CHAPTER 9 INTRODUCTION TO CONTRACT LAW AND CONTRACT

CHAPTER 9 INTRODUCTION TO CONTRACT LAW AND CONTRACT THEORY DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in the Legal Environment (8 th Ed. )

BUSINESS LAW: Cases & Principles Davidson • Knowles • Forsythe 8 th Ed. THE IMPORTANCE OF CONTRACT LAW l Law of contracts affects all aspects of daily life. l Commercial Law Contracts: having to do with commerce. l Common Law Contracts: derived from the judgments and decrees of courts. © 2004 West Legal Studies in Business A Division of Thomson Learning 2

BUSINESS LAW: Cases & Principles Davidson • Knowles • Forsythe 8 th Ed. THE IMPORTANCE OF CONTRACT LAW l Definition of a Contract: – Legally binding. – Legally enforceable promise or set of promises. – Between two or more competent parties. – Law recognizes a duty. © 2004 West Legal Studies in Business A Division of Thomson Learning 3

BUSINESS LAW: Cases & Principles Davidson • Knowles • Forsythe 8 th Ed. ELEMENTS OF A CONTRACT l Founded on an agreement. – An offer and acceptance on that offer. l Supported by consideration. – Something bargained for and given in exchange for a promise. l Made by parties having the capacity to contract. – The legal ability to contract. © 2004 West Legal Studies in Business A Division of Thomson Learning 4

BUSINESS LAW: Cases & Principles Davidson • Knowles • Forsythe 8 th Ed. ELEMENTS OF A CONTRACT l Based on the parties’ genuine assent. – Voluntary involvement as a party to the contract. l Grounded in a legal undertaking. – Subject matter must be legal. l Expressed in proper form. – Written and oral contracts can be binding if rules are understood and followed. © 2004 West Legal Studies in Business A Division of Thomson Learning 5

BUSINESS LAW: Cases & Principles Davidson • Knowles • Forsythe 8 th Ed. FROM STATUS TO FREEDOM OF CONTRACT AND BACK AGAIN l Feudal society set social hierarchies. l Contract law calls for the performance of mutual duties and obligations. l Law merchant and contracts were more important than status. l Lawmakers lately have restricted freedom of contracts. © 2004 West Legal Studies in Business A Division of Thomson Learning 6

BUSINESS LAW: Cases & Principles Davidson • Knowles • Forsythe 8 th Ed. CLASSIFICATIONS 0 F CONTRACTS l Formal vs. Informal Contracts. l Unilateral vs. Bilateral Contracts. l Valid, Voidable, Void, and Unenforceable Contracts. l Express vs. Implied Contracts. l Executory vs. Executed Contracts. l Quasi Contracts vs. Contracts Implied in Fact. © 2004 West Legal Studies in Business A Division of Thomson Learning 7

BUSINESS LAW: Cases & Principles Davidson • Knowles • Forsythe 8 th Ed. CLASSIFICATION OF CONTRACTS l Formal Versus Informal Contracts. – Formal Contracts need a seal. – Informal Contracts are simple and do not need a seal. l Unilateral Versus Bilateral Contracts. – Unilateral Contracts is a promise on one side only. – Bilateral Contracts are promises on both sides. © 2004 West Legal Studies in Business A Division of Thomson Learning 8

BUSINESS LAW: Cases & Principles Davidson • Knowles • Forsythe 8 th Ed. CLASSIFICATION OF CONTRACTS l Valid, Voidable, Void, and Unenforceable Contracts. – Valid Contract is legally binding and enforceable. – Voidable Contract can be affirmed or rejected at the option of one or more of the contracting parties. – Void Contract can never have any legal effect. l Unenforceable Contracts will not be given effect by a court of law. © 2004 West Legal Studies in Business A Division of Thomson Learning 9

BUSINESS LAW: Cases & Principles Davidson • Knowles • Forsythe 8 th Ed. CLASSIFICATION OF CONTRACTS l Express Versus Implied Contracts. – Express Contracts the parties set forth their intentions specifically and definitely in writing or oral. – Implied Contracts is inferred from the actions or conduct of the parties. © 2004 West Legal Studies in Business A Division of Thomson Learning 10

BUSINESS LAW: Cases & Principles Davidson • Knowles • Forsythe 8 th Ed. CLASSIFICATION OF CONTRACTS Executory vs. Executed Contracts – Executory Contract is when a promise remains unfulfilled by one party. – Executed Contract is when the parties have fully performed the promise. l Quasi Contracts versus Contracts Implied in Fact – Quasi Contracts are implied in law. – Implied in Fact Contracts hold that sufficient evidence exists for a court to determine that the parties were meant to contract with each other. l © 2004 West Legal Studies in Business A Division of Thomson Learning 11