1. Slide 1 The Law of Contracts I.Define the contract and the role of contracts in our economy. II.Identify and Define the Elements Required to Form a Contract. (1-11) III.Comprehend Termination and Extension of offers. (Options and Firm Offers) (12-15) IV.Analyze and Comprehend Effect of Duress and Undue Influence on a Proposed Agreement. (16-17) V.Analyze and Comprehend Effect of Mistake, Misrepresentation, and Fraud on a Proposed Agreement. (18-20) BHS Law Related Education Business Law II Ch. 7 The Law of Contracts Lesson Objectives

2. Slide 2 The Law of Contracts 1.Identify and Define the Elements Required to Form a Contract. 2.Analyze and Comprehend The Legal Effect of an Offer. 3.Analyze and Comprehend The Legal Effect of Acceptance. 4.Comprehend the Legal Concepts of Genuine Agreement and Rescission. 5.Analyze and Comprehend Effect of Duress and Undue Influence on a Proposed Agreement. 6.Analyze and Comprehend Effect of Mistake, Mis- representation, and Fraud on a Proposed Agreement. 7.Define the Statute of Frauds. 8.Comprehend Remedies for Breach of Contract. BHS Law Related Education Law II Ch. 7 The Law of Contracts Lesson Objectives

3. Slide 3 A.A contract is a binding agreement, between two parties, that courts will enforce. B.Contracts are the basis for all economic activity in the U.S. C.Contracts link consumers with businesses that produce goods and services. BHS Law Related Education Business Law II Ch. 7 The Law of Contracts I. The Creation of Binding Agreements

4. Slide 4 D. There are six major requirements that must be satisfied before courts will treat agreements as contracts; BHS Law Related Education Business Law II Ch. 7 The Law of Contracts I. The Creation of Binding Agreements 1) Offer and Acceptance 2) Genuine Assent 3) Legality 4) Consideration 5) Capacity 6) Writing

5. Slide 5 A) Offer- To be legally effective an offer must; 1.Express intent to create a legal obligation. 2.Be complete and clear. 3.Be communicated to the offeree. BHS Law Related Education Business Law II Ch. 7 The Law of Contracts II. Elements of a Contract

6. Slide 6 A) Offer & Acceptance 1. Expression Of Intent To Create A Legal Obligation a) The offeror must appear serious about creating a legal obligation. (Hot Debate t/p 110) b) Subjective intent is not the issue (i.e. what the offeror was thinking) ($5,000 Reward) c) The test of the reasonable person is used to determine intent. Examine the words and conduct of the offeror in light of all the relevant circumstances. d) Social arrangements do not create legal obligations. (t/p 114 #11) BHS Law Related Education Business Law II Ch. 7 The Law of Contracts II. Elements of a Contract

7. Slide 7 A) Offer & Acceptance 2. A Legally Binding Offer Must Be Clear & Complete. a) The offer must be clear and complete with respect to intent, identity of the parties, and legal duties and obligations. (Essential Information) (t/p 114 #12) b) If an offer is missing any essential information, it is incomplete and legally ineffective. c) Advertisements are generally not offers. Instead, courts treat them as invitations to customers to make offers. (t/p 114 #13) (This is due to the fact businesses have limited stock and could not be expected to make a sale to everyone who might accept their offer.) BHS Law Related Education Business Law II Ch. 7 The Law of Contracts II. Elements of a Contract

8. Slide 8 A) Offer & Acceptance 3. An Offer Must Be Communicated To The Offeree. a)A person who is not the intended offeree cannot accept the offer. (t/p 114 #10) b)A person’s actions will not constitute acceptance if the person was not aware of the offer. (The Lost Dog) BHS Law Related Education Business Law II Ch. 7 The Law of Contracts II. Elements of a Contract

9. Slide 9 A)Acceptance- Acceptance occurs when a party, to whom an offer has been made, agrees to the proposal. 1.To create an enforceable contract acceptance must: a)Be made by the person to whom the offer was made. (t/p 114 #10) b)Match the terms of the offer ( MIRROR IMAGE RULE ). (t/p 121 #6) c)Be communicated to the offeror. (The Lost Dog) BHS Law Related Education Business Law II Ch. 7 The Law of Contracts II. Elements of a Contract

