CONTRACTS

Goal: List and explain the 5 elements of

a valid contract

WHAT IS A CONTRACT?A legally binding agreement between two or more people.

Five Elements MUST be present in order for a contract to be valid.

1. Eating at a restaurant 2. Hiring the 13 year old next door to baby-sit3. Asking a girl to the prom4. Getting married5. A wager on a football game with your friend 6. Turning the heat on in your house 7. Taking a class at LCC8. Buying a house 9. Friday night poker game

Think - Are these contracts?

FIVE ELEMENTS OF A CONTRACT 1. Offer & Acceptance

A. Offer Definite offer or proposal Person placing the offer (the offeror) intended to

be bound by it Proposal must be communicated

Written , Oral, or Assumed

B. Acceptance: Reasonable communication

Cannot accept with silence unless agreed in advance

Must come from the person to whom the offer was

made (the offeree)

CONTRACTS

2. Genuine AssentAgreement NOT based on lie, mistake, or

unfair pressure

3. LegalityNo contracts for stolen/illegal goods or

items What if you didn’t know??

CONTRACTS 4. Consideration

Exchange of services Benefit and detriment (gain or loss) What about Promises: are they enforceable?

NO – no mutual gain/loss 5. Capacity

Must be mentally able to enter contractMay not be competent:

Minor, there are exceptions! Intoxicated Mentally impaired

CONTRACTS – SOMETIMES 6TH ELEMENT

6. Proper Legal Form Assumed Oral Written

Should be in writing:Over $500Covers a period of one year or moreReal Estate

Routine medical services need NOT be in writing

TYPESExpress: Written or oral wordsImplied: Assumed by Actions

CONTRACTS

AdvertisementsAre they legal offers to sell? NO! They are an Intent to SellMistakes in written ads Incorrect Store Price

It’s the store’s decision!

UNIFORM COMMERCIAL CODEFederal mandate encouraging States to create laws which create consistency relative to sales purchasesRULES REGARDING CONTRACTS AND SALES ARE THE SAME STATE TO STATE!

OTHER THINGS TO KNOW

Cooling Off RuleRight to cancel contract within 3 business

days if signed at location other then seller’s place of business

Mailbox RuleAccept offer by mail

If it is mailed = it is a dealAccepting materials NOT ordered

Do NOT have to pay for it And Do NOT have to ship back on own dime

1. Eating at a restaurant 2. Hiring the 13 year old next door to baby-sit3. Asking a girl to the prom4. Getting married5. A wager on a football game with your friend 6. Turning the heat on in your house 7. Taking a class at LCC8. Buying a house 9. Friday night poker game

Are these contracts?

CHAPTER 8, 10 & 14Goal: Explain when contracts are voidable.

List what contracts a minor can legally enter into.

Explain how contracts are enforced.

CAN I GET OUT OF A CONTRACT?

Valid: Both parties are bound by contract

Voidable: Someone can get out of it

Void: Contract doesn’t exist

DEFECTIVE AGREEMENTS

DuressUse improper threat or act to obtain

an agreement Undue Influence

One party is in a position of trust and misuses itGrandchild forces Grandma to sell car for $1

CONTRACT MISTAKES

Unilateral: (one-sided)CONTRACT IS VALID

Mutual Mistake: (both parties made an error)CONTRACT IS VOIDABLE!

CHAPTER 10 & 14

CONTRACTS – WHEN ARE YOU BOUND BY A CONTRACT?

Age 18 Day after birthdayAge of majority binds prior contract

Marriage terminates minority status Emancipated minor Necessity = Contract

Court-Approved, Major Commitments, Banking, Insurance, Work-Related, Sale of Realty, Apartment

REMEDY

3 Basic Remedies for breach of contract To get all parties must act reasonably and

fairly 1. Rescission & Restitution

Cancel the contract Return what has been received

2. Money Damages Compensatory

3. Specific Performance Court order contract to be finished

Must mitigate damages Minimize your injury

MONEY DAMAGES

Compensatory, Consequential, Liquidated All meant to replace injured to same financial

position if no breach Punitive

Meant to punish Nominal

Small punishment, even if no injury

CONTRACTS CHAPTER 8,10, & 14 GOALS

DEFECTIVE AGREEMENTSNot Enforceable! Misrepresentation (Fraud)

“This car is a V8” Undue Influence

“Sweet, conniving nephew” Concealment of vital facts

House was flooded at one time Threat or force

Sign this contract or else……

Explain when contracts are voidable.List what contracts a minor can legally enter

into.Explain how contracts are enforced.Minors can enterCourt-Approved, Major Commitments, Banking, Insurance, Work-Related, Sale of Realty, Apartment

BOOK WORK

Chapter 7 Vocabulary, page 110 Chapter 8 Vocabulary, page 124 Chapter 10 Think Critically Chapter 14 Think Critically

Due Monday Chapter 17 on Monday

BOOK WORK –MARK WRONG & WRITE CORRECT ANSWER

Chapter 7 Vocab:1. Unilateral contract2. Revocation3. Offeree4. Firm offer5. Counteroffer6. Mirror image rule7. Acceptance8. Option9. Contract10. Offer

CHAPTER 8 VOCABULARY

1. Mutual mistake2. Genuine assent3. Voidable4. Unilateral mistake5. Fraud6. Ratification7. Undue influence8. Duress9. Rescission

CHAPTER 10 THINK CRITICALLY ABOUT EVIDENCE

22. Jaymie can disaffirm because this car is, for her, a non-necessary

23. Laurisa may not be able to disaffirm if the computer is judged to be a necessary

24. June’s consumption of 8 drinks is evidence of intoxication and may be able to disaffirm.

25. Larson’s listing the property for more than its appraised value, his counteroffer, and reduction of price all indicate mental competence

CHAPTER 14 THINK CRITICALLY ABOUT EVIDENCE18. Elsen is entitled only to nominal damages. Hoglund did commit a legal wrong by failing to perform his duty, however there was no actual injury19. Yes, liquidated damage clause can be enforced. The amount is reasonable in relation to the overall size of the contract and a reasonable attempt to forecast the resulting damages. The amount is not punitive.20. Yes Sterm is entitled to compensatory damages. Stern is entitled to the value of the work not done but not punitive since there was no intentional tort or fraud. 21. No, Smythe is not legally obligated to pay for the goods. Statue of limitations passed. He is ethically obligated to pay.

CHAPTER 17.1

Let the buyer beware Class action lawsuit: One person sues for

group Unfair Trade Practices: Any method of

business that is dishonest or fraudulent or that illegally limits free competition

FTC Guidelines: Would be creditors must explain their terms Written warranties in certain circumstances Door-to-door must be allowed to be canceled

(over $25 purchase)

CHAPTER 17.2 & 17.3

Let the seller beware Warranty: Statement about products qualities

or performance that seller assures is true

WARRANTIES

Written Warranties must have: Name and address of warrantors What is covered Step-by-Step procedures for getting warranty

honored Legal remedies Duration of the warranty

WARRANTIES – FOUR TYPES!

Expressed Warranty: Assurance of Quality or Promise of Performance by Seller. ex. “This product will perform well” (history shows…)Trade Puff: “This sound system is the best you

can buy” Implied Warranty: Obligation by Law

Keeps companies from selling bad products Full Warranty: Everything is covered for the

time stated. Limited Warranty: Must state limitations:

certain things are not covered.