Interpretation of Contracts

Interpretation of Contracts

Plain Meaning Rule: Courts give terms their obvious meaning.

Ambiguous Terms.  If terms are ambiguous, court will attempt to interpret ambiguous contract terms in a reasonable, lawful, effective manner. 

Ø Contracts are interpreted as a whole.

Ø Terms negotiated separately given greater weight.

Ø Ordinary, common meaning given.

Ambiguous Terms (cont’d)

Ø Specific wording given greater weight than general language.

Ø Written or typewritten given greater weight than  preprinted.

Ø Ambiguous terms interpreted against the drafter.

Ø Trade usage, prior dealing, course of performance to allowed to clarify.

Case 9.3:  Dispatch Automation v. Richards (2002).

Enforceability

Enforceability

Valid.

Elements: Agreement, consideration, contractual capacity, and legality.

Void.

No contract.

Voidable (unenforceable).

Valid contract can be avoided or rescinded.

Types of Contracts

Types of Contracts

Bilateral v. Unilateral.

Bilateral - Offeree must only promise to perform (“promise for a promise”).

Unilateral - Offeree can accept the offer only by completing the contract performance (“promise for an act”).

Irrevocable: Offer cannot be revoked once performance has begun.

Express v. Implied In Fact.

Express: Words (oral or written).

Implied In Fact: Conduct creates and defines the terms of the contract. Requirements:

Ø PL furnished good or service

Ø PL expected to be paid

Ø DEF had chance to reject and did not.

Case 9.1: Homer v. Burman (2001).

Quasi Contracts - Implied in law.

Ø Fictional contracts created by courts.

Ø Imposed on parties for the interest of fairness and justice.

Ø Equitable remedies.

Ø Quantum Meruit. 

Case 9.2: Industrial Lift v. Mitsubishi (1982).

Formal v. Informal.

Executed v. Executory.

Executed - A contract that has been fully performed on both sides.

Executory - A contract that has not been fully performed on either side.              

Defense:

Defense:

Ø Legality.

Ø Genuineness of assent.

Ø Form.

Elements of a Contract

Elements of a Contract

Agreement (Offer and Acceptance).

Consideration.

Contractual Capacity.

Definition of a Contract

Definition of a Contract

A contract is a:

Ø Promise or set of promises,

Ø For which breach of which,

Ø The law provides a remedy, or

Ø The performance of which the law in some way recognizes as a duty.

Objective Theory of Contacts. Circumstances to determine intent of parties. 

Function of Contract Law

Function of Contract Law

Designed to provide stability and predictability, as well as certainty, for both, buyers and sellers in the marketplace.

Necessary to ensure compliance with a promise or to entitle the innocent party to some form of relief.

What law governs?

What law governs?

Ø Service contracts - common law of contracts.

Ø Sale and lease contracts - Uniform Commercial Code (UCC).

What is a Contract?

What is a Contract?

Ø Contract is an agreement (based on a promise) that can be enforced in court.

Contracts: Nature and Terminology

Contracts: Nature and Terminology.

Introduction

Promise is a declaration that something will or will not happen in the future.