5Chapter SECTION OPENER / CLOSER: INSERT BOOK COVER ART Contracts Section 5.1

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Section 5.1 Contracts Section 5.2 Offer and Acceptance 5 Chapter How Contracts Arise

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise What You’ll Learn How to identify a contract’s elements (p. 108) How to identify valid, void, voidable, and unenforceable contracts (p. 110)

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise What You’ll Learn How to distinguish between express and implied contracts (p. 111) How to identify unilateral and bilateral contracts (p. 111)

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise What You’ll Learn How to distinguish between oral and written contracts (p. 112)

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Why It’s Important Identifying a contract’s elements will help you manage your affairs in an intelligent and effective manner.

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Legal Terms contract (p. 106) offer/acceptance (p. 109) genuine agreement (p. 109) capacity (p. 109) consideration (p. 109) legality (p. 109)

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Legal Terms void/voidable contract (p. 110) unenforceable contract (p. 111) express/implied contract (p. 111) bilateral/unilateral contract (pp. 111, 112)

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise The Nature of a Contract The Three Theories of Contract Law The Elements of a Contract Section Outline Understanding Contract Law

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Characteristics of a Contract Valid, Void, Voidable, or Unenforceable Express or Implied Bilateral or Unilateral Oral or Written Section Outline

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Pre-Learning Question How would you define contract?

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise A contract is any agreement enforceable by law. Not all agreements are contracts, however. Whether or not it’s a contract, depends on the circumstances of the agreement. The Nature of a Contract

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise The evolution of contract law shows how its focus has changed. The Three Theories of Contract Law

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise In the past, courts asked whether the parties to a contract exchanged things of equal value. This approach was called the equity theory of contract law. The Equity Theory

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise The advent of industrial capitalism forced the courts to shift their focus.They began to ask if the parties had agreed to the terms in the agreement of their own free will. The Will Theory

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Then the courts began to study the parties’ actions and words to determine if there was a “meeting of the minds.” The Formalist Theory

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise This led to certain fixed elements in a contract. It is called the formalist theory because it relies on the form of the agreement. The Formalist Theory

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise There are six elements of a contract. Elements of a Contract 1.Offer 2.Acceptance 3.Genuine agreement 4.Consideration 5.Capacity 6.Legality

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An offer is a proposal by one party to another intended to create a legally binding agreement. An acceptance is the second party’s unqualified willingness to go along with the first party’s proposal. Elements of a Contract

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise If a valid offer is met by a valid acceptance, a genuine agreement exists. Capacity is the legal ability to enter a contract. Elements of a Contract

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Consideration is the exchange of things of value. Legality means that people can only enter into contracts for legal purposes. People cannot enter into contracts to commit illegal acts. Elements of a Contract

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Pre-Learning Question What is one characteristic that you think a contract must have?

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Contracts can have any of the following characteristics: Characteristics of a Contract Valid, void, voidable, or unenforceable Express or implied Bilateral or unilateral Oral or written

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Valid, Void, Voidable, or Unenforceable A valid contract is legally binding. A contract that is void has no legal effect.

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Valid, Void, Voidable, or Unenforceable When a party to a contract is able to void or cancel the contract for some legal reason, it is a voidable contract. An unenforceable contract is one the court will not uphold.

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An express contract is stated in words and may be either oral or written. An implied contract comes about from the actions of the parties. Express or Implied

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Sarah paid Isabel $50 to hack into Mrs. Wojcik’s computer files for a copy of the upcoming final exam, but Isabel gave Sarah the pre-test instead. Is this contract valid, void, voidable, or unenforceable?

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise ANSWER Void. It has no legal affect.

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise A bilateral contract contains two promises. A unilateral contract contains a promise by only one person to do something, if and when the other party performs some act. Bilateral or Unilateral

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise 5.1 How Parties Reach Agreement

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise 5.1 How Parties Reach Agreement

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An oral contract is created by word of mouth and comes into existence when two or more people form a contract by speaking to each other. Sometimes, however, it is desirable to put contracts in writing. Oral or Written

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned 1. 1.What are the elements of a contract? Section 5.1 Assessment

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned Offer, acceptance, genuine agreement, capacity, consideration, and legality. Section 5.1 Assessment Answer

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned 2. 2.What are the differences among valid, void, voidable, and unenforceable contracts? Section 5.1 Assessment

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned A valid contract is legally binding. An unenforceable contract will not be upheld generally by the court because of some rule of law. Section 5.1 Assessment Answer

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned A contract that is void has no legal effect and a voidable contract is not void in itself, but may be voided by one or more of the parties if the party so chooses. Section 5.1 Assessment Answer

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned 3. 3.What are the differences between express and implied contracts? Section 5.1 Assessment

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned An express contract involves words, while an implied contract does not. Section 5.1 Assessment Answer

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned 4. 4.What are the differences between unilateral and bilateral contracts? Section 5.1 Assessment

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned A unilateral is a one-sided contract, in which one party makes a promise in exchange for an act. In a bilateral contract, a contract legally comes into existence when promises are exchanged. Section 5.1 Assessment Answer

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned 5. 5.What are the differences between oral and written contracts? Section 5.1 Assessment

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Reviewing What You Learned Oral contracts are spoken. Written contracts are in writing. Section 5.1 Assessment Answer

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Section 5.1 Assessment Critical Thinking Activity History How did the Industrial Revolution change the court’s attitude toward interpreting contract law?

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Section 5.1 Assessment The industrial revolution and the need to support a profit-making system required that the courts shift their focus from contract fairness to whether the parties had actually agreed to the terms set forth in the agreement and whether they had reached a “meeting of the minds.” Critical Thinking Activity Answer History

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Section 5.1 Assessment Legal Skills in Action Elements of a Contract Your friend, Arkadi, has begun teaching contract law classes at a local senior citizens center.

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Section 5.1 Assessment Legal Skills in Action Elements of a Contract Write a paragraph in which you explain the six elements of a contract in such a way that will help Arkadi create his course outline.

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Section 5.1 Assessment Legal Skills in Action Elements of a Contract Remember to include information on the historical development of the will theory, which led to the need to develop the six elements included within the formalist theory of contract law.

Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Section 5.1 Assessment Paragraphs will vary, but should include discussion of the six elements that make up a contract. Critical Thinking Activity Answer Elements of a Contract

5Chapter SECTION OPENER / CLOSER: INSERT BOOK COVER ART Contracts End of Section 5.1