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Chapter 4: Contracts & Fraud

Chapter 4: Contracts & Fraud. What You’ll Learn. How to identify a contract’s elements (p. 108) How to identify valid, void, voidable, and unenforceable contracts (p. 110). What You’ll Learn. How to distinguish between express and implied contracts (p. 111)

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Chapter 4: Contracts & Fraud

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  1. Chapter 4: Contracts & Fraud

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

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

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

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

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

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

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

  9. 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.

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

  11. 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.

  12. 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.

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

  14. 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.

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

  16. 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.

  17. 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.

  18. 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.

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

  20. 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

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

  22. 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.

  23. 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.

  24. 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?

  25. ANSWER Void. It has no legal affect.

  26. 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.

  27. 5.1 How Parties Reach Agreement

  28. 5.1 How Parties Reach Agreement

  29. 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.

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

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

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

  33. Section 5.1Assessment 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.

  34. Section 5.1Assessment 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.

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

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

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

  38. Section 5.1Assessment 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.

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

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

  41. End of Section 5.1

  42. Section 5.2

  43. What You’ll Learn • How to recognize the requirements of an offer (p. 114) • How to distinguish between an offer and an invitation to negotiate (p. 114)

  44. What You’ll Learn • How to recognize the requirements of an acceptance (p. 116) • How to distinguish between an acceptance and a counteroffer (p. 117)

  45. What You’ll Learn • How to recognize when an offer has terminated (p. 119)

  46. Why It’s Important You need to know when an offer has been made and when an acceptance goes into effect to make sound contracts.

  47. Section Outline Requirements of an Offer Serious Intent Definiteness and Certainty Communication to the Offeree Requirements of an Acceptance Unconditional Acceptance Methods of Acceptance

  48. Section Outline Termination of an Offer Revocation Rejection Counteroffer Expiration of Time Death or Insanity

  49. Pre-Learning Question What do you think the requirements of an offer are?

  50. Requirements of an Offer • The person who makes an offer is the offeror. • The person who receives the offer is the offeree.

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