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UNIT I (notes) (***** Note : THE BOLD fonts Are Important topics ******)
2. The definition of the term contract and the basic elements that is required for
contract formation. (2 marks)
Contract law concerns the formation and keeping of promises, the excuses our society accepts
for breaking such promises, and what promises are considered contrary to public policy and
therefore legally void. This chapter introduces the basic terms and concepts of contract law,
including the rules for interpreting contract language.
A. ENFORCE PROMISES
Contract law assures the parties to private agreements that the promises they make will be
enforceable. Without the framework that the law provides, businesspersons could rely only
on the good faith of others to keep their promises.
B. AVOID PROBLEMS
The rules of contract law are often followed in business agreements to avoid
potential problems.
A. FREEDOM OF CONTRACT
Generally, everyone may enter freely into contracts. This freedom is a strongly held public
policy, and courts rarely interfere with contracts that have been voluntarily made.
1. Agreement
Includes an offer and an acceptance. One party must offer to enter into a legal
agreement, and another party must accept the offer.
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2. Consideration
Promises must be supported by legally sufficient and bargained-for consideration.
3. Contractual Capacity
Characteristics that qualify the parties to a contract as competent.
4. Legality
A contracts purpose must be to accomplish a goal that is not against public policy.
1. Genuineness of Assent
The apparent consent of both parties must be genuine.
2. Form
A contract must be in whatever form the law requires (some contracts must be in writing).
1. Bilateral Contract
A promise for a promise to accept the offer, the offeree need only promise to perform.
2. Unilateral Contract
A promise for an act the offeree can accept only by completing the contract performance.
A problem arises when the promisor attempts to revoke the offer after the promisee
has begun performance but before the act has been completed.
1. Express Contract
The terms of the agreement are fully and explicitly stated in words (oral or written).
2. Implied-in-Fact Contract
implied from the conduct of the parties.
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QUASI CONTRACTSCONTRACTS IMPLIED IN LAW
In the absence of an actual contract, a quasi contract is imposed by a court to avoid the unjust
enrichment of one party at the expense of another. Cannot be invoked if there is an actual
contract that covers the area in controversy.
1. Formal Contract
Requires a special form or method of creation to be enforceable (such as a contract
under seal, a formal writing with a special seal attached).
2.Informal Contract
All contracts that are not formal. Except for certain contracts that must be in writing,
no special form is required.
1. Executed Contract
A contract that has been fully performed on both sides.
2. Executory Contract
A contract that has not been fully performed by one or more parties.
1. Valid Contract
Has all the elements necessary for contract formation.
2. Void Contract
Has no legal force or binding effect (for example, a contract is void if its purpose
was illegal).
3. Voidable Contract
Valid contract that can be avoided by one or more parties (for example, contracts by minors
are voidable at the minors option).
4. Unenforceable Contract
Contract that cannot be enforced because of certain legal defences (for example, if a contract
that must be in writing is not in writing).
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INTERPRETATION OF CONTRACTS
3. Terms that were negotiated separately are given greater consideration than standard
terms and terms that were not negotiated separately.
4. A word is given its ordinary, common meaning, and a technical word its technical
meaning, unless the parties clearly intended otherwise.
7. When the language has more than one meaning, it is interpreted against the party
who drafted the contract.
8. Evidence of trade usage, prior dealing, and course of performance may be admitted
to clarify meaning.
C.PLAIN-LANGUAGE LAWS
The federal government and most states require an agreement to be written clearly,
A Tender Process (or "Invitation to Tender" process) is a method by which suppliers are
selected for the provision of products and services to an organization. The process involves
creating a suite of Tender Documents to manage the supplier selection process. The Tender
Documents help the organization to select the best possible supplier available, and include
documents such as the "Statement of Work", "Request for Information" and "Request for
Proposal
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Earnest money -- A sum of money given to bind an agreement, such as the sale of real
estate, the advance of a loan or some other transaction requiring a deposit. Earnest money is
forfeited by the donor if he or she fails to carry out the terms of the contract or agreement