2 Objective Standard 7: Critique components of contract law. Examples: characteristics of contract law, effects of breach of contract.
3 Section 6-1: Creation of Offers Goals:List the elements required to form a contract.Describe the requirements of an offer.
4 What Must Be in a Contract? Contract- an agreement between two or more parties that create obligations.There are six major requirements of a legally enforceable contract:Offer & AcceptanceGenuine AssentLegalityConsiderationCapacityWriting
5 Offer & Acceptance Offeror- the person who makes the offer. Offeree- the person to whom the offer is made.The terms of the offer must be definite and accepted without change by the party to whom it was intended to be offered.
6 Genuine Assent The agreement must not be based on one party’s deceiving anotheron an important mistakeon the use of unfair pressure exerted to obtain the offer of acceptance.
7 Legality What the parties agree to must be legal! An agreement to commit a crime or tort cannot be a legally enforceable contract.
8 ConsiderationThe agreement must involve both sides receiving what the law considers value in some form as a result of the transaction.
9 CapacityThe parties must have the legal ability to contract for themselves.The minimum age to form a legally enforceable contract is 18 as it is in most every state.
10 WritingSome agreements must be placed in writing to be fully enforceable in court.
11 Requirements of an Offer Offer- a proposal by an offeror to do something, provided the offeree does or refrains from dong something in return.Three tests that an offer must pass to be legally enforceable:Contractual intent must be present in the offer.The offer must be communicated to the offeree.The essential terms of the offer must be complete and definite.
12 Contractual Intent Must Be Present When a teacher says to a business law class, “I will sell you my new car for $3,000,” this probably isn’t an offer but an example.Words that take the form of offers but are spoken in jest (as a joke), in extreme terror or anger, or as a preliminary negotiation or social agreement would not be enforced.
13 Contractual Intent Must Be Present Statements made in anger or terror:Yelling after someone has just stolen your watch, “Stop thief— I’ll pay anyone who stops her $100,” is not looked upon as being a valid offer by the law.Preliminary Negotiations:“Would you pay $800 for my laptop computer?”“Look Jeff, I’ll sell you my laptop computer today for $800.”These are invitations to negotiate.
14 Contractual Intent Must Be Present Social Agreements:If two friends agree to go to the movies, no contract is intended.Social agreements do not create legal obligations.
15 Offer Must Be Communicated to the Offeree A person who is not the intended offeree cannot accept the offer.A person cannot accept an offer without knowing it has been made.
16 Essential Terms Must Be Complete and Definite Nearly all offers must, at a minimum, identify the price, subject matter, and quantity, either directly or indirectly, to be legally effective.Example: In most states the essential terms for the sale of real estate would includeLegal description of the real estatePriceFull terms of paymentDate for delivery of possession.Date for delivery of the deed.
17 Essential Terms Must Be Complete and Definite Each essential term must be identified clearly. Read pg. 112 last paragraph.
18 Section 6-2: Termination of Offers Goals:Describe the various ways to end offers.Explain how an offeree can ensure an a offer will remain open.
19 How Can Offers Be Ended?Revocation- the right to withdraw an offer before it is accepted. (Offeror)Time Stated in the Offer-how and when the offer must be excepted. (Offeror)Ex: Read pg. 114 Top ParagraphReasonable Length of Time- When nothing is said about how long an offer will remain, it will end after a reasonable amount of time. (neither)Ex: Read pg.114 Bottom Paragraph
20 How Can Offers Be Ended?Rejection by the Offeree- when the offeree clearly rejects the offer, the offer is terminated. Unless renewed by the original offeror, the offeree can no longer accept the original offer. (Offeree)Counteroffer- the offeree says in legal effect, “I refuse your offer; here is my proposal.” The counteroffer terminates the original offer and the counteroffer becomes the new offer. (Offeree)Death or Insanity of Either the Offeror or Offeree- the law acts for the parties when they can no longer act and terminate their offers. (either)Destruction of the Specific Subject Matter- what is being sold or purchased is destroyed and the offer is then ended. (neither or either)
21 How Can an Offer Be Kept Open? Options- If the offeree gives the offeror something of value in return for a promise to keep the offer open, this agreement is itself a binding contract.Firm Offer- A special rule that works the same result as an option applies to merchants who make offers in writing.
22 Section 6-3: Acceptances Goals:Discuss the requirements of an effective acceptance.Determine at what point in time an acceptance is effective.
23 What Is Required of an Acceptance? Acceptance- occurs when a party to whom an offer has been made agrees to the proposal.To create an enforceable contract, the acceptance must:Come from the person or persons to whom the offer was made.Match the terms in the offer.Be communicated to the offeror.
24 What Is Required of an Acceptance? Only Offerees May AcceptAn offer made to one person cannot be accepted by another.The Acceptance Must Match the OfferMirror Image Rule- requires that the acceptance must exactly match the terms contained in the offer. (Read pg. 118)
25 What Is Required of an Acceptance? Acceptance Must Be Communicated to the OfferorSilence As Acceptance- one is not obligated to reply to offers made by others. An offeror’s attempt to word the offer so that silence would appear to be an acceptance will not work.Bilateral Acceptance- Bilateral Contracts- require that the offeree accept by communicating the requested promise to the offeror.
26 What Is Required of an Acceptance? Acceptance Must Be Communicated to the OfferorUnilateral Contracts- the offeror requires that the offeree indicated acceptance by performing his or her obligations under the contract. The offeror promises something in return for the offeree’s performance and indicates that this performance is the way acceptance is to be made.Modes of Contractual Communication- may be generally communicated in person or by other effective means such as telephone, text messaging, mail, delivery service, , fax, etc.