Lesson 11-12 Part BWRITTEN CONTRACTS

What will you learn?

How to identify parties with “Special Capacity” needs and what is capacity

What contracts can be disaffirmed based on capacity

What contracts cannot be disaffirmed

When must contracts be written to be valid

How are illegal contracts treated

6 parts of a valid contract

1. Offer and Acceptance (Mutually agreed terms)

2. Genuine Assent (Enter under free will)

3. Consideration (Both sides gain something fair)

4. Capacity (Understanding the contract and your

actions)

5. Legality

6. Writing (Statute of Frauds)

Must contracts be written to be

valid and legal?• Most no, but some yes

• Contracts can be legally binding and not

written

• Cash register sales

• Handshake deals

• Verbal agreements

Is there a rule that states when

contracts must be written to be valid?

• Yes, its called the Statute of Frauds

• The Statute of Frauds is a rule that

states if the contract meets certain

requirements, it must be in writing

to be considered valid

• Adds strength to certain contracts

that are easily disputed by one

party or the other

When must contracts be written?

STATUTE OF FRAUDS

1. If the agreement is over $500 in value

2. If the agreement takes more than 1 year to complete

3. If the agreement means a co-signer is needed

4. If you are selling real property (Land, homes)

5. Marriage with Consideration (Marriage where one party

gains something because of marriage)

Contracts that are $500 or more

If the total amount of the transaction is for $500 or more,

it must be written to be valid

This could be achieved by a sale of something for less

than $500 and with some additional needed item, the

total goes over $500

Ex) If you purchase a washer for $475 and an extended

warranty for the washer for an additional $40, since the

total of this sale is $515, the contract would need to be in

writing to be considered valid

More than 1 year to complete

Most common way this applies is taking a line of credit

and paying it back over a long period, usually 3-5 years

or more

Car loans, mortgages, simple interest loans or other loans

where the terms are over a year or more

If you hire someone to build you something that takes

over a year this would also work

A business agreement as well

Needing a co-signer

If you take out a loan which requires a co-signer, this

would need to be in writing

A co-signer is someone who takes responsibility for

something if you do not live up to your agreed terms

Ex) If you get a co-signer for a car loan, if you do not

pay, the bank can contact the co-signer to get them to

pay. If you get an apartment when in college and your

parents co-sign, they can be responsible for damage if

you do not take care of it or pay for it

Real Property Purchases

Real property is considered land or anything attached to

it

Includes plots of land, homes or anything attached to a

home like a garage, barn or other

Property includes responsibilities for taxes, land

improvements and claims to ownership, so it must be

filed and therefore something in writing is required as

proof of the purchase

Marriage with Consideration

Marriage agreements do NOT need to be in writing but if

they include consideration, they do

Consideration means the exchange of property with the

marriage

If someone marries another person and by joining in

marriage, become part owners of a business, this must

be in writing. Same holds true to being a part home

owner, bank account owner or other property with the

marriage

When do contracts end?

Contracts end when both parties complete

their duties and obligations

An “Executed” contract is one that is ended

because both parties completed their duties

and obligations

An “Executory” contract is one that has yet to

be completed yet (Ex- Making car payments

until the car is paid off)

What must be in a written

contract to make it valid?

Legally, the parties can decide the contents

No formal writing is needed (Can be on a

scrap paper or anything)

Should include all “Essential Information”

Essential information includes names of parties,

details on subject matter, price and any other

items needed, including signature of both

parties (Signature ratifies agreement)

Can anything spoken be included

in a written agreement?

Usually “NO”

Anything agreed to should be in written

agreement

Spoken agreed to items are called “Parol

Evidence”

Parol evidence is offered when 2 parties in a

contract have a dispute over something and

usually are in a court to settle the dispute

Why is Parol Evidence NOT allowed

in most court Disputes?

Court disputes are over contract performance

One party feels the other did NOT do what

they agreed to do

If a contract was written and signed, Parol

Evidence is usually not allowed because courts

feel if the Parol Evidence was that important, it

would be included in the “Original” written

agreement

Why would Parol Evidence be

allowed in a court dispute?

Main reason is to clear up “Ambiguities” in the

written agreement

Ambiguities means something in writing that is

unclear and open to interpretation (Bad idea

to have in the first place)

Ex) You agree to sell a car in “Good Shape”

and put that in the contract, but the 2 parties

interpret the meaning differently

NOW…1. Copy the notes

2. Complete the weekly work on the

attached sheet using the textbook link

3. Complete online work

4. Email by end of week