1. Mr. Sherpinsky’s Business Law Class Entering Into Contracts 2015

2. Mr. Sherpinsky’s Business Law Class Entering Into Contracts

3. Justice Journal  Imagine you have your own website design company. You have several contracts with small businesses in your community.  In addition to doing design work, you host Web sites, keep the information updated, and troubleshoot problems for these companies. Think! importance of having a contract ▪ Take Five (5) Minutes: Think! Come up with three to four reasons why there is an importance of having a contract, what type of information would be included in your contract?… ▪ Things like: ▪ Things like: How would you bring your contract to an end or settle any disputes.

4. THE PLAYERS  Mr. Benes  Alena  Viktor  Hana  Emil QUESTIONS TO PONDER! 1) Does a promise create a contract? 2) What characteristics do contracts have? 3) When does a contract legally come into existence? 4) What constitutes a legal offer? 5) What constitutes a legal acceptance?

5.  contract (p. 106)  offer/acceptance (p. 109)  genuine agreement (p. 109)  capacity (p. 109)  consideration (p. 109)  legality (p. 109)  void/voidable contract (p. 110)  unenforceable (p. 111)  express/implied contract (p. 111)  bilateral/unilateral contract (pp. 111, 112)

6. Following through on a promise is an important underlying assumption in a contract between people and businesses.  Certain key elements must exist for a contract to be legally binding. What types of elements do you think must exist between two parties so that a contract is binding?????

7. How would you define contract?  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.

8. Evolution of contract law:  Equity Theory: Parties to a contract exchanged things of equal value. This approach was called the equity theory of contract law.  Free Will Theory: 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.  Formalist Theory: Then the courts began to study the parties’ actions and words to determine if there was a “meeting of the minds.”

9.  Offer  Acceptance  Genuine Agreement  Consideration  Capacity  Legality ***All six elements must be present in order to constitute a contract***

10. offer  An offer is a proposal by one party to another intended to create a legally binding agreement  Must be directed to a specific person  Example:  Menu listing prices isn’t an offer because it’s not directed toward anyone in particular  When you place your order, you make an offer  When they start cooking your food, the restaurant has accepted your offer, and a contract has been formed

11. acceptance  An acceptance is the second party’s unqualified willingness to go along with the first party’s proposal certain actions carry out the terms of a bargain  The law infers acceptance from certain actions, such as signing a contract or beginning to carry out the terms of a bargain

12.  Genuine Agreement: genuine agreement  If a valid offer is met by a valid acceptance, a genuine agreement exists.  Capacity  Capacity is the legal ability to enter a contract.  Minors can make contracts, but many times they are asked to have a cosigner (Person responsible for the contract should the minor fail to pay)

13.  Capacity  Capacity is the legal ability to enter a contract.  Conditions affecting capacity:  Intoxication, mental illness, legal competency or something against the public good is usually NOT enforceable

14.  Consideration  Consideration is the exchange of things of value.  (Must be legally sufficient and bargained-for) What about a promise?  You buy a shirt, the consideration you pay is the money, and the merchant’s is the item you’re buying  DOES NOT have to be the same value?

15.  Legality  Legality means that people can only enter into contracts for legal purposes.  People cannot enter into contracts to commit illegal acts.

17. ItemTotals JJ Heller ContractApplication Food18XFull entourage Transportation18XFull entourage Drink17XFull entourage Private Dressing Room15XStar and Band Accommodations11XStar and Band Clothes8OSee SWAG Personal Assistant/Care8XLiaison w/Star Staff Security8XMin: 8/2 Directly Assigned to Star TV/Entertainment8OPart of Accommodations After Party/Gathering4XUp to 40 people Make-Up Artist4OHas own people Free Passes3XUp to 20 people/Identified in advance Recording of Event3XMandatory for Label Swag3XVenue and Promotional products/full entourage Technical Stuff3XSetup 12 hours/2 rehearsals/No visitors Payment Up front2XPaid 30 days in advance of event Flowers1XIn room/dressing room/vehicle (daily) Spa1O

18.  Contracts can have any of the following characteristics:  valid, void, voidable, or unenforceable  express or implied  bilateral or unilateral  oral or written

19.  Contracts can have any of the following characteristics:  Formal and Informal  Formal:  Formal: Requires a special form or method of creation for contract formation  Examples: contracts under seal, negotiable instruments, letters of credit  Informal or (Simple Contracts): put into writing to hold proof of existence  Requires no special form for contract information, but usually details or conditions are put into writing to hold proof of existence.

