Class 24 - Contracts (cont.)

Manifestation of ascent: offer and acceptance

If an offer is made, it can be revoke or rejected, until it has been accepted. If it has been accepted, it can be enforced by law.

Sometimes, it appears that there is a contract, but certain kinds of conduct can invalidate the manifested ascent. Ex: duress.

Two types of duress: Simple duress and gun-at-head duress.

GAH duress voids a contract.
Simple duress is an improper threat. Ex: offering not to prosecute someone if he agrees to a contract. The threat of criminal prosecution. Criminal prosecution can only be done by the government. Threatening to sue civilly, is not improper. It's how you do a settlement.

Undue influence can also void a contract. Ex: adult child and an elderly parent.
Examine three factors in undue influence:
was the consideration ($) adequate?
was there independent advice given to the individual?
was full disclosure made to the individual?

Fraud - this is the major type of fact situatino taht allows someone to rescind the contract. It is not only contractual issue, it is also a tort for which punitive damages may be awarded.

Fraud in the execution - Ex: petition with a hidden contract
Fraud in the enducement - a false representation of a fact (not opinion) which is material (important) made with knowledge of its falsity with the intention to decieve and is justifyably relied upon. Silence can also be a false representation - ex: speedometer with wrong mileage.

It has to be material/important. Ex: the brand of spark plugs on a car is not material

It is fraud even if you don't know the truth. If you're making up a fact, it's fraud - Reckless indifference to the truthfulness.

Justifyable reliance - it has to be something that is relied upon. if the person didnt really care, it's not fraud.

You can recover a remedy for both the fraud (void the contract) and the tort of fraud and also punitive damages.

Innocent misrepresentation is just like fraud, but it's not intentional. You can rescind the contract, but you can't sue for any tort.

Sometimes a mistake by one or both of the parties allows for rescision.
Mistake as to the subject matter: if both parties believe that the glass is a diamond.

One party can't take advantage of the other person's mistake. Ex: guy who bought a valuable baseball card.

Mistake for failure to read the contract - this does not invalidate the contract.

Consideration

Consideration is one of the necessarily elements for an agreement to be a binding contract. (just like offer and acceptance)

Must show that the consideration was legally sufficient. Sufficiency of consideration is not the same as adequacy (pay too much or too little). Courts never get involved in adequacy of consideration.

Test of legal detriment/benefit: one of the parties much receive a legal benefit or incur a legal detriment.

Detriment - be required to do something that there was no pre-existing obligation to do, or refrain from doing something that you had a legal right to do.

Ex: promise to pay for tuition if student achieves a 3.0+ average. The student had no previous obligation to go to the school. He also gave up other things that he could have done instead.

Ex: offer to give money to a person if he loses weight. The person who diets, has incurred a legal detriment.

Promises to give gifts are unenforceable because there is no consideration.

Preexisting public obligation vs preexisting contractual obligation.
Public obligation - public employee, police must return an object as part of their job so they don't get the reward money. state's attorney has obligation to prosecute.

preexisting contractual obligation - accountant who wants more money to do work that he already had a contractual obligation to do. in order for there be consideration, he has to do more work, even menial.

sports stars renegotiating a contract - you have to tear up the old contract, otherwise there's a preexisting contractual obligation.

Settlement of a liquidated debt vs settlement of an unliquidated debt

liquidated debt - a debt which is undisputed
unliquidated debt - a debt which has a dispute over the amount of the debt

ex: writing "paid in full" on a check for less than the total amount of the debt. does not constitute an offer to settle for less.

unliquidated debt - ex: dentist who didn't discuss the cost. if the patient then writes "paid in full" on the check for less than the amount billed and the dentist cashes it, it's considered an offer and acceptance of the settlement.

Doctrine of promissary estoppal - the promise cannot be stopped. ex: if you offer to give a gift to a university and based upon that promise they take some action are reasonably rely on the promise, the doctrine of promissary estoppal says that you can't rescind the promise for lack of consideration.