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What are the Objective Theory of Contracts

What are the Objective Theory of Contracts

Reasonable outside observer would adhere. The law of contract prohibits the enforcement of contracts that appear to be too good to be true. Business contract law serves to prevent outrageous claims from being enforced. This interpretation of the law of contracts is known as the Objective Theory of Contracts.
The Objective Theory prevents the interpretations of any law of contract from enforcing ridiculously out-sized claims in advertisements as the offer of a contract. The most famous example of this in business contract law is the Pepsi Harrier Jet case. In a 1995 TV commercial Pepsi offered a Harrier jet as a reward for its Pepsi points customer give away. 
The ad said that the jet could be obtained for 7 million points. While the main method of obtaining Pepsi points was to drink Pepsi brand soda and redeem points from bottle caps, the company also allowed points to be purchased for ten cents each. John Leonard thought he saw a brilliant business opportunity.
The normal cost to obtain a Harrier jet was in excess of $23 million dollars. If Leonard bought all the points he would have needed to redeem for the jet it would cost him just $700,000. After raising money from friends and family, Leonard bought 7 million Pepsi points. 
Attempting to enforce what he thought was a valid law of contract, he sent the 7 million points he had purchased, as well as 15 Points he had obtained from other means, and an order form on which he demanded that Pepsi supply him with a Harrier jet.
In response, the company wrote him a letter giving him free coupons and a letter which claimed that business contract law did not oblige the company to provide the jet because it was obviously an outlandish claim, meant to be humorous and entertaining. Leonard took Pepsi to court, claiming that the advertisement of a Harrier jet for the 7 million Pepsi points he had purchased was a valid offer. 
Leonard said that when Pepsi did not reward him with the jet it had violated the law of contract. He claimed that by mailing in the points he had accepted their offer, the 7 million points were his consideration, and that the jet constituted Pepsi’s consideration. 
In rejecting Leonard’s claim, the judge laid out the Objective Theory of Contracts succinctly. The judge ruled that business contract law had not been violated because “no objective person” could have believed in good faith that the offer was serious. 
Due to the outrageous nature of the advertisement, the law of contract was determined to not have been violated. Business contract law is bound by a reasonable person test, that is, would a reasonable person examining the contract determine that the terms of the contract were realistic.

Quick Guide to Understanding Contracts for Difference

Quick Guide to Understanding Contracts for Difference

Contracts for difference are a financial agreement between two parties that are in the midst of purchasing and selling an asset. A contract for difference is agreed upon between two parties; the parties in the agreement are appropriately labeled as “buyers” and “sellers”. In a contract for difference, the two parties agree that the seller will pay the buyer the difference between the current value of the asset in question over a specific time frame that the contract stipulates.


In essence, contracts for difference are financial derivatives that enable investors to take advantage of price fluctuations typically found in assets such as stocks. If stock prices are moving up or trending downwards, the underlying financial instruments associated with the fluctuations, under a contract for difference, enables the two parties to agree on the difference of valuation for the stocks of the financial instruments over a specified period of time. 


As a result of its function, a contract for difference allows an investor to speculate the overall movement of the market, and more specifically the price fluctuations of the underlying investments offered in the contract. If the difference in price of the underlying asset is negative, the buyer will instead pay the seller. 


When a contract for difference is applied to an equity, for example, the contract enables the investor to speculate on the price of the stock and the movements associated without actually owning shares in the equity.

Interpreting Contracts At A Glance

Interpreting Contracts At A Glance

One of the essential tenets of business contract law is that the terms of the contract must be one to which a When interpreting a contract there are several things that an arbiter or jury must examine. The first is to determine the intention of the parties to the contract. There are many ways to do so including the plain-meaning-rule.
When determining intent, the judgment must conform itself to the intent of the parties and must be alert to times when the parties’ intents deviate from the what would normally be expected. An interpretation must also seek to not reward fraudulent intentions which may have been held by a party to the contract.

