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Contract Law

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Chapter 7

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In This Chapter

You will be introduced to contract law & how a contract is created.

Contract

A contract is a legally enforceable agreement to do or not to do a specific thing.

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Legally Enforceable Agreements Expressed – declare intentions

Implied - created by action Bilateral - promise exchanged for a

promise

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Legally Enforceable Agreements Unilateral - promise exchanged for

performance. Executory- both parties have work to

be done after the contract is signed. Executed - one that is complete upon

signing.

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Bilateral Contract Unilateral Contract

Promise for Promise Promise for Performance

Bilateral and Unilateral Contracts

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Legal Effect of Contracts Valid - meets all requirements of law. Void - no legal effect & not a contract. Voidable - one party bound but not

the other. Unenforceable – may have been valid

at an earlier time but now enforcement is barred.

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Contract Essentials

1. Competent parties

2. Mutual agreement

3. Lawful objective

4. Consideration or cause

5. Written

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Meeting of the Minds

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Offer

Acceptance Counteroffer

OfferAcceptance

Mutual Agreement Offer Acceptance Counteroffer

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Problems

Fraud Innocent misrepresentation Mistake Duress

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Parol Evidence Rule

Rule permits oral evidence to complete an otherwise incomplete or ambiguous written contract.

If contract is complete & clear the courts presume what the parties put into writing is what they agreed upon.

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STATUE OF FRAUDS

Requires real estate contracts be written Electronic form acceptable - Esign

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Electronic Transactions Effective March 1, 2001 Esign – electronic signature legal Applies only to interstate commerce Texas passed UETA in 2001 Watch for

Electronic closings Recordings Commercial contracts

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Performance

Most contracts are discharged by being fully performed or executed by the contracting parties in accordance with the contract terms.

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Discharge

Being fully performed by the contracting parties in accordance with the contract terms.

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Novation

A contract can also be performed by novation.

The substitution of a new contract between the same or new parties.

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Breach of Contract

Partial performance Unilateral Rescission Specific performance Money damages Liquidated damages Mutual Rescission

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Statute of Limitations

Written contracts have 4 years. Oral contracts have 2 years limit.

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Implied Obligations

Contractual obligations by implication. No more “caveat emptor.”

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Courts

Courts of Law Courts of Equity Current Civil Court Systems State Courts Federal Courts Court Procedure

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Key Terms Bilateral contract Breach of contract Competent parties Contract Counteroffer Duress Executed contract Executory contract Express contract Fraud Implied contract Innocent

misrepresentation

Liquidated damages Minor, infant Mistake Novation Specific performance Statute of frauds Statute of limitations Unenforceable contract Unilateral contract Void contract Voidable contract

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