Obj 201 Understand the elements and characteristics of a contract https wwwyoutubecomwatchvHi4fOXfqJJw Notes Understand Contract Law BL 201 Notes Organizer Understand Contract Law ID: 753051
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ES 2.00 UNDERSTAND CONTRACT LAW
Obj. 2.01 Understand the elements and characteristics of a contract
https://
www.youtube.com/watch?v=Hi4fOXfqJJw
Slide2
Notes: Understand Contract Law
BL 2.01 Notes Organizer
Understand
Contract Law
Handout/Open from the teacher/class webpage
https://www.youtube.com/watch?v=Hi4fOXfqJJw
Slide3
Elements of a Contract
OfferAcceptanceGenuine Agreement/Assent
Consideration
Capacity
LegalityAll elements MUST be present to be an enforceable contract.Slide4
OFFER
Proposal by one party to another with intent to create a legal binding agreement
Offeror
Makes the offer
OffereeOffer made to this personSlide5
Requirements of an Offer
Serious IntentMust intend to make the offer
Advertisements?
No serious intent
Known as an invitation to negotiate Definite and CertainMust use definite wordsCommunicated to the OffereePhone, fax, Internet, letter, etc Slide6
Termination of Offer
Revocation – Taking back of an offer by offeror Rejection – Refusal by the offeree Counteroffer – Any change in the terms of
the offer
Death
– Offeror dies Insanity – Offeror is declared insane Expiration of Time – If the offeror puts a time limit on the offer and it has passed Destruction of the subject matter Slide7
Options & Firm Offers
Option – the offeree gives the offeror something of value in return for a promise to keep the offer open for a set period of timeFirm Offer – a written offer for goods that states the period of time during which the offer will stay open
No additional consideration is required
Maximum period of time set by the UCC – 3 months
Offeror must be a merchant who deals in related goods on a daily basisSlide8
Activity 1: Contract Law--Offers
BL 2.01 Activity 1-Use the following scenario to answer the questions at the bottom.
(Use PPT Notes)Slide9
Activity 1: Contract Law--Offers
Bob called Kevin and told him he would sell 10 of his baseball cards for $50
.
Who is the offeror? Who is the offeree? Is this an offer? Why or why not?
Bob
Kevin
No
Not definite and certainSlide10
Activity 1: Contract Law--Offers
Marsha’s car broke down. She yells out I should sell this car for $50 right now. Her friend, Ashley, says “ok, I’ll buy it” and gives her $50
.
Who is the
offeror? Who is the offeree? Is this an offer? Why or why not?
Marsha
Ashley
No
No serious intentSlide11
Activity 1: Contract Law--Offers
While at home alone, Carla decides to sell her computer to Mike for $500, so that she can buy a new one.
Who is the
offeror
? Who is the offeree? Is this an offer? Why or why not?
Carla
Mike
No
Not communicated to
offereeSlide12
Activity 2: Contract Law--Offers
BL 2.01 Activity Read the scenarios and answer the questions.
(Use PPT Notes)
Handout.Slide13
ACCEPTANCE
Unqualified willingness by the offeree
to go along with the
offer
Mirror Image RuleTerms of the acceptance must match exactly (mirror) the terms of the offerAny change means there is no acceptance (counteroffer)Slide14
Methods of Acceptance
Bilateral Acceptance
Offer is accepted by offeree through communication of the promise to the offeror
Only requires giving a promise to perform, not performance itself
Most offers are bilateralUnilateral AcceptanceOfferor promises something in return for offeree’s performance and indicates that performance represents acceptanceSilence as AcceptanceDoes not represent acceptanceOfferor cannot word offer in a way that silence would be considered acceptancehttps://www.youtube.com/watch?v=oMNQHZgO-xQ Slide15
Bilateral Acceptance
Examples of bilateral contracts are present in everyday life. You're entering this type of agreement every time you make a purchase at your favorite store, order a meal at a restaurant, receive treatment from your doctor or even checkout a book at your library. In each circumstance, you've promised a certain action to another person or party in response to that person or party's action.Slide16
Unilateral Acceptance
You might see examples of unilateral contracts every day, too; one of the most common instances is a reward contract. Pretend you've lost your dog. You place an advertisement in the newspaper or online offering a $100 reward to the person who returns your missing pooch. By offering the reward, you're offering a unilateral contract. You promise to pay should anyone fulfill the obligation of returning your dog. You're the only person who has taken any action in this contract, as no one is specifically responsible or obligated to finding your dog passed on this interaction.
