What You’ll Learn

1. What You’ll Learn • How to identify a contract’s elements (p. 108) • How to identify valid, void, voidable & unenforceable contracts (p. 110) • How to distinguish between express & implied contracts (p. 111) • How to identify unilateral & bilateral contracts (p. 111) • How to distinguish between oral & written contracts (p. 112)

2. Why It’s Important Identifying a contract’s elements will help you manage your affairs in an intelligent and effective manner. Legal Terms

3. Legal Terms • contract (p. 106) • offer/acceptance (p. 109) • genuine agreement (p. 109) • capacity (p. 109) • consideration (p. 109) • legality (p. 109) • void/voidable contract (p. 110) • unenforceable contract (p. 111) • express/implied contract (p. 111) • bilateral/unilateral contract (pp. 111, 112)

4. Section Outline Understanding Contract Law The Nature of a Contract The Three Theories of Contract Law The Elements of a Contract Characteristics of a Contract Valid, Void, Voidable, or Unenforceable Express or Implied Bilateral or Unilateral Oral or Written

5. Pre-Learning Question How would you define contract?

6. The Nature of a Contract • A contract is any agreement enforceable by law. • Not all agreements are contracts, however. • Whether or not it’s a contract, depends on the circumstances of the agreement.

7. The Three Theories of Contract Law The evolution of contract law shows how its focus has changed.

8. The Equity Theory In the past, courts asked whether the parties to a contract exchanged things of equal value. This approach was called the equity theory of contract law.

9. The Will Theory The advent of industrial capitalism forced the courts to shift their focus.They began to ask if the parties had agreed to the terms in the agreement of their own free will.

10. This led to certain fixed elements in a contract. It is called the formalist theory because it relies on the form of the agreement. The Formalist Theory Then the courts began to study the parties’ actions and words to determine if there was a “meeting of the minds.”

11. Elements of a Contract There are six elements of a contract. • Offer • Acceptance • Genuine agreement • Consideration • Capacity • Legality

12. Elements of a Contract • An offer is a proposal by one party to another intended to create a legally binding agreement. • An acceptance is the second party’s unqualified willingness to go along with the first party’s proposal.

13. Elements of a Contract • If a valid offer is met by a valid acceptance, a genuine agreement exists. • Capacity is the legal ability to enter a contract.

14. Elements of a Contract • Consideration is the exchange of things of value. • Legality means that people can only enter into contracts for legal purposes. People cannot enter into contracts to commit illegal acts.

15. Pre-Learning Question What is one characteristic that you think a contract must have?

16. Characteristics of a Contract Contracts can have any of the following characteristics: • Valid, void, voidable, or unenforceable • Express or implied • Bilateral or unilateral • Oral or written

17. Valid, Void, Voidable, or Unenforceable • A valid contract is legally binding. • A contract that is void has no legal effect.

18. Valid, Void, Voidable, or Unenforceable • When a party to a contract is able to void or cancel the contract for some legal reason, it is a voidable contract. • An unenforceable contract is one the court will not uphold.

19. Express or Implied • An express contract is stated in words and may be either oral or written. • An implied contract comes about from the actions of the parties.

20. Sarah paid Isabel $50 to hack into Mrs. Wojcik’s computer files for a copy of the upcoming final exam, but Isabel gave Sarah the pre-test instead. Is this contract valid, void, voidable, or unenforceable?

21. ANSWER Void. It has no legal affect.

22. Bilateral or Unilateral • A bilateral contract contains two promises. • A unilateral contract contains a promise by only one person to do something, if and when the other party performs some act.

23. 5.1 How Parties Reach Agreement

24. Oral or Written • An oral contract is created by word of mouth and comes into existence when two or more people form a contract by speaking to each other. • Sometimes, however, it is desirable to put contracts in writing.

25. Section 5.1Assessment Reviewing What You Learned • What are the elements of a contract?

26. Section 5.1Assessment Reviewing What You Learned Answer Offer, acceptance, genuine agreement, capacity, consideration, and legality.

27. Section 5.1Assessment Reviewing What You Learned • What are the differences among valid, void, voidable, and unenforceable contracts?

28. Section 5.1Assessment Reviewing What You Learned Answer A valid contract is legally binding. An unenforceable contract will not be upheld generally by the court because of some rule of law.

29. Section 5.1Assessment Reviewing What You Learned Answer A contract that is void has no legal effect and a voidable contract is not void in itself, but may be voided by one or more of the parties if the party so chooses.

30. Section 5.1Assessment Reviewing What You Learned • What are the differences between express and implied contracts?

31. Section 5.1Assessment Reviewing What You Learned Answer An express contract involves words, while an implied contract does not.

32. Section 5.1Assessment Reviewing What You Learned • What are the differences between unilateral and bilateral contracts?

33. Section 5.1Assessment Reviewing What You Learned Answer A unilateral is a one-sided contract, in which one party makes a promise in exchange for an act. In a bilateral contract, a contract legally comes into existence when promises are exchanged.

34. Section 5.1Assessment Reviewing What You Learned • What are the differences between oral and written contracts?

35. Section 5.1Assessment Reviewing What You Learned Answer Oral contracts are spoken. Written contracts are in writing.

36. Section 5.1Assessment Critical Thinking Activity History How did the Industrial Revolution change the court’s attitude toward interpreting contract law?

37. Section 5.1Assessment Critical Thinking Activity Answer History The industrial revolution and the need to support a profit-making system required that the courts shift their focus from contract fairness to whether the parties had actually agreed to the terms set forth in the agreement and whether they had reached a “meeting of the minds.”

38. Section 5.1Assessment Legal Skills in Action Elements of a Contract Your friend, Arkadi, has begun teaching contract law classes at a local senior citizens center.

39. Section 5.1Assessment Legal Skills in Action Elements of a Contract Write a paragraph in which you explain the six elements of a contract in such a way that will help Arkadi create his course outline.

40. Section 5.1Assessment Legal Skills in Action Elements of a Contract Remember to include information on the historical development of the will theory, which led to the need to develop the six elements included within the formalist theory of contract law.

41. Section 5.1Assessment Critical Thinking Activity Answer Elements of a Contract Paragraphs will vary, but should include discussion of the six elements that make up a contract.

42. End of Section 5.1