Validity of Contract Barbara Davis and Christie Suggs

1. Validity of Contract Barbara Davis and Christie Suggs EDG 6925 Instructional Material Development Florida State University, Spring 2009 Target Audience: General – Florida undergraduate students Unit completed in collaboration with Florida State University Business Law Professor Alvin Stauber

2. Validity of Contract Deal or No Deal? • You just bought a pair of Oakley sunglasses from a sidewalk vender only to discover they were “Foakleys” – fake Oakley’s. • Your 15-year-old brother just negotiated the sale of your CD collection without your knowledge. • At the FSU/UF game day tailgate party, after a long afternoon of partying, you sign a contract to scrub fifty toilets at the agreed upon price of $1.00 per toilet. • Your roommate threatens to tell your folks about your parking tickets if you don’t agree to sell her your Gucci bag for $10. By the end of the unit, you will know if these scenarios represent a valid contract. Introduction 1

3. Validity of Contract • You will enter into many agreements throughout your lifetime. What agreements constitute a “deal” or a valid contract? Are there any circumstances that would automatically constitute “no deal” or void a contract? • There are specific elements that are required for a contract to be valid (Deal) and specific elements that would void or invalidate a contract (No Deal). Do you know what they are? • When you finish the unit, you will be able to determine for yourself whether a scenario represents Deal or No Deal. That is, you will be able to determine the validity of contract by recognizing the presence of the required elements and the absence of elements that would void a contract. Introduction 2

4. Validity of Contract A contract is a promise… It may be oral, written, electronic or implied. A contract is formed when two parties agree to do something in exchange for something else. To be valid, a contract must have five elements (offer, acceptance, consideration, capacity, legality). When you finish this section of the unit, you will recognize the required elements for validity of contract – offer, acceptance, consideration, capacity, and legality. You will be able to determine for yourself whether a scenario represents Deal or No Deal. Deal: Required Elements Overview Required Elements for Valid Contract Offer Acceptance Consideration Capacity Legality 3

5. Validity of Contract A contract is a promise when you … • See a to-die-for dress in the shop window, check the price and decide to buy, • Go to the doctor for treatment, • Agree to do extra chores for your roommate in exchange for reduced rent, • Sign up for a new cell phone plan, • Buy a scooter, house, boat or plane, Whether notarized or signed, sealed with a kiss or a handshake, if you’ve made a promise to do something in exchange for something, You have a contract. Deal: Required Elements Overview Required Elements for Valid Contract Offer Acceptance Consideration Capacity Legality 4

6. Validity of Contract Offer is the first required element and includes parties, subject matter, price, terms, and communication. • Parties make the offer and accept the offer. • Subject matter is what the offer is about. • Price is the agreed upon payment. • Terms include payment, delivery and performance time. • Communication is the means of making the offer. Let’s put this into context … Deal: Required Element: Offer Required Elements for Valid Contract Offer Acceptance Consideration Capacity Legality 5

7. Validity of Contract Examples of an Offer: • Price on an item for sale • 2006 Lamborghini Gallardo SE for $100,000 • Party = buyer/seller, subject matter is Lamborghini, price = $100K, terms include paying (payment), receiving the car (delivery), and when the exchange takes place (performance time). • Stained Glass, Trees, 9x30, for $500 • Party = buyer/seller, subject matter is stained glass, Trees, price = $500, terms include paying, receiving the artwork, and expected timeframe for paying and receiving. • Goodwill 4-slice toaster for $2.00 • Party = buyer/seller, subject matter is toaster, price = $2, terms include paying, picking up the toaster, and taking it home. Deal: Required Element: Offer Required Elements for Valid Contract Offer Acceptance Consideration Capacity Legality 6

8. Validity of Contract More Examples of an Offer: • Promise to do in exchange for something else • Wash car for $10 • Party = washer/washee, subject matter is car washing, price = $10, terms include paying (payment), having the car washed (delivery), and getting it done (timeframe). • Drive sister’s car to Gainesville for $50 • Party = driver/sister, subject matter is car driving, price = $50, terms include paying (payment), driving the car to Gainesville (delivery), and getting it done (timeframe). • I’ll gladly pay you Tuesday for a hamburger today. • Party = Wimpee/diner, subject matter is hamburger, price = listed on menu, terms include hamburger today/payment Tuesday (performance). What is NOT an offer … Deal: Required Element: Offer Required Elements for Valid Contract Offer Acceptance Consideration Capacity Legality 7

9. Validity of Contract Offer must be unequivocal -- without a doubt, clear, unquestionable. Not an offer: • I’m thinking about selling my Barbie doll collection. • I wonder what I could get for my Transformer collection. • What would you give me for my sister’s diary? • Is that apartment on the corner for rent? • I wish I could get some money for all of these old prom dresses. Can you recognize an offer? Deal: Required Element: Offer Required Elements for Valid Contract Offer Acceptance Consideration Capacity Legality 8

10. This is an offer. The seller is offering to sell the item to a buyer for the price specified on the tag. This is an offer. Lilly is offering $10 in exchange for watering plants. Validity of Contract This is not an offer. There is no explicit amount offered and no clear intent to sell. The speaker is just “wondering.” Can you recognize an offer? Deal: Required Element: Offer This is not an offer. The seller has not determined a price for his shoes and is merely “hoping” for a buyer. 2. Lilly said she’d pay $10 a week to anyone who would water her plants. Click on item an if that item is an offer. 1. Price tag on an item in a store 1. Price tag on an item in a store Great job! This is an offer. The parties include you and me. The subject matter is back-scratching, price is one for one. 2. Lilly said she’d pay $10 a week to anyone who would water her plants. 3. I was wondering what I could get for my grandmother’s wedding gown. 4. I was hoping someone would offer to buy my old golf shoes. 3. I was wondering what I could get for my grandmother’s wedding gown. 4. I was hoping someone would offer to buy my old golf shoes. 5. You scratch my back, and I’ll scratch yours. 5. You scratch my back, and I’ll scratch yours. Required Elements for Valid Contract Offer Acceptance Consideration Capacity Legality How’d you do? 9

11. Validity of Contract Review 1. Price tag on an item in a store This is an offer. The seller is offering to sell the item to a buyer for the price specified on the tag. 2. Lilly said she’d pay $10 a week to anyone who would water her plants. This is an offer. Lilly is offering $10 in exchange for watering plants. 3. I was wondering what I could get for my grandmother’s wedding gown. This is not an offer. There is no explicit amount offered and no clear intent to sell. The speaker is just “wondering.” 4. I was hoping someone would offer to buy my old golf shoes. This is not an offer. The seller has not determined a price for his shoes and is merely “hoping” for a buyer. 5. You scratch my back, and I’ll scratch yours. This is an offer. The parties include you and me. The subject matter is back-scratching, price is one for one. Deal: Required Element: Offer Required Elements for Valid Contract Offer Acceptance Consideration Capacity Legality 10