Understand the Requirements of a Contract

Understand the Requirements of a Contract

In order to form a contract, five distinct aspects must be present. The first is that there must be consideration. The offer and acceptance of contracts is often referred to as an agreement.
Consideration in a contract does not apply if the contracted act is something legal prohibited. For instance, a contract cannot be entered into if the consideration of one of the parties is to kill another person, because the killing of another person is not normally a legal right.  
Contracts can only be enforced legally if the parties involved in them are believed to have wanted the courts to become involved in them at the time the contract was created. Two parties who claim they are entering a “gentleman’s agreement” are usually not considered to have entered into a contract.    
A contract cannot be considered to be valid unless both parties to the contract have the legal capacity to enter into the contract. Legal capacity has several elements. The first is that both parties must be of sufficient age to be considered above the age of majority. While a minor may become a party to a contract, they can disaffirm any contracts they enter into at any time. In the event a minor party to a contract disaffirms the contract, the minor must forfeit any goods they received. 
Recently, minors voiding contracts have been held responsible for returning the items covered in the contract in the same State they were granted, as are adults. Of course, the minor is only responsible for returning the consideration if it is currently in their possession.
The final requirement to creating a contract is that there must be a formality to inform both parties that the contract is in effect. The formality, however, is not standardized. It may involve affixing signatures to a written contract or shaking hands to formalize a verbal contract.

Important Facts You Need to Know About MentalIncompetency

Important Facts You Need to Know About MentalIncompetency

Being mentally incompetent deals with the inability to perform a duty or understand it. Illiteracy is not a type of mental incompetency since you are not limited mentally. Rather you lack the knowledge to be labeled literate. Mental incompetency may be related to various disorders and illnesses. An example of a disorder which may be deemed excusable by contract law could be one in which an individual suffers extreme ADD or has totally lost touch with their environment.
According to contract law, if the nature, purpose, and consequences are not fully understood due to the lack of mental capacity, the contract is voidable on the discretion of the mentally incompetent individual. Contract laws tend to define mental incompetency as lacking the capacity needed to undergo a legal process.
By a court of law, one is deemed mentally incompetent when diagnosed as mentally ill, mentally retarded, senile, or suffering from some other disability that prevents them from managing their own affairs. A guardian is appointed in order to aid the mentally incompetent in carryout out their personal and legal affairs.
There are three steps which lead to the determination of labeling an individual as mentally incompetent and excusing them from their duties to contract laws. The first is the motion for a competency hearing. The second is a psychiatric or psychological evaluation. Third, there is a competency hearing.
Most motions need to be filed prior to the sentencing. In this case, it would mirror that which occurs with the motion for a competency hearing. These hearings tend be granted “if there is a reasonable cause to believe that the defendant may be suffering from a mental disease or defect rendering him mentally incompetent” (18 U.S.C.A. § 4241 (a)).
Once that is complete, the court appoints a psychiatrist or a psychologist to evaluate the individual who has been subjected to mental incompetency. The appointed individual implements various psychological tests and investigations in order to deem a person competent or incompetent.
Following these two steps, the competency hearing determines the mental capacity of the individual to understand their obligations within a contract. Once all is said and done, either the contract is enforced or the individual is excused from his obligations, and is admitted into a hospital for a period of four months to evaluate whether or not the individual may be able to reacquire his or her competency.
Contract law also deems individuals who, when entering a contract while intoxicated, as being able to void a contract due to the lack of awareness regarding the nature, purpose, and consequences of the contract. If legally incompetent, a marriage contract may also be annulled based upon insanity, legal age, mental incompetence, and a preexisting marriage. 
Regarding contract law, one of the most delicate contracts to validate are wills. When a will is being drafted and goes through the court process of probate, deciphering between the intent of the will and what appears on it may involve complications. The complications may arise from individuals who persuaded the testator to write something within the will or a beneficiary party acting upon behalf of the testator himself. This is why the mental competency of the testator needs to be determined when the will is being enforced.

Quick Contract Types Overview

Quick Contract Types Overview

There are six types of contracts, which can be broken down into three pairs of related terms. The first pair is bilateral and unilateral contracts. Bilateral and unilateral contracts are distinguished by the relationships between the offeror and offeree.
 
 
In a bilateral contract, both parties must agree to the terms of the contract before it goes into effect. In a unilateral contract, the offeror presents terms to the general public. A unilateral contract only becomes binding once a second party seeks to collect on the contract. A unilateral contract is formed if Megan puts up a poster offering a reward for her lost wallet, while a bilateral contract would be formed if Megan offered Rosemary $50 to find her wallet.
 
 
Although formal and informal contracts were both once common, informal contracts have largely replaced formal contracts. A formal contract is any contract which is required by law to take a specific form. An informal contract is any other type of contract.
 
 
An express contract is formed when both parties state what they intend to do while the contract is being formed. An implied-in-fact contract is formed by the actions of the parties. An implied contract does not require any verbal statement by the parties to be put into eff

In Depth Overview of Principal

In Depth Overview of Principal

When an individual receives the authority to act on behalf of another, they are known as principal agents. A principal gives the authority, by way of investment or contract, to the principal agent. A contract is arranged in order to set up the guidelines on how the agent acts on behalf of the principal.

