Chapter 10

- Promise – A person’s assurance that the person will or will not do something
- Contract –
o a promise or set of promises for the breach of which the law gives a remedy; or the
performance of which the law in some way recognizes as a duty
o a legally binding agreement between two or more parties who agree to perform or to
refrain from performing some act now or in the future
- Objective Theory of Contracts
o Determines intent
o Theory is that a party’s intention to enter into a legally binding agreement, or contract,
is judged by outward, objective facts as interpreted by a reasonable person, rather than
by a party’s own secret, subjective intentions
o Objective facts include:
 What the party said then entering into the contract
 How the party acted or appeared (intent may be manifested by conduct as well
as by oral or written words)
 The circumstances surrounding the transaction
- Elements of a contract
o Agreement – an agreement to form a contract includes an offer and an acceptance (one
party must offer, offeror, and another party, offeree, must accept the terms)
o Consideration – any promises made by the parties to the contract must be supported by
legally sufficient and bargained-for consideration (something of value received or
promised, money, used to convince a person to make a deal)
o Contractual Capacity – Both parties entering into the contract must have the contractual
capacity to do so; the law must recognize them as possessing characteristics that qualify
them as competent parties
o Legality – the contract’s purpose must be to accomplish some goal that is legal and not
against public policy
- Defenses to the enforceability of a contract
o Genuineness of assent – the apparent consent of both parties must be genuine(if a
contract was formed as a result of fraud, the contract may not be enforceable)
o Form – the contract must be in whatever form the law requires(some states require that
contracts must be in writing, not in LA though)
- Types of contracts
o Bilateral contracts – the offeree accepts the contract simply by performing , this is “a
promise for a promise” (camcorder deal, pg 218)
o Unilateral contracts – the offer is phrased so that the offeree can accept the offer only
by completing the contract performance (contests, lotteries, crossing a bridge for $20)
o Formal contracts – contracts that require a special form or method of creation to be
enforceable
 o Informal Contracts – aka “simple contracts” include all other contracts; no special form
is required, as the contracts are usually based on their substance rather than their form.
o Express contracts – the terms of the agreement are fully and explicitly states in the
words, oral or written
o Implied-in-fact contracts – a contract that is implied from the conduct of the parties; it
differs from an express contract in that conduct of the parties, rather than their words,
creates and defines the terms of the contract
 Requirements for Implied-in-fact contracts
 The plaintiff furnished some service or property
 The plaintiff expected to be paid for that service or property, and the
defendant knew or should have known that payment was expected
 The defendant had a chance to reject the services and did not
o Contract performance
 Executed contract – when contract has been fully performed on both sides
 Executory contract – contract that has not been fully performed by the parties(if
a contract has been fully performed by one party but not the other, then the
contract is executed on one side and executor on the other, but the whole
contract is considered to be executory)
o Valid contract –(enforceable contract) has the elements necessary to entitle at least one
of the parties to enforce it in court
 Agreement
 Consideration
 Capacity
 Legality
 Voidable Contract – a valid contract but one that can be avoided at the option of
one or both of the parties (contracts made with teens, insane persons,
intoxicated persons, etc)
 Unenforceable contracts – a contract that cannot be enforced because of
certain legal defenses against it, performing an illegal activity
o Void contracts – no contract at all, a person rendered insane voids a contractual
obligation to perform a promise in a contract

Chapter 11

- Offeror – the party who makes an offeror proposal to another party

- Offeree – the party to whom the offer or proposal is made
- Counteroffer by the offeree – a rejection of the original offer and the simultaneous making of a
new offer
o Mirror image rule – requires the offeree’s acceptance to match the offeror’s offer
exactly; any change to the to the initial offer is considered to be a counteroffer
- Termination by operation of law
o Any of the following can terminate the offer:
  Lapse of time
 Destruction of the specific subject matter of the offer
 Death or incompetence of the offeror or the offeree
 Supervening illegality of the proposed contract

