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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

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Making a contract enforceable l.jpg

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


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Basic Elements of a Contract

Agreement (or “Mutual Assent”)

Consideration

Capacity

Legality

Genuineness of assent

Writing and Form


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Party B

Party A

Reciprocal Consideration

We call the requirement “reciprocal consideration” because for each promise there must be corresponding consideration that makes that promise enforceable


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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


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Consideration Complications

  • Pre-existing duty

  • Unforeseen difficulties situations

  • Past consideration

  • Illusory promises


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Promissory Estoppel

Issue: Is there another means to enforce the promise?

Elements of Promissory Estoppel

Fact pattern: A party relies on a promise to their detriment but no consideration was given.

1) A promise

2) Justifiable reliance on the promise

3) Substantial and definite reliance

4) Enforcing the promise serves the interests of justice


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Capacity

Issues:

1) Minority

2) Mental Incompetence

3) Intoxication


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Legality

1. Contracts calling for an illegal or tortious act

Legality is our fourth element of a contract and failure to meet this element often renders a contract void

2. Contracts against public policy

3. Licensing Statutes


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Illegal Acts

1. Usury - often not a void contract

2. Gambling - void

Contracts calling for violation of federal or state statutes are void

3.Licensing statutes – void or voidable


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Restraint of Trade

Violation of Antitrust Laws - Void

Covenants Not to Compete

Contracts that interfere with or inhibit free trade are usually against the public interest

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


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Genuineness of Assent

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


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The Defenses of Genuine Assent

Many defenses make up this “element”

  • Mistakes

  • Fraud

  • Undue Influence

  • Duress

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


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Bilateral Mistakes

  • Bilateral: Both parties

  • Material: Important and central to contract

  • Fact: Not value, opinion, etc.

Must be a bilateral mistake of a materialfact!

  • EFFECT:

  • Example: Different subject matter


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Fraud

  • Fraudulent in the factum

Tricked into signing wrong document

  • Fraudulent Misrepresentation

False statement to induce signing correct document

Basic Elements to be ___________

Misrepresentation of a material fact

Intent to deceive

Justifiable reliance

Injury from the reliance


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Writing and Form

“_____________”

1) Interests in land (sale, lease, mortgage, easement)

Some contracts must be evidenced in writing to be enforceable. This is the last “element” of a contract.

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


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Written Evidence”

2) Contain essential terms of contract

Parties

Subject Matter

Consideration

Quantity

1) “Signed” by party against whom enforcement sought


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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


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A Valid Enforceable Contract

Mutual Agreement

Consideration

Capacity

Legality

Genuineness of Assent

Writing


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