Elements of Contract Law
Project Rationale:
The students will examine the typical issues of contract law in scenarios taken from a common setting, the purchase of an automobile.
Problem Statement:
For purposes of this exercise, assume the following facts to be true. John wants to buy the hottest new Italian sports car, the Sognare. He haggles with the salesman, but finally agrees to buy the car for $45,000.
What would be the result in the following situations? (Consider each situation in isolation):
Situation A:
John leaves the dealership in the car, and gets onto the expressway. He accelerates to 95 miles per hour, loses control, and crashes into a guardrail. John is seriously hurt. It turns out that in his excitement over such a large commission, the salesperson failed to have John sign the agreement to purchase the car.
Is it a valid contract?
Why or why not?
Situation B:
Suppose John did sign the contract. John, although he looks much older, is only 17 years old. If John turns 18 three weeks later, what, if anything, can be done to solidify the agreement between John and the dealership?
Situation C:
When John was 15, a judge, acting on the professional opinions of two psychiatrists, ruled John to be insane. Even after reaching the age of 18, John continues to suffer from the serious mental illness.
What, if any, bearing does his mental state have on the contract to purchase the car?
Situation D:
John’s mother, Andrea, is so convinced that John is going to hurt or driving the car that she takes out a life insurance policy on him. She names John’s fiancée, Heather, as the beneficiary. Four months later, Andrea’s fears come true, and John loses his life in a one-car crash on a country road. The insurance company refuses to honor the policy claiming John had a mental illness and that Andrea and John had withheld this information from them. Andrea is so upset over John’s death that she does nothing.
Does Heather have any legal recourse under the life insurance policy?
If so, on what theory?
To determine the answers to these contract law situations, we will need to examine the elements of a valid contract and how they apply in each situation. The elements of a valid contract typically include:
1. Offer and Acceptance: There must be a clear offer made by one party and accepted by the other party. Acceptance can be through words, actions, or conduct.
2. Mutual Assent: Both parties must agree to the terms of the contract willingly and without any duress or undue influence.
3. Consideration: There must be an exchange of something of value, often money, goods, or services.
4. Capacity: Both parties must have the legal capacity to enter into a contract. This means they must be of legal age and have the mental capacity to understand the terms of the contract.
5. Legality: The contract must be for a legal purpose and not involve any illegal activities.
Now let's apply these elements to each situation:
Situation A:
In this situation, John leaves the dealership without signing the agreement. In order for there to be a valid contract, there needs to be an offer, acceptance, and mutual assent. Without John signing the agreement, there is no clear acceptance or mutual assent to the terms. Therefore, it would not be a valid contract.
Situation B:
Here, John signs the contract but is only 17 years old. The legal age to enter into a contract in many jurisdictions is 18 years old. However, if John turns 18 three weeks later, he would then have the legal capacity to enter into a contract. This would solidify the agreement between John and the dealership, as he would now meet the capacity requirement.
Situation C:
John has a history of mental illness, and it is established that he continues to suffer from it. Mental capacity is an important element in contract law. If John was ruled insane by a judge and the mental illness affects his ability to understand and consent to the terms of the contract, it may invalidate the contract. However, this would depend on the jurisdiction and specific circumstances. If it can be proven that John lacked the mental capacity to enter into the contract, it may be considered voidable.
Situation D:
In this situation, John's mother takes out a life insurance policy on him and names Heather as the beneficiary. The insurance company refuses to honor the policy, claiming John had a mental illness that was not disclosed. Whether Heather has legal recourse will depend on the terms and conditions of the life insurance policy. If the policy does not have any exclusions for mental illness or if John's mental illness was not considered a material factor in the accident, Heather may have a claim to the insurance proceeds. However, it is important to review the specific terms of the policy and consult with a legal professional to determine the available legal recourse.
In contract law, it is always important to analyze the specific facts and circumstances of a situation, as well as the relevant jurisdiction and applicable laws, to reach a definitive legal conclusion.