Another
common example of a unilateral contract is with insurance contracts. The insurance company promises it will pay the insured person a specific amount of money in case a certain event happens. If the event doesn't happen, the company won't have to pay.Slide17
Activity
3: Contract Law—Offers & Acceptances
BL
2.01 Fill in the blanks with the correct termination of offer term.
(Use PPT Notes)
Handout/
www.quia.com
Slide18
GENUINE AGREEMENT (ASSENT)
A valid offer has been made by the offeror, and a valid acceptance has been exercised by the offeree
Several causes for genuine agreement to be lacking in a contract
Duress
Undue Influence Unilateral or Mutual Mistakehttps://www.youtube.com/watch?v=AsZn_BJ5bWk
Innocent Misrepresentation
Fraudulent MisrepresentationSlide19
Duress
Overcoming a person’s free will by use of force or by threat of force or bodily harm
Threats of Illegal Conduct
Threats to Report Crimes
Threats to SueThreats to sue made for purpose unrelated to the suitEconomic DuressThreats to a person’s business or income Slide20
Undue Influence
Unfair and improper persuasive pressure within a relationship of trust Must be able to prove:Relationship of trust, confidence or authority
Unfair persuasionSlide21
Unilateral Mistake
An
error on the part of one of the parties
Does not affect validity of the contract
Cannot get out of contractNature of the AgreementSigning a contract you don’t understand or have not readSigning a contract in a language you don’t understandSlide22
Mutual Mistake (Bilateral Mistake)
Both parties are
mistaken about an important fact
Impossibility
of Performance Contract is impossible to perform Contract is voidSubject MatterEither party can void contract Existing LawContract is validParties are expected to know the lawSlide23
Innocent Misrepresentation
Innocent statement of supposed fact that turns out to be false
Statement must be one of fact
Statement must be material
Statement must be relied uponInjured party has the right to rescind (take back) the offerNo rights to damages Slide24
Fraudulent Misrepresentation
Party to a contract deliberately makes an untrue statement of fact
Deliberate
: Done with or marked by full consciousness of the nature and effects; intentional
Deception: The fact or state of being deceivedGain: To secure as profit or rewardIn order to prove fraud, you must prove the above 3 definitions Slide25
Proving Fraudulent Misrepresentation
Untrue statement of fact
Must be one of fact, not opinion
Active concealment
Silence – may stay silent about defects except when:statement is about material factsTrue statement is made false by subsequent eventsOne party knows the other party has made a basic mistaken assumptionMaterialityStatement would cause reasonable person to contractIf one party knows the other party would rely on the statement If one party knows the statement is falseSlide26
Proving Fraudulent Misrepresentation
Reasonable RelianceOne party must reasonable rely on statement
Intentional or reckless
One party deliberately lies or conceals a material fact
One party recklessly makes a false statement of fact, without knowing whether it is true or falseStatement must be intended to induce party to enter into contractResulting LossMust cause an injurySlide27
Activity 4: Contract Law—Genuine Agreement
BL
2.01 Directions: Label each scenario with the genuine agreement issue being addressed.
(Use PPT Notes)
Handout/
www.quia.com
Slide28
CAPACITY
Legal ability to enter into a contract
Minors
Mentally Incapacitated
IntoxicatedA person serving a prison sentence lacks capacity.Slide29
Minors
Minor
– not yet reached legal
age (age of majority)
NC Age of Majority – 18 years oldEmancipation - severing of the parent-child relationshipFormal – court decreeInformal – arises from the conduct of the minor and the parentParent and minor agree that parent will end supportMinor gets marriedMinor moves out of family home
Minor joins armed forces
Minor gives birth
Minor takes on full-time employment
Ratification – agreeing to be bound by a contract that could be avoided
Contracts made by minors are voidable; minors may disaffirm (or avoid being bound by) contractsSlide30
Mentally Incapacitated
Lacking the ability to understand the consequences of his or her contractual actsSevere mental illness
Severe mental retardation
Severe senility
Contracts made by mentally incapacitated are usually void unless involving necessaries. Slide31
Intoxicated
People under the influence of drugs or alcoholIntoxication is a voluntary act.Most courts are reluctant to consider contracts entered into by intoxicated individuals as voidable.
Must be so intoxicated that the person did not know they were contracting.Slide32
CONSIDERATION
Exchange of benefits and detriments by the parties to an
agreements
Requirements of consideration:
Must involve a bargained-for exchange (promise made in return for another promise)Must involve something of valueBenefits and detriments must be legalBenefitsSomething that a party was not previously entitled to receiveDetrimentsAny loss suffered; anything given upForbearanceNot doing something that you have the right to do Slide33
Activity
5: Contract Law—Genuine Agreement
BL 2.01 Directions
: Match the terms to their examples.
