How Contracts Arise Chapter 5 Business Law. Essential Questions Explain the elements of legal...
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Transcript of How Contracts Arise Chapter 5 Business Law. Essential Questions Explain the elements of legal...
Essential Questions
• Explain the elements of legal contracts.
• What are the differences among valid, void, voidable and uneforceable contracts?
• What are the differences between unilateral and bilateral contracts?
• What are the differences between express and implied contracts?
Contracts• Contract:
– Any agreement enforceable by law
• The Three Theories of Contract Law:– Equity Theory:
• Parties exchanged things of equal value
– Will Theory:• Parties agreed to the terms set forth
– Free-Will
– Formalist Theory:• “Meeting of the minds”
• The Elements of a Contract:1. Offer:
• A proposal by one party to another intended to create a legally binding agreement
2. Acceptance:• The second party’s unqualified willingness to go
along with the first party’s proposal– Genuine Agreement: Offer and Acceptance
3. Capacity:• The legal ability to enter a contract
4. Consideration: • The exchange of things of value
5. Legality: • People cannot enter into contracts to commit
illegal acts
Characteristics of a Contract
• Valid, void, voidable, or unenforceable
• Express or implied
• Bilateral or unilateral
• Oral or written
Valid, Void, Voidable, or Unenforceable
• Valid:– Legally good
• Void:– No legal effect
• Voidable Contract:– When a party to a contract is able to void or
cancel the contract
• Unenforceable Contract:– One the court will not uphold
Express or Implied
• Express Contract:– Stated in words and may be either oral or
written
• Implied Contract:– Actions of the parties
• Getting gas
Bilateral or Unilateral
• Bilateral Contract:– Contains two promises
• Exchange for doing something
• Unilateral Contract:– Contains a promise by only one person to do
somethingOffer
Promise by offeror
Agreement AcceptanceAct performed by offeree at
offeror’s request
Unilateral Contract
Offer
Promise by offeror
Agreement AcceptancePromise made by offeree at
offeror’s request
Unilateral ContractBilateral Contract
Oral or Written
• Oral Contract:– When two or more people form a contract by
speaking to each other
• Written Contract:– Assures that both parties know the exact
terms of the contract and also provides proof that the agreement was made
Offer and Acceptance
• Offeror:– Makes the offer
• Offeree:– Receives the offer
• Three Basic Requirements:1. Made seriously2. Definite and certain3. Communicated to the offeree
Serious Intent
• If A.B. was having a bad with his car and said, “Hey J.B., give me five bucks and it’s yours”, does this hold up in court?
• Invitations to Negotiate:– Most advertisements in newspapers,
magazines, and catalogs
Definiteness and Certainty
• If Shane borrows Jeffs IPod and says I will pay part of the price if I can use this for a week. Does this hold up in court?– No, must be definite, part is not
Communication to the Offeree
• Offers may be made by telephone, letter, telegram, fax machine, e-mail, or by any other method that communicates the offer to the offeree
Requirements of an Acceptance
• Unconditional Acceptance:– Must not change the terms of the original offer
in any way• The mirror image rule:
• Counteroffer:– Any change in the terms of the offer
• House, Car, etc.
• Methods of Acceptance:– According to common law an acceptance that
must be sent over long distances is effective when it is sent
Termination of an Offer
• Revocation:– Taking back of an offer by the offeror
• Before it has been accepted
• Rejection:– Refusal of an offer by the offeree brings the
offer to an end
• Counteroffer:– Ends the first offer