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Chapter 5

Chapter 5. FORMS OF CONTRACTS. Capacity. Must be able to contract for yourself Can not Minors Mentally Impaired Sometimes “ Intoxicated”. Social Agreements. I promise to take you to lunch! Legally binding or not? Which elements are present & which are missing?.

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Chapter 5

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  1. Chapter 5 FORMS OF CONTRACTS

  2. Capacity • Must be able to contract for yourself Can not • Minors • Mentally Impaired • Sometimes “ Intoxicated”

  3. Social Agreements • I promise to take you to lunch! • Legally binding or not? • Which elements are present & which are missing?

  4. CHARACTERISTICS OF A Contract PG 110 • Valid, Void, Voidable, or Unenforceable • Express or Implied • Bilateral or Unilateral • Oral or Written

  5. Offeror & Offerees • Offeree – Person to whom the offer is made • Offeror - communicates serious proposal

  6. Oral or Written WRITTEN • Some agreements must be in writing to be enforceable. ORAL • By mouth Why is it desirable to have contracts in writing?

  7. Valid, Void, Voidable, or Unenforceable • Valid – binding • Void – not binding (missing an element) • Voidable – able to cancel contract • Minors • Unenforceable – will not be upheld due to a rule of law.

  8. Express or Implied

  9. Bilateral Contracts • A Promise for a promise • Example: “I’ll sell you my Ipod for $55” I’ll buy It

  10. I’ll give you $50 if you mow my lawn by noon today! Unilateral Contracts • One Sided • A promise for an action

  11. First 5 people through the door get a free scarf

  12. Example Herb went to a self-service gas station that requires payment before the attendant will turn on the pumps. He handed the attendant $10, returned to his car, pumped $10 worth of gas, and drove off. Neither party spoke a word, yet an implied contract arose from their actions.

  13. Example “Ill sell you my DVD player for $150,” and you say, “I’ll buy it,” Bilateral First 5 people through the door get a free scarf Unilateral

  14. Valid Offers

  15. Creating a Valid Offer • Must intend to create offer • Terms must be definite & complete • Offer must be communicated to offeree.

  16. Offer must appear serious • Test of reasonable person • If joking, angry, or in fear, then no offer is created • Angry – My car is junk, you can have it for $1

  17. Definite & Certain • Usually offers should identify • Price, subject matter, and quantity • Essential terms must be identified clearly for courts to enforce it. • Avoid using terms that are vague

  18. Offer must be communicated to the offeree • A person who is not the intended offeree can not accept the offer. • Must have known about the offer to claim.

  19. A Reward Offer • Can be made to the general public • Accepted by fulfilling the requirements of the offer. Ring lost. At Zuma beach in from of the beach house. Lady’s gold band with 12 small diamonds. $1,000 reward. Call 555-2342 Several people searched the beach for the ring. Sam found it and returned it to the owner. Sam was entitled to the money.

  20. Advertisements • Generally not offers but invitations to make negotiate. • Why???? • Limited stock available • Advertisements that are offers • Clearly worded to address all receiving the ad.

  21. Exceptions to the Rule • Ads that contain specific promises • First come, first served • Limited Quantity Available • First 5 people to call • 10th caller

  22. Invitation or Offer? • New Bike, $500.00 to first person that calls. • Offer • One Day only 50% off of Lawn Mowers. • Invitation • Subject to stock on hand. MP3 players $30.00. • offer

  23. What’s you verdict pg106 Darrow offered to trade his digital camera to Monette in exchange for her camcorder. Schorling, who had a camcorder of the same make and model, overheard the offer and said she would make the swap. Did a contract result from schorlings statement? No

  24. Assignment • Find 10 advertisements. • Tell why each ad is an offer or an invitation. • If you cant find any offers be sure to supply your own example of an ad that is an offer

  25. Acceptances • Review: Answer 1,5,6,7,& 8 • Section 5-2 notes: ACCEPTANCES

  26. Acceptance The acceptance must • be made by the offeree • Match the terms in the offer • Be communicated to the offeror

