1. CONTRACTS
Teacher: Tomás Barreto B.

2. Legal Environment
What is a contract?

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Definition of a contract
A legally binding agreement
that means there must be some kind of
agreement between two parties.
However, not all agreements are contracts
because not all agreements are legally
enforceable.
legally enforceable means that a court will
say that an agreement is a contract.

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Definition of a contract (cont.)
To decide if an agreement is legally
enforceable as a contract, a court will apply
the rules and principles of the law of
contract.
Therefore, knowing a little about these rules
can help businesspeople to create valid
contracts.

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What is a Contract?
Determining the Initial Step
Everything you wanted to know about contract law that we can
squeeze into 30 minutes.

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What is a Contract?
A contract is an agreement between two parties that
creates an obligation to perform (or not perform) a
particular duty. A legally enforceable contract
requires:
1. An Offer (I’ll mow your lawn this weekend, if you pay
me $30).
2. An Acceptance (You’ve got a deal).
3. Consideration (The value received and given – the
money and the lawn mowed).

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Simple Contracts
There is no general rule in English law that
a contract must be in writing.
In fact, people do not realise that they are
making a contract in many situations.
Some contract can be made verbally or by
actions.
These are known as parol or simple
contracts.

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Simple Contracts (cont.)
Although there is no requirement for a
simple contract to be in writing, sometimes
the parties might record the contract in
writing.
This can be useful later if there is
disagreement about the contract.
If the contract is important or involves a lot
of money it might be wise to put it in
writing.

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Contracts which must be in
Writing
Some contracts must be in writing but they
don’t have to be by deed.
Most of these requirements come from
Statute.
Some examples:
 bills of exchange
 contracts for the sale of land

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Legal Effect
As we mentioned earlier, contracts are
agreements, but not all agreements are legally
enforceable contracts.
In fact, the legal effect of agreements fall into 4
categories:
Valid contracts
Void contracts
Voidable contracts
Unenforceable contracts

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Valid Contracts
These are agreements which are completely
binding and enforceable.
Parties to valid contracts gain rights and
responsibilities.
The courts will make sure that the parties
follow these rights and responsibilities if
there is any argument.

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Why have a Law of Contract?
As we saw from the examples at the
beginning of the class, contracts arise in
simple, everyday situations.
Modern society operates by people and
companies exchanging goods and services.
The Law of Contract helps to give a
structure to this.

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Why have a Law of Contract?
The Law of Contract is part of Private Law
so it is concerned with relationships
between parties.
It helps us to decide what is a valid contract.
The Law of Contract is also part of Civil
Law so it is also concerned with remedies.
It helps us if the other party to a contract
does not keep to the agreement.

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Summary (cont.)
Business is an important part of modern
society.
The Law of Contract tells us what is
necessary to make a valid contract.
It also gives us remedies where another
person does not follow the terms of the
contract.

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Establishing Offer and Acceptance:
“A Meeting of the Minds”
A legally recognized offer and an acceptance creates
a “meeting of the minds’, or mutual assent, between
the parties.
Mutual Assent requires the presence of the following
factors:
1. Both parties must exhibit a “contractual intent”
[words spoken in jest or frustration will lack the
requisite intent];
2. The terms of the offer must be clear and definite;
3. The acceptance must be clearly communicated.

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The Requirement for Clear and
Definite Terms
Required Clarity: For terms to be legally
valid, a reasonable person must be capable of
readily understanding them.
Four primary areas in determining definite
terms:
1. the parties;
2. time for performance (term or service
schedule);
3. the price; and
4. the subject matter or scope of service.

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Consideration:
The Importance of the “Bargained Exchange.”
Consideration must be mutual. Both parties
must receive something of value.
Involvement of money is not required.
Contracts vs. Gifts.

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What Authority Defines a Contract?
Sources of Contract Law
• Common Law – Court made case law governing
contracts (primary law for service contracts).
• Uniform Commercial Code (UCC) – Governs sales
of tangible goods and secured transactions.
http://tlo2.tlc.state.tx.us/status.bc.toc.htm
• Specific Statutes in Peru: – http://www.sunarp.gob.pe
http://www.ministeriodejusticia.gob.pe

19. Categorizing University
Contracts

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Types of University Contracts
 Affiliation and International
Program Agreements
 Athletic-Specific, or
Student-Specific Contracts
(non- procurement in
nature).
 Interagency Cooperation
Agreements (IAC) & Inter-
local Agreements
 Museum and Exhibit
Agreements
 Prof. Service Agreements
(for individuals not
organized as a business)
 Procurement Contracts;
Vendor Services
 Sponsored Research
Contracts and Sponsored
Projects
 University-Provided
Services
See Categorizing Contracts

21. Initial Evaluation, Development,
and Submission

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Initial Contract Evaluation and
Development
Determining the Need for an Agreement:
1. Vendor-Originated
2. UT Determination: The risk of the project
may necessitate a formal agreement; or UT
Policies may require it.
Using Sample Agreements

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Major Areas within Every Contract
Parties
Effective Date and Terms
Statement of Service (SOS)
Pricing
Performance Standards
Warranties
Remedies
Risk Allocation
Boilerplate
Signatures
See:
contract components

24. Finalizing and Executing the
Agreement

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Finalizing the Agreement
Final Negotiations with
the Vendor.
Departmental Approval
Required.
Additional Necessary
Approvals.

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Executing the Agreement -
Who can Sign?
Upon completion of negotiation, the Contracts
Office will:
1. route the Agreement to obtain appropriate
signatures; and
2. distribute signed copies accordingly.
President-Delegated Authority:
1. V.P. for Business Affairs
2. Associate V.P. for Administration
3. Associate V.P. for Financial Affairs

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Questions