10. Slide 10 B) Genuine Assent- requires that both parties have a complete understanding of the agreement. 1. Genuine assent dictates that there be a “meeting of the minds” with respect to all essential terms of the agreement. 2. The agreement must not be based on deception, mistake or undue influence. BHS Law Related Education Business Law II Ch. 7 The Law of Contracts II. Elements of a Contract

11. Slide 11 C. Legality- The subject matter of the contract must be legal. D. Consideration- The agreement must include both sides receiving something of legal value. E. Capacity- To have a completely enforceable agreement both parties must be of legal age, sound mind, and have standing to enter the contract. F. Writing- Some agreements must be in writing to be enforceable. (i.e. real estate) BHS Law Related Education Business Law II Ch. 7 The Law of Contracts II. Elements of a Contract

12. Slide 12 A. There are six basic ways an offer can be terminated: BHS Law Related Education Business Law II Ch. 7 The Law of Contracts III. Termination and Extension of offers 1.Revocation by the offeror 2.Time stated in the offer 3.Reasonable length of time 4.Rejection by the offeree 5.Counteroffer 6.Death or insanity of either the offeror or offeree

13. Slide 13 B. Two basic ways an offer can be extended: 1. Options-Where the offeree gives the offeror something of value to keep the offer open, this agreement is itself a binding contract. 2. Firm Offers-An offer by a merchant for the sale or purchase of goods, stating in a signed writing how long the offer is to stay open is called a firm offer. BHS Law Related Education Business Law II Ch. 7 The Law of Contracts III. Termination and Extension of offers

14. Slide 14 1.Option  The Smith’s decided to sell their office building for $950,000.  Jones, a developer, was interested in buying the building, but she needed time to persuade a group of investors to form a syndicate to purchase the building.  Jones offered $10,000 to the Smith’s to keep the offer open for her alone for 60 days and the Smith’s accepted.  The next day Johnson offered the Smith’s $1,450,000 for the building.  Can the Smith’s accept? BHS Law Related Education Business Law II Ch. 7 The Law of Contracts III. Termination and Extension of offers

15. Slide 15 2. Firm Offer  On June 14, Apple Inc. maker of the MacBook, offered to sell 5,000 MacBooks to Mike’s Computer World at a fixed price of $299.00 per unit. The retail price starts at $1,299.00 per unit.  The written and signed offer stated: “Price quoted is firm for one week from this date.”  Two days later, and before Mike’s Computer World had accepted, Lebron James and Kobe Bryant appear in print advertisements and T.V. commercials endorsing the MacBook.  The demand for the MacBook rises sharply. Apple Inc. immediately phoned Mike’s Computer World and said the deal is off.  Can Apple Inc. take advantage of the market conditions to revoke the offer? BHS Law Related Education Business Law II Ch. 7 The Law of Contracts III. Termination and Extension of offers

16. Slide 16 A. (8-1) Duress occurs when one party uses an improper threat or act to obtain an expression of agreement. Examples:  Threats of illegal conduct  Threats to report crimes  Threats to sue  Economic threats BHS Law Related Education Business Law II Ch. 8 The Law of Contracts IV. Duress and Undue Influence

17. Slide 17 B. (8-1) Undue influence occurs when one party to the contract is in a position of trust and wrongfully dominates the other party. 1) There are two key elements when showing undue influence; a. The relationship b. Unfair persuasion BHS Law Related Education Business Law II Ch. 8 The Law of Contracts IV. Duress and Undue Influence

18. Slide 18 A. (8-2) Mistakes -certain mistakes can make a contract void or voidable. 1) A unilateral mistake occurs when one party holds an incorrect belief about the facts related to a contract. 2) When there is a mutual mistake both parties have an incorrect belief about an important fact. BHS Law Related Education Business Law II Ch. 8 The Law of Contracts V. Mistake, Misrepresentation, & Fraud

19. Slide 19 B. (8-2) Misrepresentation -For a statement to be treated as a mis- representation, three elements are required; 1.Untrue statement of fact or silence. 2.Materiality 3.Reasonable reliance BHS Law Related Education Business Law II Ch. 8 The Law of Contracts V. Mistake, Misrepresentation, & Fraud

20. Slide 20 C. (8-2) Fraud -occurs when a party to a contract knows that a statement he or she made is untrue. 1.Fraud must be intentional or reckless. 2.The misrepresentation or concealment must cause injury. 3.Remedies for Fraud. a. Rescission b. Damages c. Punitive damages BHS Law Related Education Business Law II Ch. 8 The Law of Contracts V. Mistake, Misrepresentation, & Fraud