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Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise TO DO LIST! 1.Chapter 4 Quiz 2.Current Events 3.Introduce Term Project.

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Presentation on theme: "Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise TO DO LIST! 1.Chapter 4 Quiz 2.Current Events 3.Introduce Term Project."— Presentation transcript:

1 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise TO DO LIST! 1.Chapter 4 Quiz 2.Current Events 3.Introduce Term Project (Due March 14) 4.Work on Assignments, Extra Credit, Term Projects 5.Test on Chapter 3 & 4 on Wed. – Unit packet due as well.

2 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise BELL QUIZ ON CHAPTER 4 1.What’s the difference between a crime and a tort? Explain both. 2.What tort interferes with the enjoyment of life or property? 3.Name the two types of defamation. 4.When must the words “reasonable person” be used? 5.Name one ultrahazardous activity.

3 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise ANSWERS TO BELL QUIZ CHAPTER 4 1.Crime harms individual as well as general welfare (offense against public at large). Tort is a private wrong committed by one person against another. 2.Nuisance 3.Libel and Slander 4.When instructing the jurors. 5.Explosives, wild animals, storing highly flammable liquids in densely populated areas.

4 5Chapter SECTION OPENER / CLOSER: INSERT BOOK COVER ART Contracts Section 5.1

5 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Section 5.1 Contracts Section 5.2 Offer and Acceptance 5 Chapter How Contracts Arise

6 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Why It’s Important Identifying a contract’s elements will help you manage your affairs in an intelligent and effective manner.

7 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Pre-Learning Question How would you define contract?

8 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise A contract is any agreement enforceable by law. Not all agreements are contracts, however. Whether or not it’s a contract, depends on the circumstances of the agreement. The Nature of a Contract

9 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise The evolution of contract law shows how its focus has changed. The Three Theories of Contract Law

10 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise In the past, courts asked whether the parties to a contract exchanged things of equal value. This approach was called the equity theory of contract law. The Equity Theory

11 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise The advent of industrial capitalism forced the courts to shift their focus. They began to ask if the parties had agreed to the terms in the agreement of their own free will. The Will Theory

12 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Then the courts began to study the parties’ actions and words to determine if there was a “meeting of the minds.” The Formalist Theory

13 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise This led to certain fixed elements in a contract. It is called the formalist theory because it relies on the form of the agreement. The Formalist Theory

14 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise There are six elements of a contract. Elements of a Contract 1.offer 2.acceptance 3.genuine agreement 4.consideration 5.capacity 6.legality

15 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An offer is a proposal by one party to another intended to create a legally binding agreement. An acceptance is the second party’s unqualified willingness to go along with the first party’s proposal. Elements of a Contract

16 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise If a valid offer is met by a valid acceptance, a genuine agreement exists. Capacity is the legal ability to enter a contract. Elements of a Contract

17 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Consideration is the exchange of things of value. Legality means that people can only enter into contracts for legal purposes. People cannot enter into contracts to commit illegal acts. Elements of a Contract

18 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Contracts can have any of the following characteristics Characteristics of a Contract valid, void, voidable, or unenforceable express or implied bilateral or unilateral oral or written

19 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Valid, Void, Voidable, or Unenforceable A valid contract is legally binding. A contract that is void has no legal effect.

20 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Valid, Void, Voidable, or Unenforceable When a party to a contract is able to void or cancel the contract for some legal reason, it is a voidable contract. An unenforceable contract is one the court will not uphold.

21 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An express contract is stated in words and may be either oral or written. An implied contract comes about from the actions of the parties. Express or Implied

22 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise A bilateral contract contains two promises. A unilateral contract contains a promise by only one person to do something, if and when the other party performs some act. Bilateral or Unilateral

23 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise 5.1 How Parties Reach Agreement

24 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise 5.1 How Parties Reach Agreement A REWARD OFFER is one of the most common instances of a unilateral contract.