Chapter 12

- Consideration – the value(such as cash) given in return for a promise or in return for a
performance
- Two parts of consideration:
o Something of legally sufficient value must be given in exchange for the promise
o Usually, there must be a bargained-for-exchange
- Legal value – may consist of a promise to do something that one has no prior legal duty to do,
the performance of an action that is otherwise not obligated to undertake, or the refraining
from an action that one had a legal right to undertake(forbearance)
- Bargained-for-exchange – providing the basis for the bargain struck between the contracting
parties.
- Rescission – the unmaking of a contract so as to return the parties to the positions they
occupied before the contract was made
- Accord and Satisfaction – involves a debtor’s offer of payment and a creditor’s acceptance of a
lesser amount than the creditor originally claimed was owed. The amount of the debt must be in
dispute in order for accord and satisfaction to occur
 Accord – the agreement under which one of the parties undertake to give or
perform – and the other to accept in satisfaction of the claim–something other
than that on which the partied originally agreed
 Satisfaction – takes place when the accord is executed(a basic rule is there is no
satisfaction unless there is first an accord)
o Liquidated Debts – one whose amount has been ascertained, fixed, agreed on, settle, or
exactly determined. If a debt is liquidated, accord and satisfaction cannot take place
o Unliquidated debts - reasonable persons may differ over the amount owed; It is not
ascertained, fixed, etc.; thus, if acceptance of a payment of a lesser amount operates as
satisfaction of the debt
- Release – a contract in which one party forfeits the right to pursue a legal claim against the
other party; it bars any further recovery beyond the terms stated in the release
- Covenant not to sue – an agreement to substitute a contractual obligation for some other tyoe
of legal action based on a valid claim
Chapter 13

- Disaffirmance – the legal avoidance, or setting aside a contractual obligation

- Minor’s right to disaffirm – a contract can ordinarily be disaffirmed at any time during minority
or for some reasonable period after reaching majority
o Majority rule – the minor need only return the goods subject to the contract, provided
the goods are in the minor’s possession or control.(was the majority rule in most states
but is no longer true)
o Minority rule – the duty of the minor to restore the adult party to the position that she
or he held before the contract was made (this rule has now been adopted by most
states)
o Exceptions to the minor’s right to disaffirm
 Some contracts such as marriage licenses and enlisting in the armed forces are
exceptions
 The other rules that allow for exceptions are:
 Misrepresentation of age
 Contracts for necessities
o Ratification – the act of accepting and giving legal force to an obligation that previously
was not enforceable
 A minor can ratify a contract once he reaches majority age either expressly or
impliedly
 Express ratification takes place when the individual states orally or in writing
that he or she intends to be bound by the contract
 Implied ratification takes place when the minor indicates an intent to abide by
the contract
- Intoxication
o The condition in which a person’s normal capacity to act or think is inhibited by alcohol
or some other drug
o Disaffirmance – a contract can be disaffirmed by an intoxicated person while intoxicated
or within a reasonable time after becoming sober
o Ratification – an intoxicated person can ratify a contract either expressly or impliedly
after becoming sober
- Mental incompetence
o Contracts made by mentally incompetent persons can be void, voidable, or valid
o Situations with mentally incompetent persons:
 When the contract will be void if the courts have previously ruled that the
person is mentally incompetent and has an appointed guardian to represent
them, if the contract was made with the mentally incompetent person, then it is
void
 When the contract will be voidable, if the courts determine that the person was
mentally incompetent at the time the contract was formed, then the mentally
incompetent has the option to disaffirm (not the other party).
  When the contract will be valid, if a mentally incompetent person who was
never previously declared incompetent enters into a contract but actually has
competency at the time the contract was agreed to will be held accountable for
the contract. (the persons can be found to be mentally incompetent but have a
lucid interval at the time of the contract and still be held accountable)

Chapter 14

- Mistakes of fact – occur in two forms

o Bilateral (mutual) – occurs when both parties are mistaken to an existing material fact (a
mutual misunderstanding concerning a basic assumption on which the contract was
made) – there has been no meeting of the minds
o Unilateral – occurs when only one of the contracting parties is mistaken about a
material fact
 Normally, a unilateral mistake does not afford the mistaken party any right to
relief from the contract
 Exceptions to this general rule:
 The other party to the contract knows or should have known that a
mistake of fact was made, the contract may not be enforceable
 A mistake was made due to a mathematical miscalculation
- Mistakes of Value – a mistake concerning the future value or quality of the object, and the
contract is normally enforceable because value is variable(it can be worth substantially different
amounts in different places with different people)
- Fraudulent misrepresentation – when an innocent party is falsely induced to enter into a
contract, the contract can normally be avoided because that party has not voluntarily consented
to the contract’s terms.
o Three elements of fraudulent misrepresentation
 A misrepresentation of a material fact must occur
 There must be an intent to deceive
 The innocent party must justifiably rely on the misrepresentation
o When a naïve person relies on a so-called expert opinion the innocent person may be
entitled to rescission or reformation(court grants an alteration to the contract to reflect
its true intentions)
o Misrepresentation by concealment – When a party takes specific action to conceal a fact
that is material to the contract
o READ PAGES 290-298