Chapter 5: How Contracts Arise

Thursday, April 3rd, 2014 Do Now: What is the document on the right? Objective: Students will identify the six elements of contract law.

What constitutes a contract? Written Oral Both? Requirements? You Research…

Contracts Contract: any agreement enforceable by law Six Elements of Contract Offer Acceptance Genuine Agreement Consideration Capacity Legality

If one element is missing, a contract does not exist If one element is missing, a contract does not exist. Contracts do not have to be in writing to be enforced.

Elements of Contracts Offer: a proposal by one party to another intended to create a legally binding contract Acceptance: the unqualified willingness to go along with the other

Elements of Contracts Genuine Agreement: “meeting of the minds”; valid offer is met by a valid acceptance

Elements of Contracts Consideration: the exchange of something of value that creates the bond between the parties to the contract

Elements of Contracts Capacity: the legal ability to enter a contract. Minors, mentally incompetent, drugged or drunk individuals have no legal capacity to enter into contracts.

Contractual capacity http://www.youtube.com/watch?v=5dBM4o6AXXs&feature=related

Elements of Contracts Legality: parties are not allowed to enforce contracts that involve doing something that is illegal.

Friday, April 4th, 2014 Do Now: What are the six elements of contracts? Why must we satisfy all six elements? Objective: Students will understand the characteristics of a contract.

Characteristics of a Contract 1. Valid, Void, Voidable, Unenforceable 2. Express Or Implied 3. Bilateral Or Unilateral 4. Oral Or Written

Characteristics of a Contract 1. Void, Valid, Voidable, Unenforceable Valid Contract: one that is legally binding Void Contract: amounts to nothing; has no legal effect. (If a contract is missing any of the 6 elements, it is a void contract.)

Characteristics of a Contract 1. Void, Valid, Voidable, Unenforceable Voidable Contract: is a contract which may be voided by one of the parties if that party chooses. Ex. A contract by a minor may be voided by the minor but not the adult

Characteristics of a Contract 1. Void, Valid, Voidable, Unenforceable Unenforceable Contract: one that cannot be enforced in court because of some rule of law. (Statute of Limitations)

Characteristics of Contracts 2. Express or Implied Express Contract: is stated in words and may be either oral or written Implied Contract: is one that comes about from the actions of the parties

Characteristics of Contracts 3. Bilateral or Unilateral Bilateral contract: contains two promises—one by each person (promise for a promise) Unilateral Contract: contains one promise only (promise for an act)

A reward offer is an example of a unilateral contract A reward offer is an example of a unilateral contract. It will take effect when someone complies with an offer.

Characteristics of Contracts 4. Oral or Written Oral Contract: is created by word of mouth Written Contract: Under the Statute of Frauds, certain contracts must be in writing --

Monday, April 7, 2014 Do Now: Give an example of a Valid, Express, Bilateral, Written Contract. Objective: Students will understand the requirements of an offer.

Offers: Offer: is a proposal by one party to another party to enter into a contract Offeror: the person making the offer Offeree: the person to whom the offer is made

Requirements of an Offer It Must Be Seriously Intended Definite And Certain Communicated To The Offeree

1. Serious Intent An offer made in the heat of anger or as a joke would not be serious intent

Newspaper ads are not offers, but rather are invitations to negotiate because sellers could not possibly sell the advertised product to everyone who saw the ad. Exceptions: ads that state “first come, first served”

United Airlines accidentally offer ridiculously low airfares http://www.nbcnews.com/travel/united-airlines-accidentally-offers-airfares-nothing-8C11139753

2. Definiteness and Certainty No Vague Terms Such As: Buy Equipment At “Competitive Price” Agreed To Pay “A Share” Of The Cost

3. Communication to the Offeree An offer must be communicated to the offeree. Ex. By telephone, letter, telegram, fax machine or other methods

Tuesday, April 8th, 2014 Do Now: Go online, visit your favorite retail outlet’s website. Are they making offers? List the website. List at least one offer. Objective: Students will understand the requirements of acceptance.

Acceptance The unqualified willingness to go along with the offer

2 Requirements of Acceptance Acceptance Must Be Unconditional Acceptance Must Follow The Rules Regarding Method Of Acceptance

1. Unconditional Acceptance Mirror Image Rule – the acceptance must not change the terms of the original offer.

1. Unconditional Acceptance Any change in the terms of the offer would result in a counteroffer, changing the offeree to the new offeror Exception to mirror image rule: Non-merchants may make minor changes and a contract will still be created

Mirror Image Rule song http://www.youtube.com/watch?v=j8pgbZV757w&feature=related

2. Follow the rules regarding methods of acceptance: When the offeree uses the same method of communication as the offeror, the contract exists when the acceptance is sent.

2. Follow the rules regarding methods of acceptance: If the offeree uses a different method of communication from the offeror, the contract exists when the acceptance is received. Silence cannot be used as the means of acceptance unless agreed upon

Wednesday, April 9th, 2014 HOMEWORK DUE Do Now: What are the two requirements of acceptance? Objective: Students will understand how an offer may be terminated.

Termination of an Offer 1. Revocation – offeror changes mind and withdraws offer Can be revoked anytime before it is accepted Revocation becomes effective when it is received by or communicated to the offeree

Termination of an Offer 2. Rejection: rejection or refusal of an offer brings the offer to an end 3. Counteroffer: a counteroffer has the effect of ending the first offer

Termination of an Offer 4. Expiration of time If offeror puts a time limit for acceptance, it must be complied with. If no time limit, it must be accepted within a reasonable time depending on circumstances. Ex. Purchase of truckload of produce/vs. purchase of a house

Option contract a binding promise to hold an offer open for a specified period of time

Termination of an Offer 5. Death or Insanity – If the offeror dies or becomes insane before the offer is accepted, the offer comes to an end. Death ends an offer, however, it does not end a contract, except for personal services.

Thursday, April 10th, 2014 TEST TOMORROW!!! Do Now: Take a handout, complete. Objective: Students will review Chapter 5: Contract Law.