1. Section 5.1

2. Chapter 5 How Contracts Arise Section 5.1 Contracts Section 5.2
Offer and Acceptance

3. What You’ll Learn
How to identify a contract’s elements (p. 108)
How to identify valid, void, voidable, and unenforceable contracts (p. 110)

4. What You’ll Learn
How to distinguish between express and implied contracts (p. 111)
How to identify unilateral and bilateral contracts (p. 111)

5. What You’ll Learn
How to distinguish between oral and written contracts (p. 112)

6. Why It’s Important
Identifying a contract’s elements will help you manage your affairs in an intelligent and effective manner.

7. Legal Terms
contract (p. 106)
offer/acceptance (p. 109)
genuine agreement (p. 109)
capacity (p. 109)
consideration (p. 109)
legality (p. 109)

8. Legal Terms
void/voidable contract (p. 110)
unenforceable contract (p. 111)
express/implied contract (p. 111)
bilateral/unilateral contract (pp. 111, 112)

9. Section Outline Understanding Contract Law The Nature of a Contract
The Three Theories of Contract Law
The Elements of a Contract

10. Section Outline Characteristics of a Contract
Valid, Void, Voidable, or Unenforceable
Express or Implied
Bilateral or Unilateral
Oral or Written

11. Pre-Learning Question
How would you define contract?

12. The Nature of a Contract
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.

13. The Three Theories of Contract Law
The evolution of contract law shows how its focus has changed.

14. The Equity Theory
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.

15. The Will Theory
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.

16. The Formalist Theory
Then the courts began to study the parties’ actions and words to determine if there was a “meeting of the minds.”

17. The Formalist Theory
This led to certain fixed elements in a contract. It is called the formalist theory because it relies on the form of the agreement.

18. Elements of a Contract There are six elements of a contract. Offer
Acceptance
Genuine agreement
Consideration
Capacity
Legality

19. Elements of a Contract
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.

20. Elements of a Contract
If a valid offer is met by a valid acceptance, a genuine agreement exists.
Capacity is the legal ability to enter a contract.

21. Elements of a Contract
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.

22. Pre-Learning Question
What is one characteristic that you think a contract must have?

23. Characteristics of a Contract
Contracts can have any of the following characteristics:
Valid, void, voidable, or unenforceable
Express or implied
Bilateral or unilateral
Oral or written

24. Valid, Void, Voidable, or Unenforceable
A valid contract is legally binding.
A contract that is void has no legal effect.

25. 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.

26. Express or Implied
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.

27. Sarah paid Isabel $50 to hack into Mrs
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?

28. ANSWER
Void. It has no legal affect.

29. Bilateral or Unilateral
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.

30. How Parties Reach Agreement
5.1
How Parties Reach Agreement

31. How Parties Reach Agreement
5.1
How Parties Reach Agreement

32. Oral or Written
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.

33. Reviewing What You Learned What are the elements of a contract?
Section 5.1 Assessment
Reviewing What You Learned
What are the elements of a contract?

34. Reviewing What You Learned Answer
Section 5.1 Assessment
Reviewing What You Learned
Answer
Offer, acceptance, genuine agreement, capacity, consideration, and legality.

35. Reviewing What You Learned
Section 5.1 Assessment
Reviewing What You Learned
What are the differences among valid, void, voidable, and unenforceable contracts?

36. Reviewing What You Learned Answer
Section 5.1 Assessment
Reviewing What You Learned
Answer
A valid contract is legally binding.
An unenforceable contract will not be upheld generally by the court because of some rule of law.

37. Reviewing What You Learned Answer
Section 5.1 Assessment
Reviewing What You Learned
Answer
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.

38. Reviewing What You Learned
Section 5.1 Assessment
Reviewing What You Learned
What are the differences between express and implied contracts?

39. Reviewing What You Learned Answer
Section 5.1 Assessment
Reviewing What You Learned
Answer
An express contract involves words, while an implied contract does not.

40. Reviewing What You Learned
Section 5.1 Assessment
Reviewing What You Learned
What are the differences between unilateral and bilateral contracts?

41. Reviewing What You Learned Answer
Section 5.1 Assessment
Reviewing What You Learned
Answer
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.

42. Reviewing What You Learned
Section 5.1 Assessment
Reviewing What You Learned
What are the differences between oral and written contracts?

43. Reviewing What You Learned Answer
Section 5.1 Assessment
Reviewing What You Learned
Answer
Oral contracts are spoken. Written contracts are in writing.

44. Critical Thinking Activity History
Section 5.1 Assessment
Critical Thinking Activity
History
How did the Industrial Revolution change the court’s attitude toward interpreting contract law?

45. Critical Thinking Activity Answer History
Section 5.1 Assessment
Critical Thinking Activity Answer
History
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.”

46. Legal Skills in Action Elements of a Contract
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.

47. Legal Skills in Action Elements of a Contract
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.

48. Legal Skills in Action Elements of a Contract
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.

49. Critical Thinking Activity Answer Elements of a Contract
Section 5.1 Assessment
Critical Thinking Activity Answer
Elements of a Contract
Paragraphs will vary, but should include discussion of the six elements that make up a contract.

50. End of Section 5.1