Mr. Stasa – Willoughby-Eastlake City Schools CONTRACTS (Part 1) Mr. Stasa – Willoughby-Eastlake City Schools

Have you entered into a contract? Do you think a contract always has to be a long, printed, and formal document? Have you ever… Bought food from a restaurant before? Bought a video game? Filled your car with gas?

Did you know…? You enter into a contract each time you agree to exchange anything of value.

What’s a contract? A contract is an agreement containing a promise to do something in exchange for something of value. Not all agreements are contracts. Example: Your promise to take out the trash without the exchange of a reward is not a contract.

Examples of a contract If you mow my yard I will pay you $25. If you locate my missing dog, I will reward you with $500 If you renovate my kitchen, I will pay you $2,000. If you pay us $28,000, we will provide you with a 39 mpg hybrid car.

6 Elements of a Legal Contract In order for a contract to be legally binding and enforceable in a court of law, six elements of a contract must exist. Offer Acceptance Genuine agreement Consideration Capacity Legality

Element #1: Offer An offer is a proposal to another party with the serious intent to create a contract. Offeror: The person proposing a contract Offeree: The person to whom a contract is offered to. Example: I will offer you a never before used iPod Touch in exchange for $95” Offeror Offeree

Requirements of an Offer Serious Intent Must intend to make the offer An offer in the heat of anger or as a joke would not meet this requirement. Communicate to the Offeree Any method that communicates the offer to the offeree Ex. phone, fax, internet, letter, telegram, text

Element #2: Acceptance Acceptance is the willingness to accept the proposal. Example: I accept, and will pay you $95 in exchange for your never before used iPod Touch. Offeree Offeror

Element #3: Genuine Agreement Genuine agreement is the “meeting of the minds” (mutual assent) when a valid offer is met by a valid acceptance.

Element #4: Consideration Consideration is the item of value promised to one party in exchange for something else of value. The exchange of value binds the two together. $95

Element #5: Capacity Capacity is of having the sound, body, and mind to enter into a contract. Exceptions include: Minors Under the influence Mentally ill

Element #6: Legality Legality is when a contract does not violate any laws. Sometimes an agreement may cause a person to break the law and are therefore unenforceable. Example: I will promise you $100 if you drive in reverse down Stevens Blvd going 40 mph. http://www.youtube.com/watch?v=fcjfvfJLUxA

POP QUIZ James was so aggravated with his car always stalling out that he said in a fit of fury, “I’ll give anyone $300 to take this care off my hands!” Rodger handed James $300. Did James and Rodger enter into a contract? No – offer was made out of heat of anger and not considered valid.