Class 25 - Contracts (cont.)

The elements of an agreement in order for it to be a legally binding contract.

intent
offer
acceptance
absence of fraud, duress or undue influence
legally sufficient consideration

It must be legal. Agreements involving illegal activities are not binding (gambling, murder, etc). If there is a contract for an unlicensed worker to do work, it depends what type of license if require.

Regulatory or Revenue-raising device.

If it's a revenue-raising device, then the contract is enforceable.
If it's a regulatory license, then the contract is not enforceable.

Another regulation is the Sunday "blue" laws. Auto dealerships are closed on Sunday. In Massachusetts, they barred businesses from being open on Sunday. Schechter Poultry sued and lost.

If the parties do business in violation of a Sunday closing law, the contract is voidable. But if the parties continue with the contract, it continues in effect.

Restraint of Trade

Non-competition clause. Gene & Georgetti's Italian Steakhouse at Franklin & Illinois. If someone buys a business and adds a clause that keeps the old owners from reopening, under the common law, this was a violation of restraint of trade. Under current law, it's permitted as long as it's reasonable in time and geography. It depends on the business and its reputation. Hot Dog stand on Armitage, east of Halsted - cannot bar them from opening in a wide area, only in the immediate area.

Non-competition clause in an employment contract also must be reasonable. Non-solicitation clause is reasonable. Barring the employee from working in his profession in his community is usually not considered reasonable.

Another illegal clause...
Violation of Public Policy - you must be responsible for your own careless behavior. If someone puts in a contract that they're not responsible for anything, it is meaningless.

Contractual Capacity

18 yrs old+
Mental capacity

Contracts for necessities
1. food
2. clothing
3. shelter
4. medical care
Contracts for necessities by minors are valid (for and against them)

Necessaries - necessary, considering the status or position in the community. Courts will enforce the contract for and against the minor.

Luxuries

Good advice: Don't deal with minors.
Story of Susan (north shore) and Sharon (inner city girl) who both bought a fur. For Susan it was a necessary - enforced the contract, for Sharon it was a luxury - contract is void.

An emancipated minor can be held responsible for his/her contracts.

If a minor buys a car, makes payments, and then becomes 18, the contract is then ratified.

Mental illness

Simple insanity - Person has lucid moments when medicated. If a person is off his meds and signs a contract, he can disaffirm it when he becomes lucid.

Ajudicated insanity - court has ruled the person insane. A contract by such a person can never be valid.

Intoxication - an intoxicated person who signs a contract cannot void the contract. unless the person was totally intoxicated and the other party knew it.

Contracts of minors are voidable by the minor if they are for luxury items. The contract is not voidable if it is for necessities or necessaries.

Statue of Frauds

A body of law that deals with misrepresentation. Some contracts are so important or unusual that they are only enforceable if they are in writing.

Most oral contracts are enforceable.

Six must be in writing:
1. promises of an executor or administrator to pay debts of an estate out of his own personal funds.
2. promise to answer the debt of another person
3. agreement upon consideration of marriage
4. agreement for the sale of land or an interest therein
5. agreements taht cannot be performed within one year
6. contracts for the sale of goods if they are in excess on $500 (according to UCC)
first 5 must be in writing according to common law.

Final exam: Tuesday, Dec 15. 6pm.