Contracts and Contract Law

1. Contracts and Contract Law The Elements of a Contract

2. Learning Goal To recognize the elements of a contract, including offer and acceptance.

3. Contract • Any agreement enforceable by law. • Does NOT have to be written!!! • To be legally complete, a contract must contain 6 Elements.

4. 6 Elements of a Contract

5. #1: Offer • A proposal made by one party (offeror) to another party (offeree) indicating a willingness to enter a contract.

6. 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

7. #2: Acceptance • The agreement of the offeree to be bound by the terms of the offer.

8. 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

9. 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

10. Termination of an Offer • Revocation – offeror terminates • Rejection – offeree terminates • Counteroffer • Expiration of Time • Death or Insanity

11. Contracts and Contract Law The Elements of a Contract

12. Learning Goal To recognize the elements of a contract, and what makes a defective agreement.

13. 6 Elements of a Contract(continued)

14. #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.

15. 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.

16. (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!

17. (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!!!

18. (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

19. (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.

20. (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.

21. Contracts and Contract Law The Elements of a Contract

22. 6 Elements of a Contract(continued)

23. Learning Goal To recognize the elements of a contract, including capacity, consideration and legality.

24. #4: Capacity • The legal ability to enter a contract. • Minors • Mentally Impaired Persons • Intoxicated Persons • Aliens & Convicts

25. 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.

26. Mentally Impaired • Contracts are voidable • If declared insane or incompetent by a court, and a guardian is appointed, contracts are all valid.

27. 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.

28. 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.

29. #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.

30. 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!

31. #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.

32. Learning Goal To recognize the elements of a contract, including capacity, consideration and legality.