Chapter 5
FORMS OF CONTRACTS
1
Capacity

Must be able to contract for yourself
Can not
 Minors
 Mentally Impaired
 Sometimes “ Intoxicated”
2
Social Agreements



I promise to take you to lunch!
Legally binding or not?
Which elements are present & which
are missing?
3
CHARACTERISTICS OF
A Contract PG 110




Valid, Void, Voidable, or Unenforceable
Express or Implied
Bilateral or Unilateral
Oral or Written
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Offeror & Offerees

Offeror communicates
serious proposal

Offeree –
Person to whom
the offer is
made
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Oral or Written

ORAL
By mouth

WRITTEN
Some agreements must
be in writing to be
enforceable.
Why is it desirable to have
contracts in writing?
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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.
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Express or Implied
express contract
•stated
in words
•oral or written.
implied contract
Actions of the parties.
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Bilateral Contracts


A Promise for a promise
Example:
“I’ll sell
you my
Ipod for
$55”
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Unilateral Contracts


One Sided
A promise for an action
I’ll give you
$50 if you
mow my
lawn by noon
today!
10

First 5 people through the door get a
free scarf
11
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.
12
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
13
Valid Offers
14
Creating a Valid Offer



Must intend to create offer
Terms must be definite & complete
Offer must be communicated to
offeree.
15
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
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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
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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.
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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.

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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.
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Exceptions to the Rule

Ads that contain specific promises
– First come, first served
– Limited Quantity Available
– First 5 people to call
– 10th caller
21
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
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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
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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
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Acceptances


Review: Answer 1,5,6,7,& 8
Section 5-2 notes: ACCEPTANCES
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Acceptance
The acceptance must
1. be made by the offeree
2. Match the terms in the offer
3. Be communicated to the offeror
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Acceptances

Contracts come into existence only
after an acceptance.
27
Mirror Image Rule

Terms must match
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Counteroffer

Any change in terms.
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Methods of Acceptance





Face to Face: immediate
Letter: when sent
Fax: when sent
Telegram: when sent
Exceptions: if otherwise specified by
offeror
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TERMINATION OF
AN OFFER





REVOCATION- Taking back of an offer
REJECTION – refusal of an offer
COUNTEROFFER- change in terms
EXPIRATION OF TIME- must answer within a
time limit or pay to hold contract open(option
contract)
DEATH OR INSANITY- offer ends if death or
insanity before acceptance.
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Which one is Different?
1.
A proposal by one party to another
2.
The legal ability to enter a contract
3.
Mentally incompetent or drugged
individuals are excused from
contractual responsibility because
they lack___________
32
Which one is Different?
1.
The exchange of things of value
2.
The 2nd parties unqualified willingness to
go along with the first parties proposal.
3.
Mr. Benes gave nothing to Vik in exchange
for his promise to take out the garbage.
(Which element is this lacking?)
33
Which one is different?
1.
When a valid offer is met by a valid
acceptance it is known as.
2.
An agreement involving fraud,
misrepresentation, mistake, or undue
influence is lacking which element?
Agreement to sell stolen goods is
lacking which element?
3.
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Which one is different?
True or False
1.
If you don’t satisfy the laws
requirement for creating an offer,
then you usually don’t have a
contract.
2.
To be valid, an offer must indicate an
intent to create a legal obligation.
3.
If an offer is made it can be accepted
by anyone who learns of it.
35
Which one is different?
1.
An offer that is missing essential
information is __________
2.
An objective legal test used by jurors or
judges rather than a subjective test based
on what you say you were thinking.
3.
You can buy one of the bikes in my shop
for $3,500.
36
Which one is different?
1.
Would you take $200 for that
Labrador puppy?
2.
Information that is communicated
without an intent to contract.
3.
When two friends agree to go to the
movies.
37
Which one is different?
1.
2.
3.
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
38
Which one is different?
“I refuse your offer; here is my
proposal.”
2. When the offeror dies before the
offer is accepted the agreement is…
3. Serious, communicated to the offeree,
& clear & complete are requirements
of _______________
1.
39
Which one is different?
True or False
1.
Offers expire at the time stated in the offer
2.
An offeree who rejects an offer can later accept
it if the acceptance occurs within a reasonable
time after the rejection.
3.
Advertisements like price tags are not treated
as offers but rather invitations to negotiate.
40
Which one is Different?
True or False
1.
2.
3.
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.”
41
Which one is different?
True or False?
1.
2.
3.
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.
42
Which one is different?
Which parties action ends the deal,
offeror or offeree?
 Counteroffer
 Rejection
 Revocation
43
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.
44
Which one is different?
Offer or not?
1.


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.
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Reviewing What You Learned
1. What are the elements of a
contract?
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Reviewing What You Learned
Answer
Offer, acceptance, genuine agreement,
capacity, consideration, and legality.
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Reviewing What You Learned
2. What are the differences among
valid, void, voidable, and
unenforceable contracts?
48
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.
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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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Reviewing What You Learned
3. What are the differences between
express and implied contracts?
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Reviewing What You Learned
Answer
An express contract involves words, while
an implied contract does not.
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Reviewing What You Learned
4. What are the differences between
unilateral and bilateral contracts?
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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.
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