1. Contracts

2. What is a Contract? An agreement that is enforceable by law Must have an offer and acceptance on mutually satisfactory terms Intent is more important than the language used

3. Unilateral Contract Only one person is obligated to perform. The offer calls for the party to act. Example??

4. Bilateral Contract Both parties receive something in return for the contract Both parties are obligated to perform an act. Example?

5. Who May Enter Into Contract? Persons who have capacity Have the ability to understand their actions and the effects of those actions

6. Those Who Lack Capacity Minors Intoxicated People Insane People These individuals may disaffirm most of their contracts

7. Disaffirm Set aside, void, nullify Most minors do not disaffirm because they do not know they can and most purchases are fair

8. You Cannot Disaffirm If you lied about your age If a minor and an adult enter into a contract, only the minor can disaffirm as long as they are still the age of a minor

9. ELEMENTS OF A CONTRACT Offer Acceptance Genuine Agreement Capacity Consideration Legality

10. Offer

11. Offeror The person who makes the offer Offeree The person who the offer is made to

12. An offer must Have contractual intent Be Serious, Have no humor, anger, or opinion Have all terms complete and definite State price, subject matter, and quantity Communicated to the offeree If you did not know about the offer, they are not obligated for it.

13. Is this an offer? This is not an offer because it does not state exactly who they will sell this Jeep Wrangler to. Instead it is an invitation to start preliminary negotiations

14. Is this a contractual offer? John asked Sara the movies Friday night. No, social agreements are not contractual offers. You can not sue someone for breaking a date unless money has been spent in preparation for the date.

15. How is an Offer Ended???

16. Revoking an Offer Saying No (Must be said) Can happen before you receive the offer This can be done be the offeror anytime before the offer is accepted

17. Making a Counter Offer Change the terms being discussed The first offer is no long available

18. Time Time has expired that was stated in the offer Subject matter destroyed Death or Insanity of either the offeror or offeree will terminate the contract A reasonable length of time has expired since the offer was extended Based on the product

19. Option The offeree gives something of value to keep the offer open for an extended period of time

20. Firm Offer Both parties state in writing how long the offer is to stay open Max of 3 months No money exchanges hands This applies to merchants (individuals who regularly deal in the goods being bought and sold)

21. Acceptance

22. Acceptance is… When the offeree agrees to the offer or has performed according to the offer

23. 3 Criteria of Acceptance Made in a reasonable manner by the offeree In Person Phone Mail/Email/Text Message Fax Mirror Image Rule Serious intention by matching the offer Communicated to the offeror

24. When does Acceptance Take Effect? When sent by the same means used for the offer, or by faster means If the offer says “received by this date” or “must be sent by this means” then that takes precedent.

25. Acceptance Can Make A Contract

26. Valid Both Sides Agree Enforceable Contract by law

27. Void (Invalid) Both sides do not agree on the same terms Not Enforceable

28. Voidable One party does not agree to all the terms Minor’s contracts Contracts involving fraud

29. Unenforceable Contract Time limits have expired No action can be taken

30. Genuine Agreement All parties are serious

31. Assignment Get with a partner Which ever first name comes first in the alphabet is the offeror (seller) The other is the offeree (buyer) Together, create a role-play showing how a basic contract is created for the purchase of either a used car, used Ipod, or used cell phone. Be prepared to share your contract with the class.

32. What is Consideration?

33. Consideration is The promise or action given in exchange for the promise or action of another

34. Forms of Consideration Unilateral One person gives something

35. Bilateral Both parties give something Also called mutual consideration

36. 6 KINDS OF CONSIDERATION 1. A return promise 2. An act other than a promise 3. Forebearance (agree not to do something) 4. A change of legal relations 5. Money 6. Other Property

37. Why is Consideration Required? Force Performance Feeling of Worth

38. Are Gifts Consideration? A gift is a transfer of property without mutual consideration. The gift cannot be recovered by the donor

39. Promissory Estoppel Even when consideration is not present, promises may be enforced if The other party relied on the promise Others would suffer economically Example: Telethon Pledges

