Take a look at the Contract you pulled from your records when reading our Week 1 Introduction. What is the Offer and what is the Acceptance? What consideration was given by both parties to the contract? What other clauses attracted your attention–Limited Warranty and Disclaimer of Implied Warranties? Conflict Resolution?

Week 1 Introduction

Contracts are the backbone of our economy and the foundation of our legal system. Without courts to enforce contracts, we would have no commerce, and therefore, no economy. Think of what our land would be like if no one was held accountable for any business agreement. The courts and our laws of contracts allow us and our businesses to exchange goods or services for money and have legal backing of that agreement.

A contract is thought of as a meeting of the minds. This means two (or more) minds made a mutual agreement that resulted in a legally enforceable contract. The meeting of the minds metaphor is a good one for students to use since without a real and mutual agreement, no contract would exist, but once one is formed, it can become legally binding and enforceable, if all of the requirements of law are satisfied. See the case – Baltimore & Ohio R. Co. v. United States where the U.S. Supreme Court said: “an agreement… founded upon a meeting of minds, which, although not embodied in an express contract, is inferred, as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.”

Contracts impact both our daily lives and our business dealings. Everything we purchase, from a home to an automobile, from our home entertainment system to items at a grocery or convenience store, is the result of a contract. When our employer offered us work and we accepted, a contract was formed. Pull out a written contract that you are a party to; whether that be the automobile that you own or leased or the home entertainment system that you purchased. Read the contract carefully. What exactly did your vendor promise to you as a result of the agreement you entered into? Are there any warranties or a disclaimer of warranties? Are there any clauses that cover resolution of disputes? All of this is the stuff that makes up contract law.

THE VOCABULARY OF CONTRACT LAW

As business students, you need to gain a working vocabulary of contract law. As is the case with all specialized forms of endeavor, a contract has a language all its own, and a basic knowledge of some of the key terms used in contracts is essential. The key contract terms used tend to be dichotomous, and you can use that dichotomy as a learning tool. Take, for example, the number of parties to a contract. At least two parties are required in all contracts. One of those two parties has to initiate the contract formation process. The person starting the mutual assent process with a promise is the offeror; the other person is the offeree. Next, look at the dichotomy of the promises being used: Is it a promise (bilateral) or is it a promise for an act (unilateral)? Have these promises been expressly made or can they somehow be implied from the circumstances? Does the form that this agreement is taking require certain formalities (such as a negotiable instrument), or can it be done in any manner chosen by the parties (informal) as long as the elements of the contract are met?

Once the parties have formed an agreement, are the performance obligations already fully met (executed), or are there still remaining performance obligations on the part of one or more of the parties (executory)? In addition, you may have to examine issues of enforceability. If all elements are in place, the agreement is now considered a valid contract. If one or more of the essential elements is missing, the agreement is not raised to the status of legally enforceable contract and may be legally void. There are also certain situations where a contract is created, but it will not be enforced. If a legal defense is found to be in place, such as a writing requirement, the contract may be an unenforceable contract. Sometimes, certain persons are given a legally recognized power to avoid a contract after it has been entered into. These contracts are voidable, and examples of this sort of situation can be found in cases involving minors, those who are defrauded into signing a contract and those who are subject to duress or undue influence.

Week 1 is devoted to the foundations of the Law of Contracts. We will cover traditional and e-contracts, along with the required elements of an enforceable contract: the Agreement necessary to form a contract, the thing of value given in exchange for a promise that constitutes the necessary contractual element of Consideration, who has the Capacity to make Contracts and the Legality of the Contract terms and, finally, situations such as mistake, misrepresentation, duress, and undue influence that can undermine the Genuineness of Assent required to form a Contract.