BCS-LEB-4 The student identifies rights and
responsibilities of contract negotiations.
BCS-LEB-8 The student explains the legal
rules that apply to personal property and
real property.
Understanding Contracts
• Most people think a
“contract” is a long,
preprinted, formal
document that they
sign when buying a
vehicle, renting an
apartment, or
purchasing insurance.
• .
• .
– However, all agreements
are not contracts.
• Never enter into a
contract without
understanding the legal
• .
Elements of a Contract
1. .
A proposal made by one party
(the offeror) to another party
(the offeree) indicating a
willingness to enter a contract
2. .
The agreement of the offeree to
be bound by the terms of the
A valid offer that is met by a
valid acceptance
4. .
The exchange of things of value.
The mutual exchange binds the
parties together.
5. .
The legal ability to enter a
6. .
Parties are not allowed to enter
contracts to commit illegal acts.
• .
• In writing is NOT an
• These elements are the
actions and words
courts use to determine
if a “meeting of the
mind” occurred during a
contractual dispute.
OFFER and Acceptance
• An offer has three basic requirements:
1. with the intention of entering into a legal obligation,
not in the heat of anger or as a joke
2. . Courts can’t enforce a contract with ambiguous
3. via phone, fax, letter, email, telegram, etc.
• .
– If a store has sold out of the advertised product, the
sale rep will reject the customer’s offer to buy
because the store no longer has product in stock.
• .
– Buyers have to be able to walk away from estimates or
price quotes
• Basic requirements of acceptance:
1. that does not change the terms of the offer in any
way -- Mirror Image Rule
• The UCC set two exceptions to the mirror image rule: 1)
contracts for the sale of goods such as personal property
involving a non-merchant and 2) the sale of goods between
• Any change in the terms of the offer means the offeree has
not really accepted the offer but has made a counteroffer.
2. by performing an action, using the same or a faster
means than that used by the offeror, or using past
practices used by the parties.
A contract is formed at the time of acceptance. Common
law says an acceptance that must be sent over long
distances is effective when it is sent.
Termination of an Offer
• Even the an offer has been property communicated to the offeree,
it may be terminated in any of the following five ways:
1. – taking back of an offer by the offeror.
– refusal of an offer by the offeree brings the offer to an end
– ends the first offer and a new offer is made
– If the offeror sets a time limit for the acceptance of the offer, it
must be honored
If the offeror has a change of mind or circumstances or the
contracted object is destroyed, the offeror can decides to
communicate the withdrawal of the offer before it has been
If no time for acceptance is stated in the offer, it must be accepted
within a reasonable time. Otherwise no contract exists.
– if the offeror dies or becomes insane before the offer is
accepted, the offer comes to an end.
Death ends an offer, not a contract.
Firm Offer
A firm offer, made between two merchants, is
an offer that
Characteristics of a Contract
• Contracts can be created in different ways and
can assume diverse forms.
• A contract can be described by any of the
following characteristics:
Valid, Void, Voidable, or Unenforceable
• The word valid means legally good, .
• A contract that is void .
• , it is a voidable contract.
– A contract between two minors is voidable.
• An unenforceable contract
– If you wait too long to bring a lawsuit for a breach
of contract, the statute of limitations or limit
period a contract can be legally enforced may
have passed which would make the contract
Express or Implied
Express Contract
• An express contract
Implied Contract
• An implied contract
– People often enter into
implied contracts without
exchanging a single word.
Bilateral or Unilateral
Bilateral Contract
Unilateral Contract
• A bilateral contract contains • A unilateral contract contains .
two promises.
– For example: If a friend says, “I’ll
– For example: If a friend says,
“I’ll sell you my DVD player for
$150,” and you say, “I’ll buy
it,” a bilateral contract is
sell you my DVD player for $150 if
you give me the cash before noon
tomorrow,” s/he will not be
required to keep the promise
unless you hand over the cash
before noon on the following day.
• A reward offer .
Oral or Written
• An oral contract
– One person usually offers to
do something, and the other
party agrees to do something
else in return.
• Most contracts are oral
contracts of this nature.
• A written contract assures.
• The Statute of Frauds law
requires that certain
contracts must be in writing
to be enforceable.
– For example, a prenuptial
agreement must be in