1. Business Law Chapter 1: An Introduction to Contracts

2. What is a contract? The legal definition of a contract is a promise (or set of promises) that, when breached by one party, gives the other party a legal remedy.

3. Technical contracts These contracts have formal requirements and are often governed by specific statutes. Examples of these technical contracts are:  Negotiable instruments  Letters of Credit Contracts “under seal”

4. The Basic Elements of all Contracts Mutual Assent: (a valid offer and acceptance) Consideration Legality of subject Capacity

5. Mutual Assent Mutual assent is the final product of a valid offer and acceptance. Also often referred to as “meeting of the minds”

6. Offer An offer is an expression by a party (usually called the offeror) that he or she is willing to enter into a bargain

7. The Power of Acceptance The power of acceptance refers to the right of the person receiving the offer to accept it and create a binding contract.

8. Offers can be made by words, by actions, or any combination of both An offer can be made without any words at all.

9. How long is an offer valid? An offer expires by its own terms, or after a reasonable period of time. A ‘reasonable period of time’ depends on all of the surrounding circumstances in a particular case.

10. Acceptance A valid offer creates the power of acceptance in another.

11. Communicating an acceptance The person accepting the offer (the offeree) must communicate this acceptance to the offeror.

12. The Mailbox Rule This rule states that an acceptance is legally effective when it is deposited in the U.S. postal system.

13. Can a person accept by silence? Actions alone can indicate acceptance.

14. Terminating the power of acceptance A person’s power of acceptance can be terminated by: A revocation of the offer by the offeror A rejection of the offer by the offeree Lapse of time Death or subsequent incapacity of either party The failure of a required condition

15. Counteroffers Counteroffers are new offers, not an acceptance of the original offer.

16. Language required to create a contract There is no magic formula of words that must be used in order to create a contract.

17. Consideration The basic reason for a contract; a person gives up something of value in exchange for receiving something of value through the contract.

18. Capacity When a person has legal “capacity”, it simply means that he or she has the legal authority to enter into binding, legal agreements.

19. Subject of contract must be legal A contract that involves illegal activity will not be enforced through the court system, for obvious reasons.

20. Types of Contracts There are many different types of contracts.

21. Classifying a contract by performance Contracts can be classified by the manner in which the parties fulfill it.

22. Unilateral contracts Unilateral Contract: A contract in which one party makes a promise in exchange for an action by the other party.

23. Bilateral Contracts A bilateral contract involves a promise in exchange for another promise.

24. Executory and executed contracts An executory contract is one that has not yet been completely performed. An executed contract is one in which all required actions have been completed.

25. Void and voidable contracts A “void” contract is a contract that is invalid. A void contract cannot be enforced. A voidable contract is a contract that could be invalidated, but has not yet been ruled void.

26. The Statute of Frauds The Statute of Frauds is a statute that requires certain types of contracts to be reduced to writing before they are considered legally enforceable.