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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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KK
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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.