Chapter 6: Contract Law
Law in Society
2013-2014
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Objective
S Standard 7: Critique components of contract law.
S Examples: characteristics of contract law, effects of breach of
contract.
Section 6-1: Creation of Offers
S Goals:
S List the elements required to form a contract.
S Describe the requirements of an offer.
What Must Be in a Contract?
S Contract- an agreement between two or more parties that create
obligations.
S There are six major requirements of a legally enforceable
contract:
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Offer & Acceptance
Genuine Assent
Legality
Consideration
Capacity
Writing
Offer & Acceptance
S Offeror- the person who makes the offer.
S Offeree- the person to whom the offer is made.
S The terms of the offer must be definite and accepted
without change by the party to whom it was intended to be
offered.
Genuine Assent
S The agreement must not be based
on one party’s deceiving another
S on an important mistake
S on the use of unfair pressure exerted to obtain the offer of
acceptance.
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Legality
S What the parties agree to must be legal!
S An agreement to commit a crime or tort cannot be a legally
enforceable contract.
Consideration
S The agreement must involve both sides receiving what the
law considers value in some form as a result of the
transaction.
Capacity
S The parties must have the legal ability to contract for
themselves.
S The minimum age to form a legally enforceable contract is
18 as it is in most every state.
Writing
S Some agreements must be placed in writing to be fully
enforceable in court.
Requirements of an Offer
S Offer- a proposal by an offeror to do something, provided
the offeree does or refrains from dong something in return.
S Three tests that an offer must pass to be legally enforceable:
S Contractual intent must be present in the offer.
S The offer must be communicated to the offeree.
S The essential terms of the offer must be complete and definite.
Contractual Intent Must Be
Present
S When a teacher says to a business law class, “I will sell you
my new car for $3,000,” this probably isn’t an offer but an
example.
S Words that take the form of offers but are spoken in jest (as
a joke), in extreme terror or anger, or as a preliminary
negotiation or social agreement would not be enforced.
Contractual Intent Must Be
Present
S Statements made in anger or terror:
S Yelling after someone has just stolen your watch, “Stop thief—
I’ll pay anyone who stops her $100,” is not looked upon as
being a valid offer by the law.
S Preliminary Negotiations:
S “Would you pay $800 for my laptop computer?”
S “Look Jeff, I’ll sell you my laptop computer today for $800.”
S These are invitations to negotiate.
Contractual Intent Must Be
Present
S Social Agreements:
S If two friends agree to go to the movies, no contract is
intended.
S Social agreements do not create legal obligations.
Offer Must Be Communicated
to the Offeree
S A person who is not the intended offeree cannot accept the
offer.
S A person cannot accept an offer without knowing it has
been made.
Essential Terms Must Be
Complete and Definite
S Complete:
S Nearly all offers must, at a minimum, identify the price, subject
matter, and quantity, either directly or indirectly, to be legally
effective.
S Example: In most states the essential terms for the sale of real
estate would include
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Legal description of the real estate
Price
Full terms of payment
Date for delivery of possession.
Date for delivery of the deed.
Essential Terms Must Be
Complete and Definite
S Definite:
S Each essential term must be identified clearly. Read pg. 112 last
paragraph.
Section 6-2: Termination of
Offers
S Goals:
S Describe the various ways to end offers.
S Explain how an offeree can ensure an a offer will remain open.
How Can Offers Be Ended?
S Revocation- the right to withdraw an offer before it is accepted.
(Offeror)
S Time Stated in the Offer-how and when the offer must be
excepted. (Offeror)
S Ex: Read pg. 114 Top Paragraph
S Reasonable Length of Time- When nothing is said about how
long an offer will remain, it will end after a reasonable amount of
time. (neither)
S Ex: Read pg.114 Bottom Paragraph
How Can Offers Be Ended?
S Rejection by the Offeree- when the offeree clearly rejects the offer, the
offer is terminated. Unless renewed by the original offeror, the offeree
can no longer accept the original offer. (Offeree)
S Counteroffer- the offeree says in legal effect, “I refuse your offer; here
is my proposal.” The counteroffer terminates the original offer and
the counteroffer becomes the new offer. (Offeree)
S Death or Insanity of Either the Offeror or Offeree- the law acts for the
parties when they can no longer act and terminate their offers. (either)
S Destruction of the Specific Subject Matter- what is being sold or
purchased is destroyed and the offer is then ended. (neither or either)
How Can an Offer Be Kept
Open?
S Options- If the offeree gives the offeror something of value
in return for a promise to keep the offer open, this
agreement is itself a binding contract.
S Firm Offer- A special rule that works the same result as an
option applies to merchants who make offers in writing.
Section 6-3: Acceptances
S Goals:
S Discuss the requirements of an effective acceptance.
S Determine at what point in time an acceptance is effective.
What Is Required of an
Acceptance?
S Acceptance- occurs when a party to whom an offer has been
made agrees to the proposal.
S To create an enforceable contract, the acceptance must:
S Come from the person or persons to whom the offer was made.
S Match the terms in the offer.
S Be communicated to the offeror.
What Is Required of an
Acceptance?
S Only Offerees May Accept
S An offer made to one person cannot be accepted by another.
S The Acceptance Must Match the Offer
S Mirror Image Rule- requires that the acceptance must exactly
match the terms contained in the offer. (Read pg. 118)
What Is Required of an
Acceptance?
S Acceptance Must Be Communicated to the Offeror
S Silence As Acceptance- one is not obligated to reply to offers
made by others. An offeror’s attempt to word the offer so that
silence would appear to be an acceptance will not work.
S Bilateral Acceptance- Bilateral Contracts- require that the
offeree accept by communicating the requested promise to the
offeror.
What Is Required of an
Acceptance?
S Acceptance Must Be Communicated to the Offeror
S Unilateral Contracts- the offeror requires that the offeree indicated
acceptance by performing his or her obligations under the
contract. The offeror promises something in return for the
offeree’s performance and indicates that this performance is the
way acceptance is to be made.
S Modes of Contractual Communication- may be generally
communicated in person or by other effective means such as
telephone, text messaging, mail, delivery service, email, fax, etc.