Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Contract law  buyer/seller relationships, personal relationships, employment, property, corporate Garage sales to purchasing islands Foundation for most types of law What are some every day contracts we engage in?

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise A contract is any agreement enforceable by law. Not all agreements are contracts There are 3 Theories of Contract Law The Nature of a Contract

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Courts asked Are you exchanging items of value Dated due to capitalism Need to be profit-making The Equity Theory

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise  Ask if the parties had agreed to the terms on of their own free will.  Contract does not need to be fair or equal  Courts were unsure if parties reached a “meeting of the minds” The Will Theory: brought on by Capitalism

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise  Then the courts began to study the parties’ actions and words to determine if there was a “meeting of the minds.”  Considers form of agreement and certain fixed elements within the contract. The Formalist Theory: what we currently use

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise To be legally complete a contract must have: Elements of a Contract 1.Offer 2.Acceptance 3.Genuine agreement 4.Consideration 5.Capacity 6.Legality

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An offer is a proposal by one party to another intended to create a legally binding agreement. An acceptance is the second party’s unqualified willingness to go along with the first party’s proposal. Elements of a Contract

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise If a valid offer is met by a valid acceptance, a genuine agreement exists. Fraud, misrepresentation, mistake, duress can destroy agreement. Capacity is the legal ability to enter a contract. Capacity is disputable. Elements of a Contract

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Consideration is the exchange of things of value. Legality means that people can only enter into contracts for legal purposes. People cannot enter into contracts to commit illegal acts. Elements of a Contract

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Valid, Void A valid contract is legally binding. A contract that is void has no legal effect.

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Voidable or Unenforceable When a party to a contract is able to void or cancel the contract for some legal reason, it is a voidable contract. A contract between 2 minors is voidable by either party. An unenforceable contract is one the court will not uphold because some rule of the laws—statues of limitations. Passing the deadline to return an item.

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An express contract is stated in words and may be either oral or written. You agree to pay your babysitter $50 to work for 4 hours. An implied contract comes about from the actions of the parties. Buying gas from the gas station. Express or Implied

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise A bilateral contract contains two promises. Two tenants agree to split the payments of the utility bills. A unilateral contract contains a promise by only one person to do something, if and when the other party performs some act. I will sell you the entertainment book if you pay first. Bilateral or Unilateral

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An oral contract is created by word of mouth and comes into existence when two or more people form a contract by speaking to each other. Sometimes, however, it is desirable to put contracts in writing. Benefits? Oral or Written