1. CONTRACTS

2. CHAPTER 4: What is a Contract? Contract is any agreement enforceable by law. Not all agreements are contracts Agreeing to take out the trash (not a contract) Offering a reward in the newspaper for returning a lost item (IS a contract) Each contract MUST have six (6) elements to be legal Capacity Consideration Legality OfferAcceptance Genuine Agreement

3. Elements of a Contract 1)Offer- A proposal made by one party (the offeror) to another party (the offeree) to create a legally binding agreement 2)Acceptance- The agreement of the offeree to go along with the first party’s proposal. 3)Genuine Agreement- Offer and acceptance go together to form a genuine agreement. A valid offer is met by a valid acceptance. Circumstances that can destroy a genuine agreement: Fraud Misrepresentation Mistake Undue Influence Economic Distress

4. Elements of a Contract (Continued) 4) Capacity- The law assumes anyone entering into a contract has the legal capacity. 5) Consideration- The thing of value promised to one person in exchange for something else. (Ex. I offer you $10 for your phone case the consideration is the $10 and the phone case) 6) Legality- Can not enter into contracts involving illegal goods or acts. - Ex. Bob signs a contract to produce X amount of drugs to Mike for X amount of dollars each week. Contract is NOT valid/legal. Not Legal Capable to enter into a contract Minors Mentally Impaired People Person under influence of drugs or alcohol

5. CHARACTERISTICS of a Contract Contract can have any of the following characteristics: 1)Valid, Void, Voidable, or Unenforceable 2)Express or Implied 3)Bilateral or Unilateral 4)Oral or Written Contracts can have characteristics from one or more of these categories EX. A contract can be Valid, Express, Bilateral and Written

6. Valid, Void, Voidable and Unenforceable Contracts may be Valid, Void, Voidable or Unenforceable Valid- a contract that is legally good (legally binding) Void- a contract lacks one or more of the elements of a contract. Has no legal effect Ex. Contract that involves something illegal Voidable- Either party can cancel the contract for a legal reason. Ex. A contract between two minors is a voidable contract because minors have the right to get out of contracts. (Reason why most companies require someone over 18 to sign a contract). Unenforceable- a contract that will not hold up in court, usually because of some rule of law. Ex. Wait to long to sue someone for breach of contract, statute of limitations may have run out and now it is unenforceable.

7. EXPRESS or IMPLIED A contract may be Express or Implied Express- a contract statement that may be oral or written Most contracts are express Implied- contract that comes about from the actions of the parties (no words are required). Ex. You go to a gas station, hand the tenant a $20 bill. You go back to your car and pump $20 worth of gas and leave. Neither of you needed to speak to each other but it was implied that both parties entered into a contract involving exchange of gas for money.

8. BILATERAL or UNILATERAL Contracts may be Unilateral or Bilateral Bilateral- both parties promise to do something One party promises to do something in exchange for the other’s promise to do something else. Most contracts are bilateral Unilateral- one party promises to do something only if the other party does something A person says they will sell you their car for $2,000 if you pay in cash by Friday afternoon. If you do not have the cash by then, the person is not required to keep their promise. A reward in a newspaper is another example. The reward is only required to be given if you return whatever they are offering a reward for.

9. ORAL or WRITTEN Contracts can be Oral or Written Oral- created by word of mouth Both parties agree to do something, but nothing is written down Can be hard to prove if there is ever a dispute Written- contract is put into writing Safer due to hard evidence of an agreement or contract Both parties know the exact terms due to it being in writing Statue of Frauds (a law)- requires certain contracts must be in writing to be enforceable.

10. 4.2 HOW A CONTRACT BEGINS

11. Requirements of an Offer An offer has 3 basic requirements: Made Seriously Definite and Certain Communicated to the offeree

12. Serious Intent An offer must be made with Serious Intent to enter into a legal obligation An offer made as a joke, or in anger, would not meet this requirement. Ex. If you are at the park and your friend says he will hit a full court shot. You jokingly tell him, “I’ll give you $1,000 if you hit that shot”. He shoots it and makes it. You never made that offer with serious intent so you are not obligated to pay.

13. Invitation to Negotiate Invitation to negotiate- invitations to deal, trade, or make an offer Often an invitation to negotiate is confused with an offer. Invitations to negotiate are associated with businesses and ads they put out Most ads are treated as invitations to negotiate because: Sellers usually have limited merchandise Can not possibly sell one to everyone who sees the ad The law treats the ad as an invitation to negotiate and not as an offer The actual offer comes when the customer attempts to buy the item.

14. Invitation to Negotiate (continued) The ad below is an invitation to negotiate Offer begins when the customer offers to make a purchase Store owner can accept or reject the offer The ad below is NOT an invitation to negotiate Due to the fact that it is very definite (has an exact date and time) it is treated as an offer. Once the customer comes in to make a purchase, they are accepting the offer and a contract is formed.

15. Invitation to Negotiate Courts consider some ads as offers when: Contain specific promises Use phrases like “first come, first served” Limit the number of items that will be sold Ad becomes an offer because the number of people who can buy the product becomes limited Examples of invitations to negotiate are: Price tags Signs in store windows and counters

16. Definiteness and Certainty An offer must be Definite and Certain to be enforceable Example of an offer that is definite and certain: I will buy your iPhone for $200 in two weeks. This offer is legally valid because it is definite. If you accept you know you will receive $200 in two weeks in exchange for your iPhone. Example of an offer that is NOT definite and certain: I will buy your iPhone for a reasonable amount at some time in the future. This is not legally valid because “reasonable amount” and “some time in the future” are not definite and certain.

17. Communication to the Offeree An offer can not be made if it is not communicated to the other party Offers may be made by: Telephone Letter Telegram Fax Email Social Media Any other method that communicates the offer to the offeree