Mr. Stasa – Willoughby-Eastlake City Schools ©

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. 1. Offer 2. Acceptance 3. Genuine agreement 4. Consideration 5. Capacity 6. Legality

Types of Contracts  Express  Implied  Bilateral  Unilateral Contracts must meet ALL 6 elements

The Offer  An offer is a proposal to another party with the intent to create a contract.  Three requirements of an offer: 1. Serious intent (no humor or jokes) 2. Certain (clear) 3. Communicated  (Writing, telephone, letter, telegram, fax, , text, etc.)

Certain  The terms of the offer must be definite and clear.  Example: “I will sell you one to ten boxes of chocolate”  Is this offer certain and clear? Or is there uncertainty as to how much juice will be sold?

Not Offers  Invitations to negotiate are often confused with an offer.  An Invitation to negotiate is an invitation to deal, trade, or to make an offer.  Advertisements are only offers ONLY when:  Limited amount available is specified, or  “First come, first served”  Invitations to negotiate include:  Price tags  Signs in windows

What do you think?  Is this an offer or an invitation to negotiate? 6 GB FLASH DRIVES $8.99 EACH Hurry! ONLY 50 LEFT!

How to tell when an offer is accepted  The acceptance must not change the terms of the original offer in any way.  The mirror image rule states the terms in the acceptance must exactly mirror the terms of the offer.  A counteroffer is a response that has changed the from the original offer.  The original offerer is not obligated to agree to the offeree’s counteroffer.

What do you think?  James offered to pay Benet $500 to repair his roof. Benet replied, “I will repair your roof, but I will have to charge you $800 for all the supplies.”  Is James obligated to hire and pay Benet $800? Why or why not?  NO – Benet changed the conditions of the original offer making this a counteroffer.

Accepting A Long-distance Offer  Special rules apply to accepting an offer when distance is applied:  Fax  Letter (postmarked)  Text message   The acceptance is effective at the time it is sent. Appropriate methods of acceptance should be specified in the offer, especially if the acceptance is time-sensitive.

Bottom line!  You must specify in your offer which method of communication is acceptable to you. By not specifying, you are then allowing many forms of communication to be valid.

The Mailbox Rule  The acceptance of an offer via mail becomes valid at the time of postmark, not when delivered.  If the offeror specifies that the acceptance must be received by a specific time, it must be received before or on the deadline. 

What do you think?  On February 22, Carol offered Sarah her used car at a price of $6,500 as long as she received a response by March 1. Carol did not specify how she should be contacted. Sarah thought about it, and replied her acceptance by sending a letter in the mail. The letter was post marked at 11:59pm on February 28. Does this qualify as a valid acceptance since Carol will clearly not receive the letter in her hand on the deadline of March 1?  No. Carol indicated that she must receive Sarah’s response by March 1.

Silence as Acceptance  The offeror can establish silence as an acceptable method of acceptance ONLY if the offeree has agreed to use this condition or if it has been used in the past.  Courts do not enforce silence as acceptance unless specified as above. Why do you think it is not normally enforced?

What do you think?  Maury offered to sell Alice his home for $150,000 as long as Alice replied by January 1. Maury told Alice in a face-to-face conversation that she can reply via phone or silence as acceptance, and Alice indicated she understood. January 1 has passed and Maury never did receive a call from Alice. Did Alice accept the offer?  Yes. Since Maury communicated that silence would be a valid acceptance and she indicated her understanding of this method, Alice is now bound to paying Maury $150,000 for his home.

POP QUIZ  Sally ed Ricky an offer to sell her iPod Touch for $150. Sally wrote that if she does not hear back from Ricky by March 1, she will accept his silence is his acceptance. March 1 had passed and Sally never did hear from Ricky. Sally showed up at Ricky’s house demanding payment for her iPod Touch. Does Ricky owe Sally $150?  No. Ricky never agreed to the terms of acceptance.

POP QUIZ  Mario placed an ad in the paper to sell his HD TV for $800 expiring on March 1. Maria responded to Mario’s ad by mailing a letter of acceptance which was postmarked February 26. At 8:00am on March 1 st Mario had a customer call him and offered the $800 and Mario agreed to sell. Two hours later, Mario received Maria’s letter in the mail. Is Mario required to sell the TV to Mariah or the new customer?  Mario is required to sell the TV to Maria since her acceptance was postmarked prior to the customer who called and was delivered by the deadline.