Chapter 5
How Contracts Arise
Contract: Any agreement
enforceable at law
Elements of a Contract:

Offer: Proposal made by one party (the
offeror) to another party (the
offeree).

Acceptance: The agreement of the offeree
to be bound by the terms of
the offer.
Elements of a Contract:
 Genuine
Agreement:
Offer +Acceptance
 Capacity: Do they have the legal
ability to enter into a contract?
(minors, mentally impaired, drunk or drugged)
Elements of a Contract:

Consideration: Something of value
promised to the other party in a contract in
exchange for something else.

Legality: Parties are not allowed to
enforced contracts that involve something
illegal.
Characteristics of a Contract
Valid, Void, Voidable, Unenforceable

Valid: Legally Good

Void: No Legal Force

Voidable: When one party cancels a contract
for a legal reason

Unenforceable: Due to a rule of law, the
contract cannot be enforced.
Express, Implied

Express Contract:
Stated in words; either
orally or in writing

Implied Contract:
Comes about from the
actions of the
parties ~ don’t have
to say a word
Bilateral, Unilateral

Bilateral Contract:
Two promises; one by
each party

Unilateral Contract:
One promise only
(reward offer)
Oral, Written

Oral: Word of Mouth

Written: Certain contracts must be in
writing.
Requirements of an Offer

Serious Intent
(Invitations to Negotiate)

Definite and Certain

Communicated to the
Offeree
Requirements of an Acceptance

Unconditional Acceptance

Mirror Image Rule: Terms must not change

Uniform Commercial Code (UCC) 1952
Unified set of statutes that cover the law of sales
 Non-merchants are an exception
 Merchant to merchant are also exceptions when…




New or different terms are not crucial
The offeror does not object to the changes
The original offer did not expressly limit acceptance
to the terms.
Methods of Acceptance
 When
the acceptance takes place,
the contract comes into existence
 Time
constraints may apply if
stated in the offer.
Methods of Acceptance

If you are face to
face or on the
phone, this happens
immediately
Methods of Acceptance

If you use the same
method of
communication,
acceptance occurs
when it is sent.
Methods of Acceptance

If you use a
different method of
communication,
acceptance occurs
when it is received.
Termination of the Offer

Revocation: Taking back an offer


Any time before it is accepted
Becomes effective when it is received by
or communicated to the offeree
Termination of the Offer

Rejection


Counteroffer


Ends the first offer
Expiration of time


By the offeree
Must be stated in the
offer or assume
reasonable time
Death or Insanity