An example of a principal-agent relationship is how the shareholders of a corporation are investing within the entity, while the entity performs its duties of raising profits and becoming more productive. The principal in this situation are the shareholders, and the corporation acts as the principal agent. The shareholders may cancel the contract at any time, but while they are the principals, they elect officials within the corporation through a voting system which they have been given the right to do. 

An issue may occur based on the conflict of interest between the two parties. An example being, if the corporation needs to take one route for its benefit, and at the same time, the stock of the corporation may go down, which negatively affects the interests of the shareholders.

There is no set goal on which the principal may be satisfied since they are hiring an agent in order to do what they specialize in. The agent in this case is to perform to his or her maximum ability in order to satisfy the principal. The only way the principal may feel dissatisfaction is if their interest within the agent depreciates.

A principal agent has a fiduciary duty towards the principal. The duties of an agent include the following: (1) To perform the tasks specified within the terms of the contract to the best of their ability, while the principal agents do not have the authority to perform acts on behalf of the principal that are not stated within the agreement; (2) An obligation to relieve his obligations with due diligence and care; (3) The duty of avoiding any conflict of interest, not only between the two parties specified in the contract, but also any conflict which they may incur even though it is not stated within the agreement.

A principal agent is not to perform any additional duties which may conflict with a prior obligation to which he or she has committed. The main issue within the principal agent relationship directly involves the lack of full disclosure. The principal has the duty to update the agent on any information which relates to the transaction or the tasks the agent has on hand. The agent must do the same, and the agent has an extra obligation of not increasing his interest without increasing the principal’s. If an agent is acting on behalf of a principal, the agent must make sure the increase in interest between the two is relative.

Appropriation

Appropriation

The Prior Appropriation Doctrine has been created in order to meet the needs of western and arid states. An arid State refers to a State which has insufficient water supply or lack of rain. This Doctrine caters on a first come first serve basis, meaning whoever makes use of the water first has the superior right to the water. All appropriation laws are not similar when going from State to State, as each varies based on the demand and what the State deems as beneficial use of the water.

Expropriation is the taking away or surrendering of the permit or right an owner has to the usage of water. This usually occurs when an owner violates regulations or breaches his contract of what is stated on the permit. Overall, the Government has put its own regulations on bodies of water, but makes sure to leave room for flexibility so that the states could apply the rules according to their needs.  

Easy to Read Enforcing Contracts Overview

Easy to Read Enforcing Contracts Overview

The courts can become involved in enforcing contracts in the event there is a dispute between the parties in a contract. The courts may establish that a contract is enforceable, voidable, unenforceable, or void. The court may also rule that a quasi-contract is in effect. Enforceable contracts, voidable contracts, and unenforceable contracts are all considered examples of valid contracts.
When issuing a judgment, a court may declare a contract void or valid, and may declare the ruling to apply to the contract as a whole or to just a part of the contract. If only a portion is declared void, and the remainder of the contract can still be considered valid, the contract will remain in effect.

Enforceable Contract
If the court rules that the contract is enforceable, it means that the two parties are bound by the terms of the contract to which they had previously agreed. An enforceable contract is a category of a valid contract. Enforceable contracts compel action on behalf of both parties.


Voidable Contracts
A voidable contract is a specific category of enforceable contract. A voidable contract exists when one or both of the parties has the ability to release itself from the contract without a finding of fault. A voidable clause can be specifically inserted during the drafting of a contract by either party.
Any contract involving a minor is automatically considered a voidable contract. A minor may terminate the contract within two year of reaching the age of majority. In a voidable contract only the party with the right to void the contract may file suit for breach of contract.

Unenforceable Contracts
An unenforceable is a valid contract which a legal body cannot compel one or both of the parties to fulfill the terms of because there is a statute or public policy with which the contract is in conflict.


Void Contracts

A void contract is an oxymoron. A contract that is void is a contract which could not exist in the first place. A contract may be declared void by the courts in several circumstances. If one of the parties has been adjudicated to be incompetent, the contract may be declared void. A contract undertaken to commit an illegal act will be declared void as well.


“Quasi” Contracts
Quasi-contracts are instances where two parties never specifically entered into a contract for the service in question, but a law creates an obligation for one party to provide compensation to another for services rendered.
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