20. Valid, Void, Voidable, or Unenforceable valid  A valid contract is legally binding.  MUST have the necessary contractual elements of offer, acceptance, agreement, consideration, legal capacity, and legal purpose void  A contract that is void has no legal effect.  No contract exists, or there is a contract without legal obligations

21. Valid, Void, Voidable, or Unenforceable void  A contract that is void has no legal effect. a voidable contract  When a party to a contract is able to avoid, or enforce, or cancel the contract for any legal reason, it is a voidable contract. unenforceable  An unenforceable contract is one the court will not uphold.

22. Express or Implied  Express words.  Express contract is stated in words.  Can be oral, written or a combination. implied in fact. (Conduct)  An implied in fact contract comes about from the actions of the parties. (Conduct)

23. Bilateral or Unilateral bilateral contract  A bilateral contract contains two promises.  Promise for a promise unilateral contract  A unilateral contract contains a promise by only one person to do something, if and when the other party performs some act.  A promise for an act  Acceptance is the completed or substantial performance of the contract

24. Oral or Written AAn o oo 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. SSometimes, however, it is desirable to put contracts in w ww writing. PPPPennsylvania Law requires written contracts!

25. one What is one characteristic that you think a contract must have?

26. CONTRACT FORMATION Bilateral A promise for a promise Unilateral A promise for an act Formal Requires a special form for creation Informal Requires no special form for creation Express Formed by words Implied by fact Formed at least in part by the parties conduct

27.  Concept Development  6 Elements of a Contract ▪ Features and Details of Contracts ▪ Be specific and detailed when possible ▪ WARNING: Watch for problems !

28. Use the Six (6) Elements  Childcare Care Giver Contract: ▪ Dates: Begin/End ▪ Worksite/Work Schedule ▪ Job Responsibilities ▪ Compensation ▪ Paid Time Off/Sick/Family leave ▪ Holidays/Off/Modified Work Schedule ▪ Taxes/Raises/Reviews/Periods ▪ Termination ▪ Social media/Privacy ▪ Signature Lines w/date

29. Care Giver Contract:  Dates: Begin/End  Start Date-End Date  Worksite/Work Schedule  Main Workplace/worksite  Days and Times for regular work schedule  Job Responsibilities  Create a stimulating, nurturing, and safe environment for the children  Supervise the children’s activities at all times  Plan and prepare meals and bottles for, and feed, the children  Dress the children  Place the children down for naps and bedtime Care Giver Contract: Job Responsibilities-Con’t  Bathe the children  Change diapers  Potty train the children  Perform housework related to child care, including washing the children’s clothes, cleaning up after meals, tidying play areas, and washing bottles  Teach the children good social manners  Play with the children, both indoors and outdoors  Plan and lead educational activities, including reading, with the children  Discipline the children, when necessary  Drive the children to and from activities  Administer medicine to the children

30. Care Giver Contract:  Compensation  Regular rate of pay  Overtime Rate  Pay day (Twice monthly/weekly/monthly)  Time off ▪ When/what days allowed ▪ Paid vs. unpaid holidays ▪ Sick days- Paid or unpaid  Number of sick days allowed (per period) ▪ Family leave time ▪ Vacation time  Taxes (Who is paying them)  Raises/Reviews/Time Periods

31.  GROUNDS FOR TERMINATION  The following are grounds for immediate termination: ▪ Allowing the safety of the dependent(s) to be compromised ▪ Inconsistent or non-performance of agreed-upon job responsibilities ▪ Concerning issues in background checks ▪ Dishonesty ▪ Stealing ▪ Misuse of family automobile ▪ Breach of confidentiality clause ▪ Persistent absenteeism or tardiness ▪ Unapproved guests ▪ Smoking or consumption of alcohol while on duty ▪ Use of an illegal drug ▪ Overuse of cell phone while on duty or while driving

32.  PRIVACY  Any and all private information obtained during the course of employment considered private ▪ Medical ▪ Financial ▪ Legal ▪ Career ▪ Strictly confidential and may not be disclosed to any third party for any reason without a court order!

