McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Written versus Oral Contracts

While the word “contract” is often used to describe a written document, many contracts are not in writing and yet are enforceable.
6-2

Bilateral Contracts versus Unilateral
Contracts
 A bilateral contract involves two promises and two performances.
 A unilateral contract involves one promise, followed by one performance, which then triggers a second performance.
6-3

Express Contracts versus Implied
Contracts versus Quasi-Contracts
 An express contract is created when the parties have expressly agreed on the terms.
 An implied contract is one in which the agreement is reached by the parties actions .
 The law permits quasi-contracts to be enforceable where one party suffers losses as a result of another party’s unjust enrichment.
6-4

Valid versus Void Contracts
 When a contract has the necessary elements, it is said to be a valid contract.
 Void contracts are agreements that have not been formed in conformance with the law from the outset of the agreement and, thus, cannot be enforced by either party.
6-5

Voidable versus Unenforceable Contracts
 An unenforceable contract is one that meets the elements required by law for an otherwise binding agreement, but is subject to a legal defense.
 Example-the statutory requirement that certain contracts be in writing in order to be enforceable.
6-6

SOURCES OF CONTRACT LAW
 Statutory Law = UCC
 Common Law = Cases
6-7

 Very little federal contract law

Usually only when contracting with federal government agency
 Almost all contract law is state law

Statutory and Common law
6-8

 Agreement

Offer


Acceptance
“mailbox” rule
6-9

 Consideration

Past, Present, Future issues

Pre-existing duty issues

Modification issues
6-10

 Legality
 Capacity

Age

Mental capacity
6-11

 Statute of Frauds
 Written vs Oral

Real property

Goods $500/over

12 month rule

Debts of another
6-12

 6 - 1 Distinguish between contracts based on categories and apply the correct source of law to specific contracts.
 6- 2 Explain the concept of mutual assent by defining the legal requirement of agreement.
 6- 3 Identify and explain the other requirements for the formation of a valid contract.
6-13

learning outcomes checklist
 6- 4 List the events that terminate the power of acceptance and distinguish between termination
.
through action of the parties versus operation of law
 6- 5 Apply the mailbox rule to resolve a question of when acceptance is effective.
 6- 6 Articulate the legal requirement of consideration and identify which contracts do not require consideration.
6-14

learning outcomes checklist
 6- 7 Give examples of circumstances where the legal requirements of capacity or legality are at issue.
 6- 8 Explain the concept of enforceability and genuine assent.
 6- 9 Categorize what contracts must be in writing to be enforceable and explain the minimum required terms that satisfy the law.
6-15