Essentials Of Business Law Chapter 6 Introduction To Contracts McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Essentials of Business LawChapter 6-2 Contract Legally enforceable agreement  Between two or more parties  Agree to perform, or to avoid performing certain legal acts Contains six elements Only legal obligations, not social or moral obligations, are enforceable

Essentials of Business LawChapter 6-3 Purposes Of A Contract Sale of merchandise or services Employment Transfer of ownership of land or personal property May be extended or otherwise revised

Essentials of Business LawChapter 6-4 Elements Of An Enforceable Contract 1.Offer and acceptance  Offer Proposal made by offeror to offeree Indicates willingness to enter contract  Acceptance Indication by offeree to agree to be bound by the terms of the offer 2.Mutual agreement  Clear understanding of agreement  Meeting of the minds

Essentials of Business LawChapter 6-5 Elements Of An Enforceable Contract 3.Consideration  Exchange of promises  Each party gives up something of value 4.Competent parties  Capacity to understand  Legal age  Normal mentality  Not impaired by injury, mental disease, drugs, or alcohol

Essentials of Business LawChapter 6-6 Elements Of An Enforceable Contract 5.Legality of purpose  Purpose of contract must be legal 6.Proper form  Must be in writing when: Over $500 Longer than one year

Essentials of Business LawChapter 6-7 Types Of Contracts Oral contract  Created from the conversation of the parties Not in writing Not signed by parties  Example: discussion of the terms of a purchase with a salesperson Written contract  Written in a permanent form  Can be handwritten, typed, or printed  Reduces the risk of possible disagreements later

Essentials of Business LawChapter 6-8 Types Of Contracts Express contract  Explicitly states the agreement of the parties  Can be oral or written Implied contract  Terms of the agreement are implied from: Conduct of the parties Customs of the trade Conditions or circumstances  Neither oral nor written

Essentials of Business LawChapter 6-9 Types Of Contracts Formal contract  Written contract with a seal Simple contract  Informal contract without a seal  Can be written, oral, or implied

Essentials of Business LawChapter 6-10 Types Of Contracts Entire contract  Contains two or more parts  Each part is dependant on the other  Goods must be offered in a single delivery, after which payment can be demanded Divisible contract  Contains two or more parts  Each part is independent of the others  Goods can be delivered in lots, payment can be demanded for each lot

Essentials of Business LawChapter 6-11 Status Of Contracts Executory contract  A future act or obligation remains to be performed  Completely executory if no part of the contract has been performed  Partly executory if some provision have been performed Executed contract  Terms of agreement have been fully performed

Essentials of Business LawChapter 6-12 Enforceability Of Contracts Valid contract  Legally enforceable  Contains six essential elements Offer and acceptance Mutual agreement Consideration Competent parties Legality of purpose Proper form

Essentials of Business LawChapter 6-13 Enforceability Of Contracts Void contract  Lacks one or more essential elements Voidable contract  May be rejected by one of the parties for a legal reason  Example: agreement with a minor