Promise: a declaration that something will or will not
happen in the future
May not create a legal obligation but a
moral obligation
Why learn about contracts?






Financial – checking/debit/credit
College – housing contract/college loans
Young Adult – apartment, employment, car loan, utilities
Putting Down Roots – marriage, real estate
Protecting it All – insurance, retirement
Through it All – vacation rentals, sale of property, hiring
for services
THESE ALL REQUIRE A CONTRACT!
Chapter 6
Slide 3
CONTRACT -- defined

Agreement between 2 or more parties that creates an
obligation

An agreement that can be enforced in court

Like what?




What contracts have you formed?
What contracts have older siblings formed?
Your Parents?
Mrs. Sigsworth?
Court System Resources are Limited
Greatest Importance – Criminal Law & Torts
1.
a.
b.
Necessary to Keep PEACE in Society
Correct damage done to injured party
Court more selective in contractual
disagreements
2.
a.
b.
Can’t look at every disagreement
Elements of contract specifically defined
Chapter 6
Slide 5
6 Essential Elements of a Contract
**Offer &
Acceptance
**Genuine Assent
•
**Legal Purpose
•
**Consideration
•
**Capacity
•
**Writing
•
Objective Theory of Contracts

Party’s intention to enter contract is judged by
outward, objective facts as interpreted by a
reasonable person, rather than the party’s secret,
subjective actions
1. what was said when entering contract
2. how party acted or appeared
3. circumstances surrounding the transaction
Types of Contracts
Bilateral Contract


2 Mutual Promises
Offeree accepts by words
Unilateral Contract


1 Promise from Offeror
Offeree accepts by action
Types of Contracts
Express Contract

Terms are fully and
explicitly stated in words
 Written
 Oral
Implied Contract

Conduct of parties creates
& defines contract
 Limited
terms
 Limited words
Types of Contracts
Formal Contract

Require special form
Informal Contract

Any other contract that
does not need special form
Types of Contracts
Executed Contract

Fully performed on both
sides
Executory Contract

Not fully performed on
either side
Enforceable no
legal defense
against it
Valid all elements
present
Voidable party has
option of
avoiding/enforcing it
Unenforceable
court cannot enforce
due to legal defense
Void no contract
exists, missing
essential element
No Contract
Offer & Acceptance
Offer




Proposal by offeror to do something, provided the
offeree does or refrains to do something in return
1. Contractual intent must be present in offer
2. Offer must be communicated to the offeree
3. Essential terms of offer must be complete and
definite
When is an Offer NOT an Offer?
I am so hungry and
have no cash – I will
sell my truck to the first
person who brings me a
pizza!
When is an Offer NOT an Offer?
I have to fix this truck
AGAIN! I will sell this
piece of junk to the first
person who brings me
$100.
When is an Offer NOT an Offer?
Offer
A social engagement is NOT
a legal obligation
Offer
I’ll sell you
my truck for
$3000.
I’ll take it!
Offer

Lot 23 in White Oaks
subdivision, being a
subdivision of part of the
southeast quarter of the
northeast quarter of
section 7, township 43
north, range 9 east of the
third principal meridian,
according to the plat
thereof recorded on
August 10, 1998, as
document
#98R00052325 in
McHenry County, Illinois
Offer
I’ll sell you my
truck for $3000.
Termination of Offer
I’ll sell you
my truck for
$3000.
On Second
thought,
never mind.
Termination of Offer
I’ll sell you
my truck for
$3000.
Let me know by
December 15th.
Termination of Offer
Termination of Offer
I’ll sell you
my truck for
$3000.
No Thanks.
Termination of Offer
I’ll sell you
my truck for
$3000.
I’ll give you
$2500.
Termination of Offer
I’ll sell you
my truck for
$3000.
He was a
nice guy.
Termination of Offer
I’ll sell you
my truck for
$3000.
Offer & Acceptance
Acceptance




Offeree agrees to the proposal
1. Comes from the person(s) to whom offer was made
2. Match the terms in the offer
3. Be communicated to the offeror
Acceptance
I’ll sell you
my truck for
$3000.
I’ll take it!
Acceptance
I’ll sell you
my truck for
$3000.
I’ll give you
$2500.
Acceptance
Pleased accept this
proven fitness tool and
try it free for 30 days.
Failure to return the
ABCircle within 30
days, will be
considered your
acceptance and you
will be billed
$199.99.

Acceptance
Bilateral Contract


2 Mutual Promises
Offeree accepts by words
Unilateral Contract


1 Promise from Offeror
Offeree accepts by action
Acceptance
Any method of
communication for
making an offer,
counteroffer,
revocation, rejection or
acceptance may be
made by any
reasonable medium
for the circumstance
unless specifically
indicated by language
Acceptance

When effective?
 Usually
when sent unless specified in offer
 Oral
acceptance: immediate
 Mailbox Rule: when posted
 Offeror
might state acceptance is complete when s/he
receives it – avoids confusion and lost messages