Powerpoint from textbook Business Law - the ethical, global, and e-commerce environment to accompany BA 330 course at the University of Alaska Fairbanks.

1. Introduction to Contracts
The Agreement: Offer
The Agreement: Acceptance
Consideration
Reality of Consent
© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

2. Capacity to Contract
Illegality
Writing
Rights of Third Parties
Performance and Remedies
© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

3. Introduction to Contracts
Contracts are agreements made up of
big words and little type.
Sam Ewing, quoted in
Saturday Evening Post
May 1993
© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

4. Learning Objectives
 Nature of contracts
 Basic elements of a contract
 Basic contract types
 Non-contract obligations
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5. Contracts
 Not every promise is legally enforceable
 But when a set of promises has the status of
contract, a person injured by a breach of that
contract is entitled to call on the government
(courts) to force the breaching party to honor
the contract
 Contract law is ancient law, but has evolved
to reflect social change
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6. Elements of a Contract
 (1) agreement (2) between competent parties
(3) based on genuine assent of the parties
that is (4) supported by consideration, (5)
made for a lawful purpose, and (6) in the
form required by law, if any
 See Figure 1, page 292
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7. Lambert v. Barron
 Facts:
 Lambert and Barron had friendly as well as professional
relationship
 Barron had financial troubles, so Lambert flew from
New Orleans to Farmerville to meet with Barron
 Lambert claims that he and Barron orally contracted for
Lambert to provide consulting services for one year at a
monthly rate of $3100
 Barron paid one invoice, but refused to pay on a second,
claiming that he had not agreed to such a price or term
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8. Lambert v. Barron
 Procedural History and Issue:
 Lambert sued for breach of contract and lost
 Issue on appeal: was there a valid contract?
 Trial Court Ruling:
 Two competing views without evidence that
contract was formed or that substantive business
benefit was realized by Barron from his friend
 No contract formed, lower court ruling affirmed
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9. Contract Concepts and Types
 Bilateral contracts: two parties make
promises to one another
 Unilateral contracts: one party makes a
promise
 Frequent buyer cards are offers for unilateral
contracts; gaining points on the cards accept
the offer and create a contract
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10. Contract Concepts and Types
 Valid contract: binding and enforceable
agreement
 Voidable contract: agreement otherwise
binding, but due to circumstances
surrounding execution or lack of capacity,
may be rejected at option of one party
 Void contract: agreement without legal effect
because prohibited by law
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11. Contract Concepts and Types
 Express contract: agreement of parties
manifested by words, written or oral
 Implied contract: agreement not shown by
words, but by acts and conduct of parties
 Difference between express & implied
contracts relates to manner of proving the
existence of the contract, not the effect; one
or the other arises
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12. Sources of Governing Law
 Two bodies of law govern contracts:
 Article 2 of Uniform Commercial Code
 Common law of contracts
 Uniform Commercial Code (UCC) is
statutory law in every state, but the
common law of contracts is evolving
 UCC contains nine articles
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13. UCC Article 2
 Article 2 expressly applies to contracts for the
sale of goods [2–102] (numbers in brackets
refer to specific Code sections)
 UCC [1–105]: goods are tangible, movable,
personal property
 Does not apply to sale of services, intangible
property (stocks, intellectual property), or
real estate
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14. The UCC and
Hybrid Contracts
 Many contracts involve goods and services
 Test that courts most frequently apply to
decide whether Article 2 applies is to ask
which element – goods or services –
predominates in the contract
 See Pass v. Shelby Aviation
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15. The UCC or Common Law
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16. International Contract Law
 United Nations Convention on Contracts
for the International Sale of Goods (CISG) is
body of contract rules that harmonizes
contract principles from many legal systems
 Seventy-one nations, including the United
States and Canada, are parties to the CISG
 See
UN Commission on International Trade Law
website
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17. International Contract Law
 CISG automatically
applies to a contract for
the sale of goods
between commercial
parties from nations
that agreed to the CISG
unless the parties
expressly opt out of the
CISG in their contract
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18. Non-Contract Obligations
 Sometimes the law enforces an obligation to
pay for certain losses or benefits even in the
absence of mutual agreement and exchange
of value; the court then applies:
 Quasi-contract theory
 Promissory estoppel
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19. Quasi-Contract Theory
 Quasi-contract is an obligation imposed by
law to prevent unjust enrichment of one
party in certain circumstances
 E.g., work performed by painter thinking work
justified by contract & other party, who receives
benefit of work, denies work was justified
 E.g., minor buys something but wrecks it,
agreement is void by law, but the minor must
pay the damages
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20. Quasi-Contract Remedies
 Plaintiff recovers either the reasonable value
of the benefit conferred on the defendant
(reasonable price) or value of labor (quantum
meruit)
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21. Promissory Estoppel
 A court may apply doctrine of promissory
estoppel when one party relies upon another
party’s promise to his or her detriment
(detrimental reliance), but there’s no contract
 Court will force promisor to fulfill
promise or pay compensation
 Example: Holt v. Home Depot, U.S.A., Inc.
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22. Holt v. Home Depot, U.S.A., Inc.
 Facts & Procedural History:
 Holt was a Home Depot manager for four years
 Home Depot assured employees that an open-
door policy allowed complaints to management
about supervisors without penalty
 Home Depot moved Holt and family to
Connecticut, but soon after, Holt began to have
difficulties with his immediate supervisor
 Holt told a senior manager about the problems
 Called Impact Line to begin formal complaint
 Six days later, Home Depot fired Holt
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23. Holt v. Home Depot, U.S.A.,
Inc.
 Procedural History:
 Holt sued claiming promissory estoppel
 Jury found for Holt, awarding $467,000 damages
 Appellate Decision and Ruling:
 Jury could reasonably find that Home Depot’s
promise not to retaliate against employees was so
clear and emphatic that Holt could reasonably
believe it was inviolable; evidence indicated Holt
terminated because of complaint about supervisor
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24. Review
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25. Test Your Knowledge
 True=A, False = B
 Every promise is legally enforceable
 The main element of a contract is fairness
 In a bilateral contract, two parties make
promises to one another
 The UCC is statutory law in every state
 The UCC applies to the sale of goods and
services
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26. Test Your Knowledge
 Multiple Choice
 A void contract refers to an agreement that is:
(a) Binding and enforceable agreement
(b) Otherwise binding, but due to
circumstances surrounding execution or lack
of capacity, may be rejected at option of one
party
(c) Without legal effect because prohibited by
law
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27. Test Your Knowledge
 Multiple Choice
 Non-contract obligations include all of the
following except:
(a) Quasi-contract theory
(b) Promissory estoppel
(c) The CISG doctrine
(d) Quantum meruit
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28. Thought Question
 What contracts have you entered into
recently?
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