25 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An oral contract is created by word of mouth and comes into existence when two or more people form a contract by speaking to each other. Sometimes, however, it is desirable to put contracts in writing. Oral or Written

26 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise People’s Court 2 Video “Too Lovely to Live In”

27 5Chapter SECTION OPENER / CLOSER: INSERT BOOK COVER ART Contracts Section 5.2 Offer and Acceptance

28 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Why It’s Important You need to know when an offer has been made and when an acceptance goes into effect to make sound contracts.

29 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise The person who makes an offer is the offeror. The person who receives the offer is the offeree. Requirements of an Offer

30 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An offer has three basic requirements. It must be: Requirements of an Offer 1.made seriously 2.definite and certain 3.communicated to the offeree

31 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An offer must be made with the intention of entering into a legal obligation. An offer made in the heat of anger or as a joke would not meet this requirement. Serious Intent

32 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Sometimes an invitation to negotiate can be confused with an offer. Serious Intent

33 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Advertisements in newspapers, magazines, and catalogs are examples of invitations to negotiate, which are invitations to make an offer. Exception to rule: “first come, first served” or limit number of items that will be sold is considered an offer. Serious Intent

34 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An offer must be definite and certain to be enforceable. Offers that use vague words or terms that cannot be quantified lack definiteness and certainty (reasonable; pay “a share”) Definiteness and Certainty

35 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Offers may be made by any method that communicates the offer to the offeree, including Communication to the Offeree telephonelettertelegram Example 5 – page 116 fax machine cell phone- text???

36 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Who or what is an offeree? Who or what is an offeror?

37 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise ANSWER The offeree is the person making the offer. The offeror is the person receiving the offer.

38 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise To be legally binding, the acceptance must meet certain basic requirements. Requirements of an Acceptance the acceptance must be unconditional (terms not changed) the acceptance must follow the rules regarding the method of acceptance

39 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise The acceptance must not change the terms of the original offer in any way. This principle is called the mirror image rule. Unconditional Acceptance

40 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Any change in the terms of the offer means the offeree has not really accepted the offer. The offeree has made a counteroffer. Unconditional Acceptance

41 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise If a counteroffer is made, the original offeror is not obligated to go along and no contract exists. The offeror becomes an offeree and may accept or reject the counteroffer. Unconditional Acceptance

42 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Contracts for the sale of goods are exceptions to the mirror image rule. These exceptions include contracts for personal property such as clothing, furniture, food, motor vehicles, and appliances. Unconditional Acceptance

43 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise The time at which an acceptance takes place is important because that is when the contract comes into existence. Methods of Acceptance

44 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Special rules govern acceptances that take place when the parties are separated by a distance and must be communicated by letters, telegrams, or fax. Methods of Acceptance

45 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise According to common law, an acceptance that must be sent over long distances is effective when it is sent. Methods of Acceptance

46 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise An acceptance is implied when the offeree accepts by the same or a faster means than that used by the offeror. Methods of Acceptance

47 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise The authorization of an acceptance can also be implied by any reasonable means, including Methods of Acceptance past practices between the parties the usual method in the trade customary means in comparable transactions

48 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Termination of an offer may occur in any of the following five ways. Termination of an Offer 1.revocation 2.rejection 3.counteroffer 4.expiration of time 5.death or insanity

49 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Revocation is the taking back of an offer by the offeror. The offer is withdrawn BEFORE the offer was accepted. Revocation

50 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise Rejection, or refusal, of an offer by the offeree brings the offer to an end. Rejection

51 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise A counteroffer ends the first offer. The offeree creates a new offer, which the original offeror may accept or reject. Counteroffer

52 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise If the offeror sets a time limit for the acceptance of the offer, it must be honored. If no time limit is stated, it must be accepted within a reasonable time. Expiration of Time

53 Understanding Business and Personal Law Contracts Section 5.1 How Contracts Arise If the offeror dies or becomes insane before the offer is accepted, the offer comes to an end. Death or Insanity End of Chapter


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