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Bell Ringer

Bell Ringer. What should a contract be based on? What things should be included in a contract? What things could make a contract no longer applicable? . CH 5: Entering into Contracts . What is a contract?.

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Bell Ringer

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  1. Bell Ringer • What should a contract be based on? • What things should be included in a contract? • What things could make a contract no longer applicable?

  2. CH 5: Entering into Contracts

  3. What is a contract? • Most people think of contracts as preprinted, formal legal documents that relate to only important things (buying cars, new job, etc) • You enter into a contract any time your agree to exchange things of value • A contract is an agreement enforceable by law.

  4. Three Theories of Contracts: Equality Theory • Equality theory: Whether the parties exchanged things of equal value • Was used primarily in the past • Was phased out as industrialization and capitalism became more prominent

  5. Three Theories of Contracts: Will Theory • Will Theory: Whether the parties had agreed to terms set forth in a contract • Called the will theory because each part has free will • Courts no longer looked at if the contract was fair, but if each party agree to the terms of their own volition • The Will Theory is hard to prove as it is almost impossible to prove what a person is thinking at any given moment

  6. Three Theories of Contracts:Formalist Agreement • Since Will Theory proved inadequate courts started to look for specific actions/parts to a contract • The court tried to determine if it seemed like the two parties had collaborate on the contract • This would led to specific fixed elements that appear in all contracts • If these elements were present, courts acknowledge the existence of a contract.

  7. Elements of a Contract • As stated in formalist theory courts are looking for fixed specific parts of an agreement. • If these parts are present in an agreement the courts acknowledge something was a contract • Without all six elements an agreement is not a contract • There are SIX elements of a contract courts look for: offer, acceptance, genuine agreement, consideration, capacity, legality

  8. Offer: A proposal by one party (offeror) to another (offeree) intended to create legally binding agreement • Acceptance: The Agreement of the offeree to be bound by the terms of the offer

  9. Genuine Agreement: The offer and acceptance combine together to form a genuine agreement. • A Genuine Agreement can be destroyed by fraud, misrepresentation, mistake, duress, or undue influence

  10. Consideration: The thing of value promised to one party in contract in exchange for something else of value promised by the other party. • The mutual exchange binds the parties together

  11. Capacity: The law presumes anyone entering into a contract can legally do so • Contracts can be invalidated if a party involved is too young, mentally incompetent, drugged, drunk, etc • Legality: Parties are not allowed to enforce contracts that involve illegal activities.

  12. Characteristics of a Contract • Once a contract has been entered it can be described in numerous ways, and take on numerous forms • Valid, void, voidable, or unenforceable • Express or implied • Bilateral or unilateral • Oral or written

  13. Valid, Void, Voidable, or Unenforceable • Valid: legally good (legally binding) • Void: no longer legal • If a contract is missing one element, it can be void

  14. Voidable Contract: when a party to a contract is able to void or cancel the contract for some legal reason • Unenforceable Contract: a contract that the court will not uphold, generally because of some rule of law, such as the statue of limitations

  15. Express vs Implied Contract • Express Contract: stated in words and may be either oral or written • Implied Contract: come from the actions of the parties • Pumping gas: By pumping your own gas you enter an implied contract you will PAY FOR THE GAS!!!

  16. Bilateral vs Unilateral • Bilateral Contract: Contains two contracts. One party promises to do something in exchange from another’s promise to do something else • Unilateral Contract: contains a promise by only one person to do something, if and when the other party performs some action.

  17. Oral vs Written • Oral Contract: when a contract is formed by word of mouth and comes about by two people speaking to each other • Written Contract: a written contract assures that both parties know the exact terms of the contract and providing proof of the agreement

  18. Requirements of an Offer • An offer had three basic requirements • Made Seriously • Definite and certain • Communicated to the offeree • Serious Intent: an offer must be made with the intent of entering into a legal obligation • Therefore, saying “If you hit this shot I will give you $10,000” is NOT actually legally binding.

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