40. What is Sufficient Consideration? The actual value of the consideration is unimportant as long as the contracting parties have voluntarily agreed It CANNOT be something you are legally required to do

41. Nominal Consideration A token amount identified in a written contract when parties cannot or do not wish to state the amount publicly

42. LEGALITY

43. TYPES OF ILLEGAL CONTRACTS Agreements to: Commit crimes or torts Obstruct legal procedures Injure Public Service Collect money without a required license Usury Lending money at a higher rate of interest than the state’s maximum rate Illegal gambling or lotteries Affect marriage negatively

44. Illegal Contracts Can Be Void There is no contract and neither party is bound

45. Voidable Contract Only the party who has been victimized in some way may cancel or disaffirm the contract

46. Most Common Cause of Illegal Contracts Fraud False representation or concealment of a significant fact.

47. What are the Rights of a Defrauded Party? Contracts entered into as a result of fraud are voidable Anything that has been received must be returned

48. You Cannot use Duress to create a contract? Compelling another person through threat of force or act of violence or illegal imprisonment

49. What Is Undue Influence? Undue influence compelling another person to enter an unfavorable contract This most likely occurs in a relationship of trust, authority, or confidence

50. What Happens if You Make A Mistake and Enter Into A Contract

51. Unilateral Mistake One of the parties has an erroneous idea about facts of the contract this does not generally affect validity

52. Bilateral or Mutual Mistake Both parties are wrong about important facts Either party may disaffirm

53. When Can a Minor Disaffirm a Contract? Generally, a minor may disaffirm while still a minor or within a reasonable time of reaching majority

54. Exceptions for Minors transfer of real property a contract made with court approval a contract to enter armed forces insurance contracts (in some states)

55. What Form Does a Contract Need to Be?

56. Contracts May be Expressed Spoken or Written Implied from conduct Paying for a Trax ticket and then getting on the train without saying a word

57. Quasi Contracts Parties are bound even though a contract does not exist  Example: A doctor who gave you medical attention at the scene of an accident may collect a fee for his service even though you did not agree to his help.

58. Formal Written Contract that must be in a special form  Example: Checks Simple A receipt

59. Executed Already Done Executory One that has not been fully performed

60. Advantages to a Written Contract More reliable as proof of agreement Protects against the innocent failure of memory There is usually greater care and thought in preparation

61. Required Elements to a Written Contract Current Date Offer’s Name(s) Offeree’s Name(s) The Offer The Acceptance The Consideration Date to be completed by Signature of both parties

62. The Statute of Frauds The statute of frauds states that certain contracts must be in writing to be enforceable in court a simple memorandum is sufficient if it states quantity and is properly signed if a contract isn’t signed, the agreement is not enforceable in court

63. What Contracts are Subject to the Statute of Frauds? Buy and sell goods for a price of $500 or more Contract that cannot be performed within one year Sale of any real property Contract to pay the debt of another person Contract when the consideration is marriage

64. Assigning, Delegating, and Discharging

65. What is an Assignment? Assignment transfer of contractual rights Bank sells your loan to another institution The party who makes the assignment is the assignor The party who receives the contract is the assignee

66. Delegation of Duties Transferring routine contractual duties Example: Building Contractors The person who delegates the contract duties remains legally obligated and responsible

68. How Are Contracts Usually Discharged? Discharge of contract both parties perform as promised Substantial performance the contract is basically performed; however, there are minor modifications or failures to fulfill all parts of the contract

69. How Are Contracts Usually Discharged? Diminished value rule if the contract is not fully performed, the buyer is entitled to the value missing Breach of contract if the contract is not performed, the injured party can cancel and perhaps sue

70. How Are Contracts Usually Discharged? Anticipatory breach if a party notifies the other ahead of time that the contract will not be performed, the injured party may immediately sue Cancellation of contract if there is a breach, the terms of the contract are terminated (cancelled)

71. Agreement to end the contract by both parties Impossibility of Performance The consideration is no longer available Operation of the Law

72. Your Assignment Find a contract you, a family member, or friend have entered into Make a copy of the contract Highlight the important elements of the contract. (offer, acceptance, consideration, etc) Bring it to class next time we meet.