1. Contract Law

2. The Big Picture The Legal System Criminal Law Civil Law Tort Law
Contract
Law
Consumer
Law
Employment
Law

3. Today’s Objectives Identify the six elements of a contract.
Explain the effects of a contract on a minor.
Identify types of contracts.
Analyze the need for contracts.

4. THINKER QUESTION
How many of you are currently subject to a contractual agreement? What are some examples of contracts?

5. Potential Contracts Credit Card Grocery store “club” card
Selling / buying something to a friend for money
Movie rental store agreement
College commitment or sports agreement
Part-time jobs
accounts, iTunes, etc.

6. What is a Contract?

7. The Nature of a Contract
A contract is any agreement enforceable by law.
Not all agreements are contracts.

8. What makes a contract?
Six Elements of a Contract

9. Elements of a Contract Offer Acceptance Agreement Consideration
Capacity
Legality
In order to have a legally enforceable contract, all six elements must be present.
Do contracts have to be in writing to be enforceable by law?

10. Offer Proposal to make a definite and certain deal with serious intent
Must be communicated to another person
Remains open until it is accepted, rejected, retracted, or expires
Counter-offers can be made and close the original offer
Definite – identifies the basic obligation of the contract

11. Acceptance
Acknowledgement by the offeree (person receiving the offer) that the offer is accepted unconditionally
Must be communicated to the offeror in a reasonable manner
May be spoken, written, or by action

12. Genuine Assent Reached when a valid offer is met by a valid acceptance
The offer and acceptance together create genuine assent.
Genuine agreements cannot exist if there is fraud, misrepresentation, mistake, undue influence, etc.

13. Is it valid?
Read each example and decide.

14. Jim negotiated a deal to re-roof his house with a carpenter
Jim negotiated a deal to re-roof his house with a carpenter. They did not sign a written agreement. The roofers showed up at the house on the agreed day, and another carpenter had already started work. Was there a contract?

15. Cheryl was fired from her job at the newspaper, and she sued because she thought there had been gender discrimination in her firing. Cheryl and the newspaper company agreed on the basic outline for a settlement, but before it was signed, she backed out and wanted to go to court. Should the settlement be binding?

16. An advertisement in a magazine promises, “Our product will clear up your acne or we will give you double your money back!” Jenny bought the product, ProAktiv, at a drug store and did not notify the company that she planned on taking them up on their offer. Does the ProAktiv have to pay Jenny double her money back if the product does not work?

17. The Other Elements

18. Capacity Legal ability to enter a contract
Contracts can be disaffirmed by:
Minors
People with mental impairments
People under the influence
Minors can enter into a contract provided the other party is aware of the minor’s age. The law usually gives minors the right to disaffirm contracts.

19. Consideration
Consideration is what is exchanged as a result of the contract.
May be money, property, or services

20. Legality
In general, a court will not help any party to an illegal contract.
Neither party can enforce the agreement.
Neither party can get help from the court.

21. Email Account Contracts
Yahoo handout

22. Yahoo! Who is the offeror? The offeree? What is the offer?
What is being offered? Key terms?
How does a user accept?
When does acceptance bind the user?
What is the consideration for each party?
Identify any other interesting parts of the contract.

23. Types of Contracts
What kinds of contracts are recognized by law?

24. The Law Recognizes… Express Contracts – written or spoken
Implied Contracts – comes from the actions of the parties
Executory Contracts – not fully performed
Executed Contracts – completed by both parties
Quasi-Contracts – missing an element, still enforceable
Sales Contracts – sale of property, rent, wills, estates
Employment Contracts – business organizations

25. Bilateral contracts – contract that contains two promises.
Unilateral contracts – Contract that contains a promise by only one person to do something, if and when the other party performs some act. Example: Reward
Mirror Image rule – terms stated in the acceptance must exactly mirror or match the terms of the offer.

26. Termination of an Offer
Revocation – the taking back of an offer by the offeror.
Rejection – is a refusal of an offer by the offeree that brings the offer to an end
Expiration of Time – if the offeror sets a time limit of the offer, it must be honored.
Counteroffer – is a response to an offer in which the terms of the original offer are changed.

27. Termination of an Offer
Death or Insanity – If the offeror dies or becomes insane before the offer is accepted, the offer comes to an end. Although death ends an offer, it does not end a contract, except for contracts related to personal services.

28. Why do we need contracts?

29. We need contracts…
Because they are important in a free- market economy
Because verbal (handshake) agreements are in decline
Because they have protective power
Because the court can intervene & enforce
Because of the litigious nature of society

30. Enforcing Contracts

31. Last Class… Identify the six elements of a contract.
Explain the effects of a contract on a minor.
Identify types of contracts.
Analyze the need for contracts.

32. Today’s Objectives
Analyze agreements to determine if a valid contract exists.
Determine when a breach of contract occurs.
Identify defenses to contractual agreements.
Apply contract law to negotiation deals.

33. Breach

34. Breaching a Contract
If one party does not follow through with consideration in a contract, the other party doesn’t have to perform.
Failure to perform is called a breach.

35. Thinker Question!
What happens when one party breaches a contract?

36. Enforcement
Damages – the party who is harmed can request money (equal to the amount lost from the breach) from the other party
Specific Performance – if it is still possible to perform the contract, the court can require the party to perform

37. Sam burned his hand on the stove
Sam burned his hand on the stove. The burn was so bad that it permanently scarred his hand and made it difficult to grip things. A doctor told him that he could fix his hand with a simple “skin-grafting” procedure for $1200. After the surgery, Sam’s hand worked perfectly… but, he started growing hair out of the palm of his hand. He tried waxing it, but he couldn’t stop the hair from growing back. He decides to sue the doctor for giving him a hairy hand.
Did the doctor breach the contract? Should the court do something about it? If so, what should the court do?

38. Defenses to Contracts
Certain things can make contracts void, even though both parties agreed on the terms and there was valid consideration.

39. Unconscionability
If one party tricked another party into agreeing to an unfair contract, the court may not enforce it.
Example: businesses who try to trick poor or uneducated clients

40. Fraud or Duress Lying or misrepresenting something in negotiations
Taking advantage of someone in a bad situation

41. A law, the Statute of Frauds
Requires that certain contracts must be in writing to be enforceable.
Contracts for Sale
Contracts for Lease
Contracts for a mortgage (real property)
Contracts longer than 1 year
Collateral contracts
Prenuptial agreements
Contracts for sale of goods valued at $500 or more

42. Explain the impact of
The Uniform Commercial Code on interstate commerce
Makes it easier to do business
Eliminates the need for the involvement of lawyers with regard to the various aspects of interstate business.