unit 2 chapter 7
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Unit 2 Chapter 7. How Contracts Arise. Elements of a Contract. Contract= an agreement enforceable by law. Contracts have 6 elements: (don’t write this) Offer Acceptance Genuine Agreement Consideration Capacity Legality. Elements of a contract Cont. - PowerPoint PPT PresentationTRANSCRIPT
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UNIT 2 CHAPTER 7How Contracts Arise
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ELEMENTS OF A CONTRACT Contract= an agreement enforceable by law. Contracts have 6 elements: (don’t write this)
Offer Acceptance Genuine Agreement Consideration Capacity Legality
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ELEMENTS OF A CONTRACT CONT. Offer = a proposal by one party to another
intended to create a legally binding contract.
Acceptance = the unqualified willingness to go along with the offer.
Valid offer + Valid Acceptance = gunuine agreement
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HOW TO DESTROY GENUINE AGREEMENT…. Fraud Misrepresentation Undue Influence
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CAPACITY The legal ability to enter a contract
Sane Sober Minor (are you old enough to enter into a
conract)
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CONSIDERATION Exchange of things of value that creates
the bond between the parties to the contract.
Consideration must have a value that can be objectively determined. A promise, for example, to make a gift, or a promise of love or affection, is not enforceable because of the subjective nature of the promise.
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LEGALITY People cannot agree to do illegal acts
Murder Theft
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CHARACTERISTICS OF A CONTRACT
Valid, Void, voidable or uneforceable Bilateral or unilateral
Express or implied Oral or written
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VALID, VOID, VOIDABLE, UNEFORCEABLE Valid = legally good
Contract would be legally binding
Void = no legal force Contract has no legal effect (if missing on of the
6 elements contract would be voided)
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VALID, VOID, VOIDABLE, UNEFORCEABLE Voidable = one person is able to void or
cancel the contract for some legal reason
When one party can “get out of the contract” it is voidable (minor and adult – minor can get out, adult can’t)
Unenforceable = some rule of law is not able to be enforced in court. (read example p. 94)
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EXPRESS, IMPLIED Express contract = stated in words and may
be oral or written. (example 1 was an express contract)
Implied contract = contract that comes from the actions of the parties. (example 2 p. 94)
A contract is implied when a party knowingly accepts a benefit from another party in cimcumstances where the benefit cannot be considered a gift. Therefore, the party accepting the benefit is under legal obligation to give fair value for the benefit received.
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BILATERAL CONTRACT Contains 2 promises – one by each person.
One person promises to do something in exchange for the other person’s promise to do something.
A Promise for a Promise
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UNILATERAL CONTRACT Contains one promise only
One person promises to do soemthing IF AND EWHEN THE OTHER PERSON PERFORMS SOME ACT.
A Promise for an Act.
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WHAT KIND OF CONTRACT IS THIS?UNILATERAL OR BILATERAL?
I’ll sell you my pizza for $7.50
I will buy it!!
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WHAT KIND OF CONTRACT IS THIS---- UNILATERAL OR BILATERAL?
Will you help me kidnap my son? Yes I will.
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WHAT KIND OF CONTRACT IS THIS--- UNILATERAL OR BILATERAL?
I will sell you my dog for $20, but only for today.
I will buy your dog!!
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ORAL CONTRACTS Created by word of mouth. Most contracts are oral.
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WRITTEN CONTRACTS Good idea to get things in writing.
Everybody knows the exact terms of the contract and can prove the agreement was made.
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REQUIREMENTS OF AN OFFER Valid offer is the first of the 6 elements that
creates a contract. Offer = a proposal by one party to another
party to enter into a contract.
Person making the offer is the offeror Person to who the offer is made is the offeree.
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REQUIREMENTS OF AN OFFER It must be seriously intended. It must be definite and certain. It must be communicated to the offeree.
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SERIOUS INTENT Must be made with the intent to enter into a
legal contract.
Can’t be a joke or offer made in anger.
Invitations to negotiate are NOT contracts (newspaper sale ads)
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DEFINITENESS AND CERTAINTY Can’t be vague… I’ll pay “ a share:, I’ll buy at
“competitive prices”, I’ll pay “reasonable” rent.
Spell out exact terms.
Read example 5 pg. 97
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COMMUNICATION TO THE OFFEREE Offers can be by phone, fax, letter, telegram,
but it must be communicated to the offeree.
Read example 6 pg. 97
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REQUIREMENTS OF AN ACCEPTANCE Acceptance = unqualified willingness to go
along with the offer.
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UNCONDITIONAL ACCEPTANCE Can’t change the terms of the original offer
in my way. Mirror image rule Any change in terms = a counteroffer.
Read example 7 pg. 97
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UNIFORM COMMERCIAL CODE (UCC) Contracts for sale of goods are exceptions to
the mirror image rule.
Read the 2 paragraphs on pg. 98.
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METHODS OF ACCEPTANCE When using the same type of communication
– the contract comes into existence when the acceptance is sent.
When using a different form of communication the contract comes into existence when the acceptance is received.
Read the Methods of Acceptance section
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TERMINATION OF AN OFFER Revocation – taking back an offer by the
offeror. Can be revoked any time before it is accepted. Offeree is notified that offer is revoked.
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REJECTION Offeree rejects the offer
Example: I don’t want to buy your dog.
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COUNTEROFFER A counteroffer ends the first offer.
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EXPIRATION OF TIME If offeror puts a time limit for acceptance it
must be complied with. If no time limit must be accepted within a
“reasonable time period”
Option = binding promise to hold an offer open for a specified period of time.
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DEATH OR INSANITY If an offeror dies or becomes insance before
the offer is accepted, the offer comes to an end.
Death ends an offer, it does not end a contract, except for personal services.