUR IN UNDERSTANDING OF TERM.TERM.

Lee vs. Travelers Ins. Co. of Hartford, 173.S.C. 185Lee vs. Travelers Ins. Co. of Hartford, 173.S.C. 185

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CONTRACTSCONTRACTS

Definition:Definition:A promise that the A promise that the

law will enforce.law will enforce.

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PURPOSE OF CONTRACTSPURPOSE OF CONTRACTS

Contracts exist to Contracts exist to make business make business matters more matters more predictablepredictable..

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JUDICIAL ACTIVISM JUDICIAL ACTIVISM VSVS

JUDICIAL RESTRAINTJUDICIAL RESTRAINT

Judicial restraint makes the law less Judicial restraint makes the law less flexible but more predictable.flexible but more predictable.

Judicial activism makes the law more Judicial activism makes the law more flexible but less predictable.flexible but less predictable.

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DEVELOPMENT OF CONTRACT DEVELOPMENT OF CONTRACT LAWLAW

Common law requirements:Common law requirements:Later, some payment was required.Later, some payment was required.Mutual promises became Mutual promises became

enforceable.enforceable.By the 1900’s, courts began to By the 1900’s, courts began to

consider fairness.consider fairness.

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ELEMENTS OF A CONTRACTELEMENTS OF A CONTRACT

AgreementAgreement

ConsiderationConsideration

LegalityLegality

CapacityCapacity

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TYPES OF CONTRACTSTYPES OF CONTRACTS

Bilateral vs. Unilateral

Express vs. Implied

Executory vs. Executed

Valid vs. Unenforceable vs. Voidable vs. Void

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TYPES OF CONTRACTS TYPES OF CONTRACTS (cont’d)(cont’d)

BilateralBilateral

UnilateralUnilateral

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TYPES OF CONTRACTS TYPES OF CONTRACTS (cont’d)(cont’d)

ExpressExpress

ImpliedImplied

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TYPES OF CONTRACTS TYPES OF CONTRACTS (cont’d)(cont’d)

ExecutoryExecutory

ExecutedExecuted

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TYPES OF CONTRACTS TYPES OF CONTRACTS (cont’d)(cont’d)

ValidValid: : UnenforceableUnenforceable: :

VoidableVoidable: : VoidVoid::

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PROMISSORY ESTOPPELPROMISSORY ESTOPPEL

Even when there is no Even when there is no contract, a plaintiff may use contract, a plaintiff may use

promissory estoppelpromissory estoppel to to enforce the defendant’s enforce the defendant’s

promise.promise.

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PROMISSORY ESTOPPELPROMISSORY ESTOPPEL

1.1. The defendant made a promise The defendant made a promise knowing that the plaintiff would knowing that the plaintiff would likely rely on it.likely rely on it.

2.2. The plaintiff did rely on the The plaintiff did rely on the promise; andpromise; and

3.3. The only way to avoid injustice is The only way to avoid injustice is to enforce the promiseto enforce the promise..

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QUASI-CONTRACTQUASI-CONTRACT

Even when there is no Even when there is no contract, a court may contract, a court may use use quasi-contractquasi-contract to to

compensate a plaintiff.compensate a plaintiff.

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REQUIREMENTS FOR QUASI-REQUIREMENTS FOR QUASI-CONTRACTCONTRACT

1.1. Plaintiff gave some benefit to the Plaintiff gave some benefit to the defendant.defendant.

2.2. Plaintiff reasonably expected to be Plaintiff reasonably expected to be paid for the benefit and the defendant paid for the benefit and the defendant knew this; andknew this; and

3.3. The defendant would be unjustly The defendant would be unjustly enriched if she did not pay.enriched if she did not pay.

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QUASI-CONTRACT DAMAGESQUASI-CONTRACT DAMAGES

The damages awarded are The damages awarded are called called quantum meruitquantum meruit..

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SOURCES OF CONTRACT LAWSOURCES OF CONTRACT LAW

Common LawCommon Law

Uniform Commercial Uniform Commercial CodeCode

Restatement (Second) of Restatement (Second) of ContractsContracts

22Business Law and the Legal EnvironmentBusiness Law and the Legal Environment

CONTRACTS

• ARE A PROMISE THE LAW WILL ENFORCE.

• EXIST TO MAKE BUSINESS MATTERS MORE PREDICTABLE.