UNIT 4: Consumer and Housing Law Chapter 23 Contracts STREET LAW

A consumer is a person who buys goods or services from a seller The legal expression “caveat emptor” is a Latin phrase meaning “let the buyer beware” which characterizes consumer law Consumers had to look out for unfair & misleading sales practices before buying, or be prepared to suffer the consequences Today, the law is more balanced – consumers have the right to be correctly informed of important information such as quality, price, & credit terms Consumers also have the responsibility of being fair & honest to sellers

A contract is an agreement between 2+ people to exchange something of value A contract legally binds the parties to uphold their end of the bargain A party breaches, or breaks, the contract by failing to live up to the promise

Elements of a Contract   A legally binding contract must have three elements an offer There must be an offer by one person & an acceptance by another an acceptance The offer must be made to a specific person, & that person must accept the offer on the proposing party's terms & an exchange of consideration To have a valid contract, there must also be an exchange of something of value—this item of value is called consideration In order to be bound to a contract, the parties forming it must both be competent & aware of the conditions agreed upon

Minors and Contracts   A minor is a person under the legal age of adulthood, which is 18 in most states Minors may make contracts, but they generally cannot be legally held to their terms For this reason, many stores require minors to have an adult cosigner who will assume responsibility if the minor cannot meet the contract's terms Even without a cosigner, however, a minor may be held to contracts involving certain necessary items, such as food or shelter

A contract has been ratified when a minor continues making payments on the contract after reaching the age of majority (differs from state to state) Once a contract has been ratified, it may no longer be voided by the person who was a minor when the contract was made

State law may create other situations where contracts entered into by minors are enforceable & not voidable For example, if a minor tells the seller that he/she is 18 & it’s reasonable to believe that he/she is 18, the minor might not be able to get out of the contract agreement Educational loans entered into by someone age 16 or older may not be canceled in some states Minors in some states may not be able to cancel contracts for life or disability insurance for themselves if they are a certain age

Written & Oral Contracts The requirement that certain contracts be in writing derives from the “statute of frauds” This law was originally enacted in England in 1677 to prevent fraud, which often occurred when the only proof of a contract was oral evidence

Most contracts may be either in writing or spoken (oral) Some contracts, however, must be in writing in order to be enforceable in court These include contracts for the sale of land or real estate contracts to buy or sell items that are worth $500 or more & agreements to pay money that someone else owes A written contract provides better evidence of the terms the parties agreed to than an oral contract

Illegal Contracts  Contracts will not be enforced by the courts if they involve illegal activities For example, if you agreed to pay $50 in exchange for an item & the seller never gives it to you, you could go to court to make the seller deliver the item as promised However, if the item you were trying to purchase was illegal drugs, the courts would not enforce that contract

Although the law will not protect you from making a bad deal, there are some rare cases in which courts find the terms of a contract so unfair to one of the parties that they refuse to enforce them Courts may also refuse to enforce an agreement that violates an important public policy Fraud & misrepresentation are other reasons courts may refuse to enforce a contract

Courts generally presume that all parties read, understand, & agree to each provision of their contracts Someone is unlikely to win in court simply because he or she didn’t, in fact, read, understand, or agree to each provision