33.  Social media  No information about: ▪ His/her location ▪ Plans for the day ▪ Pictures of the children ▪ Information sharing  Distractions and fears for kids using Internet  Emails, Instant Messenger, and chats  Cyberbullying

34. Use the Six (6) Elements  Childcare Care Giver Contract: ▪ Dates: Beginning/End Dates of employment ▪ Worksite/Work Schedule Min. 6 day week with hours on specific days ▪ Job Responsibilities Min. 6 duties ▪ Compensation Salary, Benefits ▪ Paid Time Off/Sick/Family leave ▪ Holidays/Off/Modified Work Schedule ▪ Taxes/Raises/Reviews/Periods ▪ Termination-Min. 10 reasons ▪ Social media/Privacy: Rules ▪ Signature Lines w/date

35. Offer and Acceptance

36.  Evaluating Intent  “Janine and Sedrick were joking about how difficult it was to go back in college after the summer break. Janine said that she wished she were back at home and would sell all her books to the first person who gave her $100. Sedrick pulled out $100 and offers it to Janine for her books.”  Should Janine be required to sell her books to Sedrick?

37.  What do you think is the difference between an offer and an invitation to negotiate? Offer versus Invitation to Negotiate

38. 1. Must be made seriously 2. Has to be definite and certain 3. Must be communicated to offeree

39.  No contract without both primary elements  Mutually agreed terms

40.  Offeror  Gives proposal  Offeree  Person to whom offer is made  Proposal by offeror to do something  Must appear to intend to create legal obligation  Terms must be definite & complete  Must be communicated to the offeree

41.  Objective legal test used by jurors or judges  Concerned with the appearance of the action ▪ Problem: Think you are joking but interpreted as serious intention then you have made an offer ▪ Problem: If you are serious but interpreted as joking you have not made an offer

42.  The intention of entering into a legal obligation.  Example: Venting

43.  Offer must be made with seriousness  Not in heat of anger  As a joke Advertisement for Lava Lamps, $49.98 Buyer comes to store to buy a lamp Clerk apologized and said lamps had sold out in 1 hour after the store opened.

44. Information communicated without indicating intent  Social Agreements ▪ Don’t create legal obligations  Advertisements ▪ Not considered an offer – but an invitation to make offer

45.  Advertisements (price tags, signs in windows or on counters, prices marked on merchandise)…unless it contains a specific promise, Example: “first come, first served”  Example 3, pg. 114

46.  Allows court to determine what was intended & identify legal rights  Complete  Price (if not communicated = current market price)  Full terms for payment  Legal description of goods/services  Date for delivery of possession  Date for delivery of the transfer of ownership/title/deed  Definite  Essential term identified clearly

47.  Cannot be a certain offer if something is too unclear or vague  Example 4, pg. 115-116

48. Example  Joe Vasquez offered a position as an account executive w/ International Corp.  Salary of $2,400 per month plus reasonable commission on total sales  Is this a definite and certain offer?  No, why?  Difficult to determine what “reasonable” commission is….

49.  Only intended offeree can accept  Can’t accept if didn’t know offer was made

50.  Telephone, letter, telegram, fax, e-mail, or any other method that communicates the offer to the offeree.  Mailbox Rule!  Example 5, pg. 116

51. Example:  Jean LeFerve found a wallet.  The driver’s license identified the owner.  Jean returned the wallet  The owner thank her but did nothing more  Later in the evening, while reading the newspaper, Leferve discovered that the owner offered a reward for the return of the wallet.  Does she have a claim?

52. 1. Must be made seriously 2. Has to be definite and certain 3. Must be communicated to offeree

54. Must be 1. Unconditional 2. Unqualified 3. Must follow all rules regarding the method of acceptance

55.  Offeree must accept all terms  Changes = Counteroffer  Mirror Image Rule ▪ Terms in acceptance exactly match the terms contained in the offer

56.  Silence as Acceptance  Continuing relationship – agree in advance ▪ Not Valid if offer is worded in a way in which silence means acceptance  Unilateral Acceptance  Promises something in return for the offeree’s performance & indicates performance is acceptance ▪ Only be revoke after reasonable amount of time

57. Example:  Bradley wrote a letter to Franz offering to sell his motorcycle. “If I do not hear from you, I shall assume that you have accepted my offer,” he said…  Did he really accept the offer?  Would being silent bind him to pay?

