1. 1-1 CHAPTER 6 MATERIALS TO SUPPLEMENT TEXTBOOK J. Pittman, Instructor

2. OVERVIEW The textbook presents contract law in a summary fashion that may be difficult to follow The following slides add some details missing from the textbook presentation J. Pittman, Instructor2

3. 3 CONTRACT DEFINITION A contract is an agreement between two or more parties that can be enforced in a court of law Contract law protects promises that have been made, allowing commerce to function

4. 4 SOURCES OF AMERICAN CONTRACT LAW Court created “common law” regulates contracts involving: The sale of real property (land) The sale of services, and The sale of intangible, personal property Personal property is everything that is not land Intangible property does not have a physical existence, for example, patent and copyright ownership The Uniform Commercial Code (UCC) regulates contracts involving: The sale of tangible, personal property (called “goods”) Tangible property has a physical existence

5. 5 ELEMENTS OF A CONTRACT Offer - Proposal to enter into a binding agreement Acceptance – Definite, clear agreement to the proposal terms The offer and acceptance create an agreement The genuineness of the agreement can be challenged by arguing the presence of fraud, duress, and so forth The offer and acceptance together provide an agreement

6. 6 REQUIREMENTS OF AN OFFER To legally constitute an offer, the following elements must be present: Intent - offeror is serious, not joking, and intends to be bound by the offer (note the advertising rules, textbook pgs.104-05) Definite – the offer has reasonably certain and definite terms Communication – the offer is communicated to the offeree, either actually or constructively Constructive communication is a reasonable attempt at communicating the offer terms, e.g., a sign on a parking garage wall that the parking garage owners are not responsible for damage to parked cars

7. 7 TERMINATION OF THE OFFER By action of the parties Revocation Rejection Counter-offer By operation of law Lapse of time Destruction of subject matter Death or incompetence of either party Illegality of offer

8. 8 REQUIREMENTS OF AN ACCEPTANCE An acceptance is a voluntary agreement to be bound by the terms of the offer Acceptance issues The mirror image rule Silence as acceptance – generally your silence is not construed as an acceptance of an offer

9. ELEMENTS OF A CONTRACT In addition to an agreement, the following elements must be present to turn an agreement into a contract: Consideration (next slide) Capacity (18 years old and of sound mind) Legality Writing (required by the Statute of Frauds) J. Pittman, Instructor9

10. 10 CONSIDERATION Contracts usually involve promises exchanged between the parties Using a simplified method, the requirement of “consideration” means that each party must suffer a “detriment” with his/her promise A detriment occurs with a promise to do something the promisor had no duty to do, or a promise to give up a legal right

11. 11 CONSIDERATION EXAMPLE Cindy promises to pay $ for the car, a promise she had no prior legal duty to perform Tom promises to sell his car to Cindy, a promise that he had no prior legal duty to perform car $$