Making a Contract Enforceable Was Consideration given Was

Making a Contract Enforceable Was Consideration given? Was there Capacity to Contract? Legal Subject Matter? Was there Genuine Assent? Was the Statute of Frauds Satisfied? OBE 118, Section 3 Fall 2004

Basic Elements of a Contract Agreement (or “Mutual Assent”) Consideration Capacity Legality Genuineness of assent Writing and Form

Reciprocal Consideration We call the requirement “reciprocal consideration” because for each promise there must be corresponding consideration that makes that promise enforceable Party A Party B

Consideration: Legal Value • A legal detriment • Dollar cost • Doing or promising to do something that there was no prior legal duty to perform • No requirement that each side give up something of equal value

Consideration Complications • Pre-existing duty • Unforeseen difficulties situations • Past consideration • Illusory promises

Promissory Estoppel Fact pattern: A party relies on a promise to their detriment but no consideration was given. Issue: Is there another means to enforce the promise? Elements of Promissory Estoppel 1) A promise 2) Justifiable reliance on the promise 3) Substantial and definite reliance 4) Enforcing the promise serves the interests of justice

Capacity Issues: 1) Minority 2) Mental Incompetence 3) Intoxication

Legality is our fourth element of a contract and failure to meet this element often renders a contract void 1. Contracts calling for an illegal or tortious act 2. Contracts against public policy 3. Licensing Statutes

Illegal Acts Contracts calling for violation of federal or state statutes are void 1. Usury - often not a void contract 2. Gambling - void 3. Licensing statutes – void or voidable

Restraint of Trade Contracts that interfere with or inhibit free trade are usually against the public interest Violation of Antitrust Laws - Void Covenants Not to Compete A covenant not to compete can be valid and enforceable if it is reasonably limited in time, scope, and distance. 1. Part of a sale of a business 2. Part of an employment agreement

Genuineness of Assent Genuine Assent is our fifth element of a contract and requires that their be a true objective meeting of the minds.

The Defenses of Genuine Assent is our fifth element of a contract and requires that their be a true objective meeting of the minds. Many defenses make up this “element” 1. 2. 3. 4. Mistakes Fraud Undue Influence Duress

Bilateral Mistakes Must be a bilateral mistake of a material fact! Bilateral: Both parties Material: Important and central to contract Fact: Not value, opinion, etc. EFFECT: Example: Different subject matter

Fraud • Fraudulent in the factum Tricked into signing wrong document • Fraudulent Misrepresentation False statement to induce signing correct document Basic Elements to be ______ 1) 2) 3) 4) Misrepresentation of a material fact Intent to deceive Justifiable reliance Injury from the reliance

Writing and Form Some contracts must be evidenced in writing to be enforceable. This is the last “element” of a contract. “_______” 1) Interests in land (sale, lease, mortgage, easement) 2) > 1 Year performance 3) Paying debt or performing duty of another 4) Sale of Goods >$500 5) Promises for marriage 6) Executor of estate assuming debt personally

“Written Evidence” 1) “Signed” by party against whom enforcement sought 2) Contain essential terms of contract Parties Subject Matter Consideration Quantity

Parol Evidence Rule When a contract is expressed in writing, oral negotiations, promises, or terms prior to the writing are not usable to prove the contract’s terms “Exceptions” 1) Later changes* 2) Evidence to show contract is voidable or void* 3) Unclear terms- to show meaning 4) Incomplete contract- to fill gaps 5) Show obvious or gross clerical error

A Valid Enforceable Contract 1) 2) 3) 4) 5) 6) Mutual Agreement Consideration Capacity Legality Genuineness of Assent Writing