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Introduction to Contracts and Their Formation. “It’s a deal, I’ll take it”. OBE-118, Section 10 Fall 2004. These four are sometimes called the elements. “Defenses” to Formation. Basic Elements of a Contract. Usually looked at as six elements Agreement (or “Mutual Assent”)

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Introduction to contracts and their formation l.jpg

Introduction to Contracts and Their Formation

“It’s a deal, I’ll take it”

OBE-118, Section 10

Fall 2004


Basic elements of a contract l.jpg

These four are sometimes called the elements

“Defenses” to Formation

Basic Elements of a Contract

Usually looked at as six elements

Agreement (or “Mutual Assent”)

Consideration

Capacity

Legality

Genuineness of assent

Writing and Form


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Classifying Contracts

  • Bilateral versus Unilateral

  • Express versus Implied

  • Formal versus Informal

  • Valid, Void, Voidable, and Unenforceable


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Formation

  • Mutual Agreement or Mutual Assent

  • Requires acceptance of an offer

  • The “objective theory of contracts” resolves issues as to what was an offer,


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Offer

Basic Elements of an offer

  • Serious objective intent by offeror

  • Terms reasonable definite and certain

  • Offer communicated to offeree

  • No: “ Want to buy my car?”

  • “My car is for sale”

  • ‘I want to sell my 2000 BMW for $40,000”


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Acceptance

  • Voluntary act that expresses assent or agreement to terms of offer

  • Unequivocal or absolute

  • Communicated to the offeror

No: “Maybe”

“Okay but only if…”

“Yes if you increase the the price by…”


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Did the Offer Survive to be Accepted?

Offer Terminated?

Offer

Revocation?

Acceptance

Rejection?

Counteroffer?

Operation of Law?

Was offer non-revocable?


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Revocation of Offers

  • Direct repudiation

  • Behavior conforming to repudiation

  • Generally, revocation must be received by offeror or offeror’s agent.

  • Irrevocable offers

Firm Offers

Option contract


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Termination by Rejection

  • Words or acts that convey “no”

Termination by Counteroffer

  • A rejection with a new offer

  • Watch out for inquiries: “Would you accept $50?

  • Mirror-image rule (common law)


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Termination by Operation of Law

  • Lapse of time

  • Destruction of Subject matter

  • Death or incompetence of offeror

  • Illegality of proposed contract


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