THE BIG PICTURE
The Legal System
Criminal
Law
Civil Law
Tort Contract
Law
Law
Consumer
Law
Employment
Law
TODAY’S OBJECTIVES

Identify the six elements of a
contract.

Explain the effects of a contract
on a minor.

Identify types of contracts.

Analyze the need for contracts.
How many of you are
currently subject to a
contractual agreement?
What are some examples of
contracts?
POTENTIAL CONTRACTS







Credit Card
Grocery store “club” card
Selling / buying something to a friend for
money
Movie rental store agreement
College commitment or sports
agreement
Part-time jobs
Email accounts, iTunes, etc.
THE NATURE OF A
CONTRACT
A
contract is
any agreement
enforceable by
law.
 Not all
agreements are
contracts.
Six Elements of a Contract
ELEMENTS OF A CONTRACT
Offer
 Acceptance
 Agreement
 Consideration
 Capacity
 Legality



In order to have a
legally enforceable
contract, all six
elements must be
present.
Do contracts have
to be in writing to
be enforceable by
law?
OFFER




Proposal to make a
definite and certain deal
with serious intent
Must be communicated to
another person
Remains open until it is
accepted, rejected,
retracted, or expires
Counter-offers can be
made and close the
original offer
ACCEPTANCE



Acknowledgement by
the offeree (person
receiving the offer) that
the offer is accepted
unconditionally
Must be
communicated to the
offeror in a reasonable
manner
May be spoken,
written, or by action
GENUINE ASSENT



Reached when a valid
offer is met by a valid
acceptance
The offer and acceptance
together create genuine
assent.
Genuine agreements
cannot exist if there is
fraud, misrepresentation,
mistake, undue influence,
etc.
Read each example and decide.
Jim negotiated a deal to re-roof his
house with a carpenter. They did
not sign a written agreement. The
roofers showed up at the house
on the agreed day, and another
carpenter had already started
work. Was there a contract?
Cheryl was fired from her job at the
newspaper, and she sued because
she thought there had been gender
discrimination in her firing. Cheryl
and the newspaper company agreed
on the basic outline for a settlement,
but before it was signed, she backed
out and wanted to go to court.
Should the settlement be binding?
An advertisement in a magazine
promises, “Our product will clear up
your acne or we will give you double
your money back!” Jenny bought the
product, ProAktiv, at a drug store and
did not notify the company that she
planned on taking them up on their
offer. Does the ProAktiv have to pay
Jenny double her money back if the
product does not work?
CAPACITY

Legal ability to enter a
contract

Contracts can be
disaffirmed by:
 Minors
 People
with mental
impairments
 People
under the
influence
CONSIDERATION


Consideration is
what is
exchanged as a
result of the
contract.
May be money,
property, or
services
LEGALITY



In general, a court
will not help any
party to an illegal
contract.
Neither party can
enforce the
agreement.
Neither party can
get help from the
court.
YAHOO!


Who is the offeror? The offeree?
What is the offer?
 What

is being offered? Key terms?
How does a user accept?
 When


does acceptance bind the user?
What is the consideration for each
party?
Identify any other interesting parts of the
contract.
What kinds of contracts are recognized
by law?
THE LAW RECOGNIZES…

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
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Express Contracts – written or spoken
Implied Contracts – comes from the actions of
the parties
Executory Contracts – not fully performed
Executed Contracts – completed by both parties
Quasi-Contracts – missing an element, still
enforceable
Sales Contracts – sale of property, rent, wills,
estates
Employment Contracts – business organizations



Bilateral contracts – contract that
contains two promises.
Unilateral contracts – Contract that
contains a promise by only one person
to do something, if and when the other
party performs some act. Example:
Reward
Mirror Image rule – terms stated in the
acceptance must exactly mirror or match
the terms of the offer.
TERMINATION OF AN OFFER



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Revocation – the taking back of an offer
by the offeror.
Rejection – is a refusal of an offer by
the offeree that brings the offer to an end
Expiration of Time – if the offeror sets a
time limit of the offer, it must be honored.
Counteroffer – is a response to an offer
in which the terms of the original offer
are changed.
TERMINATION OF AN OFFER

Death or Insanity – If the offeror
dies or becomes insane before the
offer is accepted, the offer comes to
an end. Although death ends an
offer, it does not end a contract,
except for contracts related to
personal services.
WE NEED CONTRACTS…

Because they are important in a freemarket economy

Because verbal (handshake) agreements
are in decline

Because they have protective power

Because the court can intervene &
enforce

Because of the litigious nature of society
LAST CLASS…

Identify the six elements of a
contract.

Explain the effects of a contract
on a minor.

Identify types of contracts.

Analyze the need for contracts.
TODAY’S OBJECTIVES




Analyze agreements to determine if
a valid contract exists.
Determine when a breach of
contract occurs.
Identify defenses to contractual
agreements.
Apply contract law to negotiation
deals.
BREACHING A CONTRACT
 If
one party does not follow
through with consideration in
a contract, the other party
doesn’t have to perform.
 Failure to perform is called a
breach.
What happens when
one party breaches a
contract?
ENFORCEMENT
Damages – the party who is
harmed can request money
(equal to the amount lost from
the breach) from the other party
 Specific Performance – if it is
still possible to perform the
contract, the court can require
the party to perform

Sam burned his hand on the stove. The
burn was so bad that it permanently scarred
his hand and made it difficult to grip things.
A doctor told him that he could fix his hand
with a simple “skin-grafting” procedure for
$1200.
After the surgery, Sam’s hand worked
perfectly… but, he started growing hair out
of the palm of his hand. He tried waxing it,
but he couldn’t stop the hair from growing
back. He decides to sue the doctor for
giving him a hairy hand.
Certain things can make contracts void,
even though both parties agreed on the
terms and there was valid consideration.
UNCONSCIONABILITY


If one party tricked
another party into
agreeing to an
unfair contract, the
court may not
enforce it.
Example:
businesses who try
to trick poor or
uneducated clients
FRAUD OR DURESS
Lying or
misrepresentin
g something in
negotiations
 Taking
advantage of
someone in a
bad situation

A LAW,
THE STATUTE OF FRAUDS

Requires that certain contracts must be
in writing to be enforceable.
 Contracts
for Sale
 Contracts for Lease
 Contracts for a mortgage (real property)
 Contracts longer than 1 year
 Collateral contracts
 Prenuptial agreements
 Contracts for sale of goods valued at $500
or more
EXPLAIN THE IMPACT OF

The Uniform Commercial Code on
interstate commerce
 Makes
it easier to do business
 Eliminates the need for the involvement
of lawyers with regard to the various
aspects of interstate business.