The Essentials of Contract Law

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UNIT 7

• The Essentials of Contract Law

SUNY CRIMINAL BUSINESS LAW/MUSOLINO
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Learning Objectives

1. Explain the three theories of contract law.
2. Identify the six elements of a contract.
3. Explain the place of the UCC in contract law.
4. Distinguish contracts from other agreements
   between different parties.
5. Explain the concept of privity and contract law.
6. Explain the nature of valid, void, voidable, and
   unenforceable contracts

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Learning Objectives

1. Contrast unilateral and bilateral contractual
   arrangements.
2. Outline the difference between express and
   implied contracts.
3. Discuss the difference between quasi-contracts
   and implied-in-fact contracts.
4. Differentiate between formal and informal
   contracts.
5. Explain how executory contracts differ from
   executed contracts.

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Question?

• What is an agreement between two or more
  competent parties?
• Deal
• Bond
• Treaty
• Contract

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The Basics of Contract Law

• Contract
• an agreement between two or more competent
  parties, based on mutual promises, to do or
  refrain from doing some particular thing that is
  neither illegal nor impossible
• results in an obligation or a duty that can be
  enforced in a court of law

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Question?

• What is the contracting party who makes a
  promise?
• Promisee
• Promisor
• Obligee
• Obligor

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Question?

• What is the contracting party to whom a party
  owes an obligation?
• Promisee
• Promisor
• Obligee
• Obligor

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The Basics of Contract Law

• Promisor
• the contracting party who makes a promise
• Promisee
• the one to whom the promise is made is the
• Obligor
• the party who is obligated to deliver on a
  promise or undertake some act of performance
• Obligee
• the contracting party to whom this party owes an
  obligation

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The Objectives of Contract Law

• The courts goal in the remedy phase of a
  contract dispute is to place the injured party in
  as good a position as he or she would have been
  had the contract been carried out
• Mitigation
• Punitive damages

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Question?

• Which theory states that a contract will exist
  once all of the parties with the legal capacity
  to contract have actually accepted all
  obligations and benefits under the contract ?
• Equal value theory
• Equity theory
• Will theory
• Judgment theory

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Three Theories of Contract Law

• The will theory
• a general principle of law that states that a
  contract will exist once all of the parties with
  the legal capacity to contract have actually
  accepted all obligations and benefits under the
  contract and have exchanged, or promised to
  exchange, things of value

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Three Theories of Contract Law

• The equal value theory or equity theory
• insisted that a contract would be valid only if
  the things exchanged were of equal value
• bartering

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Three Theories of Contract Law

• If each element is present, then a contract
  exists, regardless of what the parties may argue
  after the fact
• The formalist theory of contract law
• the courts look to see if certain elements exist
• offer, acceptance, mutual, assent, capacity,
  consideration, and legality.

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The Six Elements of a Contract
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Contracts and the UCC

• The Uniform Commercial Code (UCC) is a unified
  set of statutes designed to govern almost all
  commercial transactions
• Article 2 of the UCC sets down the rules that
  govern sale-of-goods contracts

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Contracts and Other Agreements

• All contracts are agreements, but not all
  agreements are contracts.
• To be enforceable, an agreement must conform to
  the law of contracts.

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Question?

• When both parties have a legally recognized
  interest in the subject of the contract it is
  called ________.
• Privity
• Judgment
• Contractual obligation
• Gordon defense

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Contracts and Privity

• Privity
• both parties have a legally recognized interest
  in the subject of the contract if they are to be
  bound by it

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Contractual Characteristics

• Valid contract
• one that is legally binding and fully enforceable
  by the court
• Void contract
• one that has no legal effect whatsoever

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Contractual Characteristics

• Voidable contract
• one that may be avoided or canceled by one of the
  parties
• Unenforceable contract
• one that, because of some rule of law, cannot be
  upheld by a court of law

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Question?

• What type of contract is one in which both
  parties make promises?
• Voided contract
• Unilateral contract
• Express contract
• Bilateral contract

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Contractual Characteristics

• Unilateral contract
• an agreement in which one party makes a promise
  to do something in return for an act of some sort
• Bilateral contract
• one in which both parties make promises
• Breach of contract
• occurs when one of the two parties fails to keep
  the promise

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Contractual Characteristics

• Express contract
• requires some sort of written or spoken
  expression indicating a desire to enter the
  contractual relationship
• Implied contract
• created by the actions or gestures of the parties
  involved in the transaction

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Contractual Characteristics

• Informal contract
• Any oral or written contract that is not under
  seal or is not a contract of record
• Formal contract
• has to be (1) written (2) signed, witnessed, and
  placed under the seal of the parties and (3)
  delivered
• Contract of record

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Contractual Characteristics

• Executory contract
• A contract that has not yet been fully performed
  by the parties is called an
• Executed contract
• When a contracts terms have been completely and
  satisfactorily carried out by both parties