[CONTRACT ENFORCEMENT]

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[REVIEW]

Review: Contract Classification Express Contract Implied Contract Bilateral Contract Unilateral Contract Executory Contract Executed Contract Valid Contract

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[REVIEW]

Review: Contract Classification

Unenforceable Contract An unenforceable contract is a contract that is otherwise valid, but cannot be enforced, because fails to meet a certain requirement.

Void Contract A void contract is a contract that is void and without legal effect

from its attempted creation.

Voidable Contract A voidable contract can be avoided by one or both of the parties.

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Learning Plan 3LA3100

VOID AND VOIDABLE

CONTRACTS

[CONTRACT ENFORCEMENT]

[VOIDABLE & VOID CONTRACTS]Even if an agreement has the required elements to form a contract, these factors can make the agreement unenforceable:

1. Party lacked capacity. 2. Involuntary agreement of a party. 3. Statute of Frauds violation.4. Illegality.

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[VOIDABLE FOR INCAPACITY]Anyone can form a contract. But in many states, laws protect certain people from enforcement of contracts, by creating voidable contracts, such as:

1. Persons under the age of 18 years (minors) 2. Persons who are mentally incompetent 3. Persons under the influence of alcohol or drugs During the development of contract law, it was recognized that these groups of people might not understand the consequences of entering into a contract-that they lacked capacity.

Remedy: Excuse from performing.

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[VOIDABLE FOR INVOLUNTARY PARTY]

A contract must be a voluntary agreement to be enforceable. Situations in which consent may not have been voluntarily given:

1. Mistake 2. Fraud 3. Duress 4. Undue Influence

These situations create a voidable contract.

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[VOIDABLE BY MISTAKE]Mutual Mistake. 1. Both parties are mistaken about a material fact. 2. Either party may rescind (cancel) the contract. Remedy: Consideration returned by both parties.

Unilateral Mistake. 1. One party mistaken about a material fact, 2. Misrepresentation: knowledge of the mistake, term ambiguity.

Remedy: Recission allowed if there is misrepresentation.

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[VOIDABLE BY FRAUD, DURESS, INFLUENCE]

Fraud: Intentional misrepresentation of a fact.

Duress: Contract created under wrongful threat.

Undue Influence: Contract created by manipulation of a party’s confidence-”Trust me!”

Remedy: The harmed party can recind or sue the fraudulent party for resulting damages.

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[VOID BY ILLEGALITY]

Generally, a court will not enforce an illegal contract. As a result, the court system is not available to the parties in the event of a contract dispute.

1. A contract to commit a crime 2. A contract to commit a tort

Remedy: None.

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[VOID PER STATUTE OF FRAUDS]

Statute of frauds requirement of express contracts in certain situations:

1. Sale of land.2. Duration of more than one year. 3. Over a specified dollar amount ($500).

Remedy: A person may be able to recover the reasonable value of the performance/consideration as a quasi-contract.

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[ASSIGNMENTS OF CONTRACTS]

Certainly, a contract may be enforced by the original parties to a contract. However, in many cases a contract may also be enforced by other parties, including:

1. Assignees2. Third Party Beneficiaries

The person making the assignment is called the assignor and the person receiving the assignment is called the assignee.

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[CONTRACTS NOT ASSIGNABLE]

Courts generally favor parties’ rights to contract, including the right to assign contracts.

However, some assignments are prohibited:1. Statutory prohibition. 2. Assignment prohibition clause. 3. Unique, personal service contracts. 4. Burden-increasing assignments.

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[BENEFICIARIES OF CONTRACTS]

A contract need not be assigned to be enforced by a person who is not a party to the original contract. A contact may also be enforced by a beneficiary of the contract. Examples:

1. Creditor beneficiary 2. Donee beneficiary 3. Incidental beneficiary

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Learning Plan 3LA3100

BREACH

[CONTRACT ENFORCEMENT]

[ENFORCING A BREACH]

BREACH OF CONTRACT When parties enter into a contract, they

generally do not intend to breach (break) the contract.

Breaches are anticipated, however. Often, the remedy is included as a clause in the contract.

If there is no clause predetermining damages, it is often difficult to determine the appropriate remedy for a breach.

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[CONTRACT CONDITIONS]

In determining whether a contract has been breached, it is necessary to review the conditions of the contract.

A condition is an event that creates, limits, or terminates a party's duty to perform under the contract. (aka a “term” of the contract).

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[CONTRACT CONDITIONS]

Condition Precedent: One party is obligated to perform a duty before the other party is obligated to perform.

Condition Concurrent: Both parties to the contract must perform their duties at the same time.

Condition Subsequent: A condition that terminates an existing duty to perform.

Express Condition: Term written into the contract.

Implied Condition Assumed term based on circumstances.

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[CONTRACT ENFORCEMENT

Learning Plan 3LA3100

DAMAGES

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Compensatory damages: Puts the nonbreaching party in the monetary position that the party would have been had no breach occurred and the contract had been fully performed.

Consequential damages: Additional award, if at the time the contract was made, a reasonable person could have expected that such damages would have resulted.

Liquidated damages. A set dollar amount awarded only if: 1. Actual damages difficult to predict at formation.2. Reasonable amount; does not constitute a penalty.

Equitable remedies: When monetary damages insufficiently remedy, specific performance can order the breaching party to fulfill his obligations.

[DUTY TO MITIGATE DAMAGES]LA3100L P 3

A nonbreaching party has a duty to mitigate damages (personally attempt to recover loss).

[CONTRACT ENFORCEMENT]LA3100 Learn ing P lan 4