CONTRACT LAW

May not create a legal obligation but a moral obligation Promise: a declaration that something will or will not happen in the future

Why learn about contracts?  Financial – checking/debit/credit  College – housing contract/college loans  Young Adult – apartment, employment, car loan, utilities  Putting Down Roots – marriage, real estate  Protecting it All – insurance, retirement  Through it All – vacation rentals, sale of property, hiring for services Slide 3 Chapter 6 THESE ALL REQUIRE A CONTRACT!

CONTRACT -- defined  Agreement between 2 or more parties that creates an obligation  An agreement that can be enforced in court  Like what?  What contracts have you formed?  What contracts have older siblings formed?  Your Parents?  Mrs. Sigsworth?

Court System Resources are Limited 1. Greatest Importance – Criminal Law & Torts a. Necessary to Keep PEACE in Society b. Correct damage done to injured party 2. Court more selective in contractual disagreements a. Can’t look at every disagreement b. Elements of contract specifically defined Slide 5 Chapter 6

6 Essential Elements of a Contract **Offer & Acceptance **Genuine Assent **Legal Purpose **Consideration **Capacity **Writing

Objective Theory of Contracts  Party’s intention to enter contract is judged by outward, objective facts as interpreted by a reasonable person, rather than the party’s secret, subjective actions 1. what was said when entering contract 2. how party acted or appeared 3. circumstances surrounding the transaction

Types of Contracts  2 Mutual Promises  Offeree accepts by words  1 Promise from Offeror  Offeree accepts by action Bilateral ContractUnilateral Contract

Types of Contracts  Terms are fully and explicitly stated in words  Written  Oral  Conduct of parties creates & defines contract  Limited terms  Limited words Express ContractImplied Contract

Types of Contracts  Require special form  Any other contract that does not need special form Formal ContractInformal Contract

Types of Contracts  Fully performed on both sides  Not fully performed on either side Executed ContractExecutory Contract

Valid all elements present Enforceable no legal defense against it Voidable party has option of avoiding/enforcing it Unenforceable court cannot enforce due to legal defense Void no contract exists, missing essential element No Contract

Offer & Acceptance

Offer  Proposal by offeror to do something, provided the offeree does or refrains to do something in return  1. Contractual intent must be present in offer  2. Offer must be communicated to the offeree  3. Essential terms of offer must be complete and definite

When is an Offer NOT an Offer? I am so hungry and have no cash – I will sell my truck to the first person who brings me a pizza!

When is an Offer NOT an Offer? I have to fix this truck AGAIN! I will sell this piece of junk to the first person who brings me $100.

When is an Offer NOT an Offer?

Offer A social engagement is NOT a legal obligation

Offer I’ll sell you my truck for $3000. I’ll take it!

Offer  Lot 23 in White Oaks subdivision, being a subdivision of part of the southeast quarter of the northeast quarter of section 7, township 43 north, range 9 east of the third principal meridian, according to the plat thereof recorded on August 10, 1998, as document #98R in McHenry County, Illinois

Offer I’ll sell you my truck for $3000.

Termination of Offer I’ll sell you my truck for $3000. On Second thought, never mind.

Termination of Offer I’ll sell you my truck for $3000. Let me know by December 15 th.

Termination of Offer

I’ll sell you my truck for $3000. No Thanks.

Termination of Offer I’ll sell you my truck for $3000. I’ll give you $2500.

Termination of Offer I’ll sell you my truck for $3000. He was a nice guy.

Termination of Offer I’ll sell you my truck for $3000.

Offer & Acceptance

Acceptance  Offeree agrees to the proposal  1. Comes from the person(s) to whom offer was made  2. Match the terms in the offer  3. Be communicated to the offeror

Acceptance I’ll sell you my truck for $3000. I’ll take it!

Acceptance I’ll sell you my truck for $3000. I’ll give you $2500.

Acceptance  Pleased accept this proven fitness tool and try it free for 30 days. Failure to return the ABCircle within 30 days, will be considered your acceptance and you will be billed $

Acceptance  2 Mutual Promises  Offeree accepts by words  1 Promise from Offeror  Offeree accepts by action Bilateral ContractUnilateral Contract

Acceptance Any method of communication for making an offer, counteroffer, revocation, rejection or acceptance may be made by any reasonable medium for the circumstance unless specifically indicated by language

Acceptance  When effective?  Usually when sent unless specified in offer Oral acceptance: immediate Mailbox Rule: when posted  Offeror might state acceptance is complete when s/he receives it – avoids confusion and lost messages