CONTRACT Law Offer & Acceptance Genuineness of Assent Consideration Legal Capacity to Contract Legal Purpose & Proper Form Contractual Obligations & their Enforcement

Offer & Acceptance Chapter 6 Creation of Offers Termination of Offers Acceptances Additional Info – backing out, mistakes, misrepresentation, & capacity rights

CREATION OF OFFERS WHAT IS A CONTRACT? An Agreement that Courts will Enforce, Legal links between the individuals and companies producing & consuming goods and services, Offer – Proposal by Offeror to do something provided the offeree does something in return. Offeror – party who makes an offer to form a contract, Offeree – party to whom the offer is made Acceptance – occurs when a party to whom an offer has been made Agrees to the Proposal.

Elements Required to Form a Contract… There are 6 major requirements that must be satisfied before courts will treat transactions as contracts: OFFER & ACCEPTANCE Offer must be Serious, Definite/Certain Terms of offer Must be Accepted by Person to whom it was Communicated. Without Both Offer and Acceptance on Mutually Agreed Terms, there is no contract 2. GENUINE ASSENT – honest/sincere agreement Agreement must NOT be based on deception, an important mistake, or on the use of unfair pressure

Elements Required to Form a Contract… continued… LEGALITY – what parties agree to Must be Legal, CONSIDERATION – Both parties Receiving Something of legal value, CAPACITY – Parties Must be able to Contract for Themselves, rather than being obligated to use parents or legal representatives 6. PROPER FORM – some agreements must be in Writing

Nature & Classes of Contracts Executed and Executory Contracts: Executed – fully performed, both parties done all they promised Executory – Not fully performed, something remains to be done Express, Implied-in-Fact, and Implied-at-Law Contracts: Express – All terms are stated orally or in writing, Implied-in-Fact – can be inferred from acts/conduct Implied-at-Law – Quasi, not really a contract, justice/law enforces Unilateral and Bilateral (Multilateral) Contracts: Unilateral – offeror promises something in return for the offeree’s PERFORMANCE, Bilateral – mutual exchange of legally binding promises

REQUIREMENTS of an Offer Offer – proposal by offeror to do something provided the offeree does something in return. If the offeree accepts the proposal, a contract is formed. To CREATE a VALID OFFER The Offeror Must Appear to INTEND to create a Legal Obligation, How would a Reasonable Person interpret your conduct? TEST of the REASONABLE PERSON. – objective legal test used by jurors/judges, rather than a subjective test based on what you say you were thinking. Facts & Circumstances – Test of RP examines the offeror’s words & conduct in light of all the relevant facts and circumstances, (Jest/Anger/Terror) Preliminary Negotiations – determine if interested, inviting others to make offers, Not indicating an intent to contract. Social Agreements – Do Not create legal obligations

REQUIREMENTS of an Offer To CREATE a VALID OFFER (continued): The Terms of the Offer must be Definite & COMPLETE, Is offer missing Essential information? Does it identify - Price, Subject Matter, Quantity, Date? Implied Terms – some contracts a term might be a common business practice. Ex: contracts between merchants for the sale of goods, when price is not specified, current market price is the basis for the contract. Advertisements – Generally Not Offers, instead are viewed as Invitations to customers to make offers. Occasionally Ads May Be Offers if – Ad is clearly worded in ways that address the problem of numerous people receiving the ad for a limited amount of product, or Ad asks the offeree to perform an act as a way of accepting.

REQUIREMENTS of an Offer To CREATE a VALID OFFER (continued): The Offer must be Communicated to Offeree A person who is Not the intended offeree, cannot accept the offer, Nor can a person accept an offer without knowing it has been made

TERMINATION of Offers HOW CAN OFFERS BE ENDED? An offer does not last forever… REVOCATION by the Offeror TIME STATED in the Offer REASONABLE LENGTH of TIME REJECTION by the Offeree COUNTEROFFER DEATH or INSANITY of either Offeror or Offeree Destruction of the Specific Subject Matter

How Can An Offer Be Kept Open? Generally, an offeror is not obligated to keep an offer open for a specified time… WHY? - offeree has given nothing in exchange for the promise. OPTION – a binding contract arising when the offeree gives the offeror something of value in return for a promise to leave an offer open. FIRM OFFER – a binding offer stating in writing how long it is to be held open. (no longer than 3 months) NEITHER Death nor Insanity, of either party, Terminates an Option or Firm Offer, unless it is dependent on the personal performance.

ACCEPTANCES Be made by person to whom offer was made, HOW ARE ACCEPTANCES CREATED? To create an enforceable contract, the acceptance must: Be made by person to whom offer was made, Match terms in offer, Be Communicated to the Offeror

ACCEPTANCE MUST MATCH THE OFFER WHO CAN ACCEPT AN OFFER? An offer made to one person Cannot be accepted by another, An offer can be made to a particular group or public – may accept by doing whatever the offer requires ACCEPTANCE MUST MATCH THE OFFER Any change by offeree, ends the original offer, resulting in a counteroffer, MIRROR IMAGE RULE – requires the terms in the acceptance must exactly match terms contained in offer

COMMUNICATED to OFFEROR Acceptance must be COMMUNICATED to OFFEROR SILENCE – offeree is not required to reply to offer, so silence is not acceptable. EXCEPTION – in a Continuing Relationship, the parties may agree in advance that silence is to be regarded as acceptance UNILATERAL Acceptance – In some offers, the offeror requires the offeree indicate Acceptance by PERFORMING their obligations under the contract. – Unilateral Contract. BILATERAL Acceptance - most offers are Bilateral, means the offer implies that it can be Accepted by communicating a PROMISE instead of performing the contracted-for act.

COMMUNICATED to OFFEROR Acceptance must be COMMUNICATED to OFFEROR When Acceptance is EFFECTIVE? Contract Communications - Offers, Acceptances, Rejections, Revocations, & Countersoffers Ways to be Communicated: Orally, In Person, Fax, Phone, Writing, Mail, Delivery, E-mail, & Texting All Forms of CC, Except Acceptance, take effect when Received… Acceptance is effective when Sent, Unless the offeror specified the acceptance would be effective when received.

Additional Information… Rescission – backing out & both parties returning… Ratification – conduct suggesting intention… Disaffirmance – giving back the consideration to… Mistakes…Unilateral v. Mutual Misrepresenting your Age – tort, false representation CAPACITY RIGHTS – minors, the intoxicated, & the mentally incapacitated lack contractual capacity. Meaning they are assumed by law to lack the maturity & experience to protect their self interests. So they are given special contractual rights designed to protect them from being cheated.

2 rights given to those who lack capacity are: CAPACITY RIGHTS… 2 rights given to those who lack capacity are: The right to disaffirm (giving back consideration by both) contracts for non-necessaries (not needed to maintain one’s economic or social status; cosmetics/jewelry/liquor/expensive food) &, The right to pay a fair price instead of the contract price for contracts for necessaries. (g/s that are reasonably required to maintain a person’s lifestyle; basic food/clothing/shelter/transportation) varies from one person to another, must not already possess.

What Contracts CANNOT be Disaffirmed? Some contracts of minors for Non-necessaries cannot be disaffirmed. Vary from state to state. MOST COMMON EXCEPTIONS ARE: Court-Approved Contracts - In all states, minors cannot void any contracts approved for them by a court. Ex: minors who are employed as actors or as professionals in sports usually have their contracts approved by a court. Major Commitments – In all states, contracts to enlist in armed services, contracts for educational loans, & marriage contracts cannot be disaffirmed. Banking/Insurance/Rental Contracts - can’t be disaffirmed…