Chapter 7 – How Contracts Arise - PowerPoint Presentation

Slide1

Chapter 7 – How Contracts Arise

Personal and Business Law

Mr. Ulmer Rm. 112Slide2

Definition

Contract

– is any agreement enforceable at lawSlide3

Elements of a Contract

Offer

Acceptance

Genuine Agreement

Consideration

Capacity

Legality

-Figure 7-1 (p. 93)Slide4

Offer

A proposal made by one party (the offeror) to another party (the offeree) indicating a willingness to enter a contract

Example: “I will give you $100 to wear this t-shirt all day at work.”Slide5

Acceptance

The agreement of the offeree to be bound by the terms of the offer

Example: “I accept the offer. I will wear the t-shirt all day while I am at work.”Slide6

Genuine Agreement

Offer and acceptance go together to create genuine agreement, or a meeting of the minds

Agreement can be destroyed by:

Fraud

Misrepresentation

Mistake

Duress

Undue influenceSlide7

Consideration

The thing of value promised to the other party in a contract in exchange for something else of value promised by the other party

Mutual exchange binds the parties togetherSlide8

Capacity

The law presumes that anyone entering a contract has the legal capacity to do so

People excused from contractual responsibility may include:

Minors

Mentally incompetent individuals

Drugged or drunk individualsSlide9

Legality

Parties are not allowed to enforce contracts that involve doing something that is illegal

Some illegal contracts involve agreement to commit a crime or tort

Others involve activities made illegal by statutory lawSlide10

Importance of Elements

To be legally complete, a contract must include these six elements.

What if one of the elements is missing?

A valid contract does not existSlide11

Characteristics of Contracts

4 Categories of Contracts

Valid, void, voidable, or unenforceable

Express or implied

Bilateral or unilateral

Oral or written

Any one contract may have 1 or more of these 4 categoriesSlide12

Valid, Void, and Voidable

Valid

– means legally good, which is legally binding

Void

– means no legal force, which has no legal effect whatsoever

Voidable

– When a party is able to void or cancel a contract for some legal reason, a contract is “voidable”Slide13

Unenforceable

Some rule of law that cannot enforce the contract in court.

Statute of Limitations

Example 1 (p. 94)Slide14

Express, Implied

An

express contract

is stated in words and may be either oral or written.

An

implied contract

is one that comes about from the actions of the parties.

Example 2 (p. 94)Slide15

Bilateral, Unilateral

Bilateral

– is a contract that contains two promises – one from each person.

Lloyd: “I will sell you my PS4 for $300”

Harry: “I will buy it”

Unilateral

– One promise only. One person promises to do something in exchange for the other person’s promise to do something.Slide16

Oral, Written

Oral contract is created by word of mouth. Must be at least two people speaking for contract to come into existence

Written contract is desirable since it allowed the parties to know the exact terms of the contract and provide proof agreement was made.Slide17

Requirements of an Offer

An Offer’s Three Basic Requirements:

1) It must be seriously intended

2) It must be definite and certain

3) Must be communicated to the offereeSlide18

Requirements of an Acceptance

The unqualified willingness to go along with the offer

Basic Requirements for an Acceptance:

Unconditional Acceptance

Methods of AcceptanceSlide19

Termination of an Offer

Revocation

– the taking back of an offer by the offeror

Rejection

– rejection or refusal of an offer by the offeree

Counteroffer

– Any change in the terms of the offer by the offereeSlide20

Termination of an Offer

Expiration of Time

If offeror puts a time limit for the acceptance of an offer, the offer may be terminated

Death or Insanity

If offeror dies or becomes insane before offer is accepted, the offer comes to an end