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Contracts and Contract Law. The Elements of a Contract. Learning Goal. To recognize the elements of a contract, including offer and acceptance. Contract. Any agreement enforceable by law. Does NOT have to be written!!! To be legally complete, a contract must contain 6 Elements.

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contracts and contract law

Contracts and Contract Law

The Elements of a Contract

learning goal
Learning Goal

To recognize the

elements of

a contract, including offer and acceptance.

contract
Contract
  • Any agreement enforceable by law.
      • Does NOT have to be written!!!
      • To be legally complete, a contract must contain 6 Elements.
1 offer
#1: Offer
  • A proposal made by one party (offeror) to another party (offeree) indicating a willingness to enter a contract.
3 requirements of an offer
3 Requirements of an Offer
  • Serious Intent
    • Not merely an “invitation to negotiate” like an advertisement.
  • Definiteness and Certainty
    • Vague conditions are not legally enforceable.
  • Communication to the Offeree
    • MUST be communicated to be legal
2 acceptance
#2: Acceptance
  • The agreement of the offeree to be bound by the terms of the offer.
requirements of acceptance
Requirements of Acceptance
  • Unconditional Acceptance
    • Must NOT change the terms of the original offer in ANY way.
    • If a change is made, it is a “counteroffer” and the original offeror is not obligated to accept.
  • Must follow the rules regarding the Methods of Acceptance
methods of acceptance
Methods of Acceptance
  • When negotiating long-distance:
    • Acceptance is effective when sent
    • Any communication qualifies
    • Acceptance is implied when using the same speed as the offeror
  • Some offers/acceptances can be implied
  • Some offers require specific performance
termination of an offer
Termination of an Offer
  • Revocation – offeror terminates
  • Rejection – offeree terminates
  • Counteroffer
  • Expiration of Time
  • Death or Insanity
contracts and contract law1

Contracts and Contract Law

The Elements of a Contract

learning goal1
Learning Goal

To recognize the

elements of

a contract, and what makes a defective agreement.

3 genuine agreement
#3: Genuine Agreement
  • When a valid offer is met by a valid acceptance. “A meeting of the minds.”
    • When Offer and Acceptance are both present . . . but . . .
    • Agreement can be destroyed if it is found to be not genuine.
defective agreements
Defective Agreements
  • Concealment – Choosing not to reveal important information that a party is obligated to reveal.
  • Innocent Misrepresentation – Making an innocent statement that turns-out to be false.
    • The victim may rescind the contract, but can NOT collect any damages.
defective agreements1
(Defective Agreements)
  • Mistake – Entering a contract with the belief that certain things are true, which are in fact not true.
    • Unilateral Mistake – An error on the part of one party.
      • The mistaken party might not be able to get out of the contract!
    • Bilateral Mistake – An error on the party of both parties.
      • Either party can get out of the contract!
defective agreements2
(Defective Agreements)
  • Duress – Overcoming a person’s will by use of force or by threat.
    • Physical Duress
    • Emotional Duress (threat of physical force)
    • Economic Duress
  • Threatening legal action is NOT a form of Duress!!!
defective agreements3
(Defective Agreements)
  • Undue Influence – When a person uses unfair or improper persuasive pressure to force someone to enter into an agreement.
    • A Dependency Relationship
    • Unfair or Improper Pressure
    • A Beneficial Contract
defective agreements4
(Defective Agreements)
  • Fraud – Deliberate deception intended to secure an unfair or unlawful gain.

Fraud MUST contain 5 Elements!!!

    • Must be a false representation of fact.
    • The party making it must know it is false.
defective agreements5
(Defective Agreements)

. . . 5 Elements of Fraud . . .

  • The false representation must be made knowing it is relied upon by the other party.
  • The innocent party must reasonably rely upon the false representation.
  • The innocent party must actually suffer some monetary loss.
contracts and contract law2

Contracts and Contract Law

The Elements of a Contract

learning goal2
Learning Goal

To recognize the

elements of

a contract, including capacity, consideration and legality.

4 capacity
#4: Capacity
  • The legal ability to enter a contract.
    • Minors
    • Mentally Impaired Persons
    • Intoxicated Persons
    • Aliens & Convicts
minors
Minors
  • Contracts are voidable if the minor chooses.
    • Even if the minor has damaged an item purchased.
    • Necessities are an exception
  • Minor lies about age = FELONY
  • Contracts are ratified when minor becomes an adult, and continues contract.
mentally impaired
Mentally Impaired
  • Contracts are voidable
  • If declared insane or incompetent by a court, and a guardian is appointed, contracts are all valid.
intoxicated persons
Intoxicated Persons
  • Sometimes able to disaffirm a contract, if intoxicated at the time the contract was entered.
    • Must have been so intoxicated at the time as to not understand the purpose, nature or effect of the agreement.
    • A court decides the person’s condition.
aliens convicts
Aliens & Convicts
  • Limitations placed on contracts.
    • Foreign-born people from non-allied countries are denied legal capacity during war.
    • Sometimes there are limitations during peace.
    • All states differ in limitations on these people.
5 consideration
#5: Consideration
  • A thing of value promised to one party in exchange for another thing of value.
    • Giving up something you have the legal right to keep.
    • Doing something you have the legal right to not do.
    • Not doing something you have the legal right to do.
types of consideration
Types of Consideration
  • Money
  • Property and Services
  • Promise not to Sue
    • “Forbearance”
    • Lawsuits are often settled in this way
  • Charitable Pledges
    • Legally enforceable – no matter how small!
6 legality
#6: Legality
  • Parties are not allowed to enforce contracts that involve illegal acts by crime, tort or statutory law.
    • This is called “conspiracy”
    • Can apply to entire contracts, or to parts of contracts.
learning goal3
Learning Goal

To recognize the

elements of

a contract, including capacity, consideration and legality.