9/20 Contracts – Accounting NotesWhat is the difference between a promise and a contract?-Contracts – legally binding agreement

-If there is a breach, there is a remedy -A contract is an agreement supported by consideration that is enforceable

-Consideration – something of value supporting the contract-Promisor vs. promise and offeror vs. offeree-A lot of contract law is in prenuptial agreements and contracts

-Who gets what ect. What are the sources of Contract Law?-Common Law-UCC – Uniform Commercial Code

-Leases, contracts-Restatement of Contracts

-Secondary source of lawWhat are the elements of Contracts?Four main elements-Agreement (offer and acceptance)

-Someone must make and offer and another must accept-Consideration

-Anything of value, courts will not question value-Capacity to contract

-Have to be able to think clearly enough or be older enough-Legality

-Is the contract legal?

-Every contract has a promise-Bilateral Contact – a promise for a promise-Unilateral Contract – a promise for an act

Contract Variations-Contracts can be formal (like under seal) or informal, written or oral, express (terms are stated or written) or implied (terms are implied by the facts or the history), executed (fully performed) or executor (not yet fully performed)-Contracts can be valid or void (not a contract at all)-A valid contract may be enforceable, unenforceable (there is a legal defense to it), or voidable (at a party’s option a minor has an option to void a contract, and a contact entered into due to undue influence may be voidable)

-Always get it in writing-Expressed contracts – are very specific, write out all the details, there is agreement, consideration, capacity, and legality -Implied contracts – You go into a coffee house, they recognize you and you can pour yourself a cup without paying right away and you build a tab maybe

-Are not clear in their terms, but the behavior and actions imply -Contract can be valid or void

-Valid has all four elements

-Void is missing at least one of the elementsWhat are the elements of an offer?-It is serious, its terms are reasonably certain, and it’s communicated to the offeree

-Must be serious, communicated, and have terms to be valid-Distinguished an offer from an invitation to negotiate (e.g. an ad offering a house for sale for $250,000 does not bind the seller to sell the house to the first person who whips out $250,000)How long are offers valid/open-Unless otherwise specified, for a reasonable period of timeWhat constitutes acceptance of an offer?-Acceptance must be unequivocal, and by the person to whom the offer was made-Sometimes, silence is acceptance-In a bilateral contract, communication of the acceptance is necessary. In a unilateral contract full or substantial performance is necessary-Acceptance must occur within a reasonable time (if the time to accept is not specified), and before the offer is withdrawn or revokedWhat is the effect of rejecting an offer?-A rejection takes away the original offer. You can not reject and then accept because the offer is gone upon rejection-A counteroffer functions as a rejection and a new offer

-Rejection and a new offer-Offeror and Offeree switch places

The Mailbox Rule-Acceptance occurs when the item is dropped in the mailbox;-The offer, a revocation, or a rejection occurs when it is received -The mailbox rule is rendered almost meaningless due to instant communicationWhat is meant by Consideration?-Consideration is something of value-Giving or giving up something of value-A contract will still be based on consideration and thus enforceable if one party gets a bad deal. If it’s a terrible deal, a court may declare it unenforceable as unconscionable. A court will only evaluate consideration if it is “grossly inadequate”When is consideration lacking?-Illegal consideration (ex extortion)-Illusory promises

-“I’ll think about it”-Moral obligation-Preexisting duty

-ex. Reward is out to find a person, a police officer finds the missing person, and they will not get the reward because it was their duty to do that job

-Past consideration-ex. I have a job and work hard, Christmas time comes, boss says they will give you a bonus; they do not have to do the contract

Other Examples of Enforced Obligations-A quasi contact may be imposed by a court to avoid unjust enrichment

-ex. Doctor who saves an unconscious person’s life should be paid for the service even though there was no contract

-Settlement of Claims, Accord and Satisfaction, and Release are usually enforceable -Promissory Estoppel: If someone detrimentally relies on a promise, the promisor may be estopped from revoking the promise.

-ex. You stay in your aunts condo in Maui if you fix the roof. You buy everything and set up the plane ticket, ect. and ms. aunt changes her mind, you can take her to court