(Use PPT Notes)Handout/www.quia.com
Word Bank:
Unilateral Mistake
Bilateral Mistake
Fraud
Innocent Misrepresentation
Duress
Undue Influence
Emancipation
Ratification
Capacity
Mentally Incapacitated
Intoxicated
NecessariesSlide34
Adequacy of Consideration
Courts don’t look at adequacy or value of an agreement unless it is “unconscionable”Unconscionable
So grossly unfair or oppressive that it would shock the conscience of the court
So
lop-sided that the average person would not agree to termsSlide35
Nominal Consideration
Token amount in a written contract where either the parties cannot or do not wish to state the amountSlide36
Agreements without Consideration
Promise to make a giftGifts have no considerationCannot be enforced
Gift that has been
given
Doesn’t have to be returnedDonor – Gives the giftDonee – Accepts the giftSlide37
Illusory Promises
Clause or wording that allows party to escape from legal obligation
Termination clause
Illusory – clause to allow termination of contract for any reason
Not illusory – termination only allowed after a change in defined circumstancesOutput ContractsAgreement to purchase all of a specific producer’s productRequirements ContractsAgreement to supply all of the needs of a specific buyerOutput & Requirements contracts are recognized by the courts as having consideration by implying fair dealing.Slide38
Existing Duty
Existing Public DutyNo detriment
Obligation
to obey the law
Existing Private DutyIf a person is already under legal duty to do something, another promise to do that same thing does not furnish consideration for a new contract.Slide39
Past Performance
An act that has already been performed cannot be consideration in a contract.Slide40
Exceptions to Consideration
Promises to charitable organizationsGift or Pledge for future contribution
Enforceable as consideration if organization identifies the pledge for a specific use and acts in reliance on the pledge
Promises covered by the UCC
Firm offers Good faith modification of contractPromises discharged in bankruptcySlide41
Exceptions to Consideration
Promises barred from collectionPromissory
Estoppel
Rely on what a person said
Elements:Promise must bring action or forbearanceOne who gave no consideration must have relied on the promiseInjustice can be avoided only enforcing the promise Slide42
LEGALITYSlide43
Illegal Contracts
Civil & Criminal
Agreements to commit a crime/tort are illegal
Usury
State sets a max interest rateInterest – fee the borrower pays to the lender for using the money Usury - charging too high of an interest rateGamblingLegal gambling varies from state to stateLicensingStates require that persons in certain occupations obtain a license to practice that occupationDoctors, plumbers, barbers, lawyers, funeral directorsSlide44
Illegal Contracts
Public policy
Agreements that unreasonably restrain trade
Takes away the ability to do business with others
Agreements not to competeRestrictive covenant - agreement not to compete in a region for a period of time Only legal for a short period of time and small geographic region Agreements for price fixingPrice Fixing - competitors agree on certain price ranges within which they will sell their productsSlide45
Illegal Contracts
Public policy (continued)
Agreements
to eliminate competitive bidding (or bid rigging
)Bid - offer to buy or sell goods or services at a stated price Bid rigging – competitors agree that one bidder will have low bid for a certain job….low bidder sets bid higher than would if real competitionAgreements to obstruct justiceAnything that delays or prevents justiceAgreements to induce breach of duty or fraudInfluencing persons who hold positions of high trust for private gainAgreements to interfere with marriageDamage, destroy, or discourage good family relationshipsSlide46
Statute of Frauds
Requires that certain contracts be in writing to be enforceableContracts to buy and sell goods for a price of $500 or more
Contracts to buy and sell real property
Contracts that require more than one year to complete
Promises to pay the debt of anotherPromises to give something of value in return for marriageSlide47
CHARACTERISTICS OF A CONTRACT
Valid, void, voidable, unenforceableExpress or implied
Bilateral or unilateral
Oral or writtenSlide48
Valid, Void, Voidable, Unenforceable
Valid contract
Includes all elements recognized by the courts
Legally binding
Void contractWithout legal effectContracts missing one or more elements Voidable contractOne or more parties can get out of contract for some legal reasonContract lacks genuine assent, contracts with minorsUnenforceable contractContract that court will not uphold, usually because of some rule of lawStatute of limitations has expiredSlide49
Express or implied
Express Contract statement that may be written or oralImplied
Contract that comes about from the actions of the partiesSlide50
Bilateral or Unilateral
Bilateral Contains two promises
Most contracts are bilateral
Unilateral
Contains a promise by only one person to do something if, and when, the other party performs a certain actReward offer is most common unilateral contractSlide51
Oral or written
OralCreated by two or more people speaking to each other
Written
contract terms are written so that both parties know the exact terms
Provides proof of existence for the contractCertain contract are required by the Statute of Frauds to be in writingSlide52
Activity
7: Contract Debate
Process
:
Group students into teams and assign topic for debate. You should have a team debating for and a team debating against the topic.Teams research and plan three questions for the other team. Allow 10 minutes or this could be a homework assignment for students.Introduction of issue (3 minutes per team)Teacher asks each team questions. Teams have two minutes to answer, with each team getting a one minute rebuttal.Conclusion (3 minutes per team)Class Discussion (5 minutes)Slide53
Activity 8: Contract Law—Legality
BL 2.01 Directions
:
Summarize the legal issues in each scenario. List the 5 types of agreements that have to be in writing and give an example of each.
PartnerSlide54
Activity 9: Contract Law—Characteristics of a
Cotnract
BL 2.01 Directions
: Match the terms to their examples.
(Use PPT Notes)Handout/www.quia.com
Slide55
Activity 10: Contract Law—Characteristics of a
Cotnract
BL 2.01 Directions
: Identify which characteristic is being presented in the scenario.
(Use PPT Notes)Handout