  27. Acceptances • Contracts come into existence only after an acceptance. Acceptance Offer Offeree Offeror

  28. Mirror Image Rule • Terms must match

  29. Counteroffer • Any change in terms. Counteroffer Offer

  30. Methods of Acceptance • Face to Face: immediate • Letter: when sent • Fax: when sent • Telegram: when sent • Exceptions: if otherwise specified by offeror

  31. TERMINATION OF AN OFFER • REVOCATION- Taking back of an offer • REJECTION – refusal of an offer • COUNTEROFFER- change in terms • EXPIRATION OF TIME- mustanswer within a time limit or pay to hold contract open(option contract) • DEATH OR INSANITY- offer ends if death or insanity before acceptance.

  32. Which one is Different? • A proposal by one party to another • The legal ability to enter a contract • Mentally incompetent or drugged individuals are excused from contractual responsibility because they lack___________

  33. Which one is Different? • The exchange of things of value • The 2nd parties unqualified willingness to go along with the first parties proposal. • Mr. Benes gave nothing to Vik in exchange for his promise to take out the garbage. (Which element is this lacking?)

  34. Which one is different? • When a valid offer is met by a valid acceptance it is known as. • An agreement involving fraud, misrepresentation, mistake, or undue influence is lacking which element? • Agreement to sell stolen goods is lacking which element?

  35. Which one is different?True or False • If you don’t satisfy the laws requirement for creating an offer, then you usually don’t have a contract. • To be valid, an offer must indicate an intent to create a legal obligation. • If an offer is made it can be accepted by anyone who learns of it.

  36. Which one is different? • An offer that is missing essential information is __________ • An objective legal test used by jurors or judges rather than a subjective test based on what you say you were thinking. • You can buy one of the bikes in my shop for $3,500.

  37. Which one is different? • Would you take $200 for that Labrador puppy? • Information that is communicated without an intent to contract. • When two friends agree to go to the movies.

  38. Which one is different? • The right to withdraw an offer at anytime before it is accepted. • When the terms of the offer are changed in any way. • Taking back an offer by the offeror

  39. Which one is different? • “I refuse your offer; here is my proposal.” • When the offeror dies before the offer is accepted the agreement is… 3. Serious, communicated to the offeree, & clear & complete are requirements of _______________

  40. Which one is different?True or False • Offers expire at the time stated in the offer • An offeree who rejects an offer can later accept it if the acceptance occurs within a reasonable time after the rejection. • Advertisements like price tags are not treated as offers but rather invitations to negotiate.

  41. Which one is Different?True or False • A contract that amounts to nothing and has no legal effect. • A contract that contains a promise by both parties • “I’ll give you a haircut for $10 if you pay me when we are finished.” “I agree to pay you when you have cut my hair.”

  42. Which one is different?True or False? • When an offer changes the offeror’s terms in important ways, the offeror makes an agreement. • If the offeror is admitted to the hospital for medical examining & tests the offer is terminated. • If the offeror dies before the acceptance is made the offer is terminated.

  43. Which one is different? Which parties action ends the deal, offeror or offeree? • Counteroffer • Rejection • Revocation

  44. Which One is Different?Invitation or offer? • New Bike, $500.00 to first person that calls. • One Day only 50% off of Lawn Mowers. • First 30 people through the door get $75 gift card if you spend $200.

  45. Which one is different?Offer or not? • Nick asks Kim to go to dinner at the Sunset Restaurant at 7 p.m. on Saturday. • Would you think about selling your fishing boat for $2,000.00? • I’ll trade you my 2000 model car for you 2000 model truck.

  46. Reviewing What You Learned • What are the elements of a contract?

  47. Reviewing What You Learned Answer Offer, acceptance, genuine agreement, capacity, consideration, and legality.

  48. Reviewing What You Learned • What are the differences among valid, void, voidable, and unenforceable contracts?

  49. 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.

  50. 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.

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