bilateral contract - McGraw Hill Higher Education

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Chapter 6

Overview and

Formation of Contracts

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

State vs Federal

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

Elements of Contract Formation

Agreement

Offer

Acceptance

“mailbox” rule

6-9

Elements of Contract Formation

Consideration

Past, Present, Future issues

Pre-existing duty issues

Modification issues

6-10

Elements of Contract Formation

Legality

Capacity

Age

Mental capacity

6-11

Elements of Contract Formation

Statute of Frauds

Written vs Oral

Real property

Goods $500/over

12 month rule

Debts of another

6-12

learning outcomes checklist

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

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