Thomson/South-Western©2008

Chapter 7

Contract Law

_______________________________________

Thomson/South-Western©2008

Legally Enforceable Agreement

• Expressed – declare intentions

• Implied - created by action

• Bilateral - promise exchanged for a promise• Unilateral - promise exchanged for performance

Thomson/South-Western©2008

Bilateral Contract Unilateral Contract

Promise for Promise Promise for Performance

Bilateral and Unilateral Contracts

Thomson/South-Western©2008

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.

Thomson/South-Western©2008

Contract Essentials

1. Competent parties

2. Mutual assent

3. Lawful objective

4. Consideration or cause

5. Written

Thomson/South-Western©2008

Meeting of the Minds

Offer

Acceptance Counteroffer

OfferAcceptance

Thomson/South-Western©2008

Mutual Agreement

• Offer & Acceptance

• Counteroffer

Thomson/South-Western©2008

Problems

• Innocent misrepresentation

• Mistake

• Duress

• Parol Evidence rule

Thomson/South-Western©2008

STATUE OF FRAUDS

• Requires real estate contracts be written

• Electronic form acceptable - Esign

Thomson/South-Western©2008

Electronic Transactions

• Effective March 1, 2001

• Esign – electronic signature legal!

• Applies only to interstate commerce

• Texas passed UETA in 2001

• Look to the future for– Electronic closing– Recordings– Commercial contracts

Thomson/South-Western©2008

Performance

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

Thomson/South-Western©2008

NOVATION

• A contract can also be performed by novation

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

Thomson/South-Western©2008

Breach of Contract

• Partial performance

• Unilateral Rescission

• Specific performance

• Money damages

• Liquidated damages

• Mutual Rescission

Thomson/South-Western©2008

Statute of limitations

• Written contracts have 4 years.

• Oral contracts have 2 years limit.

Thomson/South-Western©2008

Implied Obligations

• Contractual obligations by implication.

• No more “caveat emptor.”

Thomson/South-Western©2008

Performance

• Novation

• Breach of Contract

• Specific Performance

• Duress

• Fraud

• Mistake

• Misrepresentation

Thomson/South-Western©2008

Key Terms

• Breach of contract• Competent parties• Contract• Duress• Fraud

• Liquidated damages• Minor, Infant• Specific performance• Void contract• Voidable contract