Capacity Legality Consideration Offer Acceptance Genuine Agreement Elements of a Contract Capacity Legality Consideration Offer Acceptance Genuine Agreement

Capacity Who does not have capacity? Mentally impaired persons Intoxicated persons Minors Exceptions: Contracts involving necessaries (food, clothing, shelter, medical care)

Mentally Impaired Persons A mental impairment can be: An injury A physical problem the person was born with A diagnosed psychological problem The impairment must: Have made the person unable to understand the contract Be determined by doctors, not lawyers or judges

Intoxicated Persons Must have been under the influence at the time they entered into the contract Must have been so intoxicated that they did not understand what they were doing Decision is made by judge or jury

Minors Generally able to enter into contracts, but have the right to disaffirm Must disaffirm either all or none of a contract When two minors enter a contract, both have right to disaffirm When breaking a sales contract, a minor must return the goods A driver’s license give most of the same rights/responsibilities to minors as to adults Lying about age when making a contract can be considered fraud

Minors Emancipated minors have the same contractual duties as adults How can a minor become emancipated? Marriage Set up own household Sue for emancipation

Can it be voided? Jordan is 16. While mowing his grass, he seriously cut his hand. His neighbor took him to the emergency room where he was treated and released. Two weeks later, he receives a bill from the hospital for $575. Jordan refused to pay the bill. Can he be held responsible for this bill, or can the contract be voided? He can be held responsible for the hospital bill. Under the theory of necessaries, emergency medical care given to a minor is a contract that cannot be voided just because the patient was a minor.

Legality A contract must not violate statutes such as: Civil or criminal statutes Usury statutes Gambling statutes Sunday statutes (blue laws) Licensing statutes

Legality Contracts may not violate public policy such as: Agreements not to compete Agreements for price fixing Agreements to obstruct justice

Legality Illegal contracts are not enforceable by either party If both parties know that the contract is illegal, they are in pari delicto (equally at fault) If only part of a contract is illegal, the legal part may still be enforceable

Is it enforceable? Jimmy Connor is a truck driver. He agrees to drive nonstop from Vermont to Arizona to deliver a shipment. Regulations prohibit drivers from driving more than 8 hours without a layover and rest. This trip would take more than 8 hours. Is this contract enforceable? Partially. The main purpose of the agreement is to deliver goods. This is legal and enforceable. Driving more than 8 hours nonstop is illegal and cannot be enforced. Jimmy should be paid for delivering the goods, even if he stops for a break on the way.

Consideration A thing of value must be exchanged for something else of value. Giving up something you have the legal right to keep. Doing something you have the legal right to not do. Not doing something you have the legal right to do.

Consideration The 4 types of consideration are: Monetary Consideration – $ in exchange for property or service Property or Services as Consideration – Property or services in exchange for $ (or other property/services) Promise not to sue – $ in exchange for the promise not to sue; a type of forbearance Charitable Pledges – Any promise to give $ to a charity; does NOT require consideration on the part of the giver; applies to ANY amount

Is this valid consideration? Janet agrees to babysit Brenda’s children the first Saturday of each month. In return, Brenda will drive Janet’s child to school every Friday. Have Janet and Brenda entered into a contract with valid consideration? Yes. The key here is “in return”. Brenda and Janet are both offering services as consideration.

Offer A proposal made by one party to another, indicating a willingness to enter into a contract. The person making the offer is the: Offeror The person to whom the offer is made is the: Offeree

Offer An offer must be: Made seriously Definite and certain Communicated to the offeree

Is this a legally effective offer? The Galaxy Research Center emailed an offer to the owners of Twin Pines, a farm in rural Arkansas. The messages stated: “Please consider this our offer to purchase between 9,000 and 11,000 acres of your 15,000-acre tract of farmland near Twin Pines, Arkansas. Our offering price is between $15,000 and $19,000 per acre. Respond ASAP.” Is this legally considered a valid offer? No, an offer must be definite (specific). This is too vague.

Acceptance The offeree’s unconditional willingness to go along with the offeror’s proposal. Mirror image rule: terms stated in acceptance must exactly mirror/match the terms in the original offer If the terms aren’t accepted exactly, it becomes a counteroffer.

Acceptance Methods of acceptance: Can be implied Can require a specific action Can be direct or long-distance Long-distance acceptance has special requirements Acceptance is effective when sent Any method endorsed by the offeror is effective

Genuine Agreement An agreement genuine when a valid offer is met by a valid acceptance An agreement is not genuine if it occurs under the following circumstances: Fraud Misrepresentation (intentional) Mistake Duress Undue Influence