58.  Bilateral Acceptance  Most offers use this type of acceptance  Most common method of acceptance ▪ Requires that offeree accept by communicating the requested promise back to offeror

59.  Telephone?  Text Messaging?  Mail?  Delivery Service?  E-mail?  Fax?  Other?

60. require  Offeror may require offeree to use a certain communication method to accept.  Once it is accepted, it’s binding  Oral/Spoken  Mail  Telegram  Fax  Email

61. contract  The time at which an acceptance takes place is important because that is when the contract comes into existence.  Example 7, pg. 119

62.  Art Gifford sent a letter to Marge and Norm Grayson, offering to buy their home for $80,000  The Graysons who advertised their house at $85,000, wrote a reply stating, “We accept your offer. However, we would like the price set at $83,000  Did the Graysons accept the offer?

65. May occur in any of 5 ways 1. Revocation 2. Rejection 3. Counteroffer – ends the first offer 4. Expiration of time 5. Death or Insanity

66. Taking back of an offer by the offeror Example  Rob offered to sell his CD burner to Jodi Costa for $250.00  Jodi examined the CD burner and found that it was in good condition  However, Jodi couldn’t decide if she wanted to spend so much money.  She told Rob she would consider his offer.  Rob called Jodi later the same day and withdrew his offer.  Can he do so? Why?  Jodi had not yet accepted his offer….  – example 8, pg. 120

67. Refusal of an offer by the offeree brings the offer to an end.  Example  Diane decided that she wanted to make some extra money by selling dried flower.  She offered the flowers to a friend for $40.00  Friend looked at the flowers and decided not to purchase them.  Has the offer come to an end?  – example 9, pg. 120

68. A counteroffer ends the first offer. Example:  “I’ll sell you my camera for $50.00, and you say “I’ll give you $45.00 for it.”  No contract comes into existence unless the original offeror accepts your new offer.  If you say later, “Ok, I’ll give you $50.00 you are now making a new offer…”  Mirror Image Rule (Must be exactly same)

69. If the offeror sets a time limit for the acceptance of the offer, it must be honored. Example:  If Frank says to John, “I’ll sell you my motorcycle for $1,000 and you have till noon tomorrow to accept, then you must honor the timeline given.  If no timeline is given then the offer must be accepted within a reasonable time.

70. Example:  Options  If an offeree pays money or other consideration to an offeror to hold an offer open for an agreed period of time, an option contract comes into existence.  An option contract is a binding promise to hold an offer open for a specific period of time. ▪ Exclusive right to accept the offer ▪ Within the agreed time ▪ Subject to the terms of the original offer

71. If the offeror dies or becomes insane before the offer is accepted, the offer comes to an end.  Death ends an offer, but not a contract  Estate heirs will have to comply with the terms of any contract  Unless the contract is for personal services  Destruction  Destruction of specific subject matter

72.  Options  Offeree gives the offeror something of value in return for a promise to keep the offer open ▪ Binding the Offerer within the specific limits  Firm Offers (Standing Offers) MUST STAY OPEN UNTIL DEADLINE!  Applies to merchants who make offers in writing…MUST STAY OPEN UNTIL DEADLINE! ▪ MUST contain a term stating how long it is to stay open and how it MAY be revoked!

73.  What are the requirements of an offer?  Serious intent  Clear and definite terms  Communication to the offeree  What is the difference between an offer and an invitation to negotiate?  An offer empowers the offeree to accept its terms and create a contract  An invitation to negotiate invites the other party to make an offer.

74.  What are the requirements of acceptance?  Must be unconditional (Known as???)  Must follow the rules regarding the method of acceptance  What is the difference between an acceptance and a counteroffer?  An acceptance creates a contract  A counteroffer means the original offer has not been accepted… New offer has been made

75.  When is an offer terminated? revocation  Upon revocation by offeror rejection  On rejection by offeree counteroffer  When a counteroffer has been made expiration  After expiration of a set period of time or deadline  Death/and/or Insanity Destructionof Subject Matter  Death/and/or Insanity or Destruction of Subject Matter

77. YOU BE THE JUDGE!

78. Situation Analysis  Anne Samuels offered John Goodwin $25.00 if Goodwin would polish her car. Goodwin said nothing but started to work and polished the car.  Is there a contract?

79. Class Work Situation Analysis  Anne Samuels offered John Goodwin $25.00 if Goodwin would polish her car. Goodwin said nothing but started to work and polished the car.  Is there a contract?  Yes…But what kind of contract?  This unilateral contract consists of an offer that is accepted by an act. When the act is done the contract is complete.

80. Situation Analysis  An auctioneer says, “Do I hear a bid for this antique sofa? Someone in the crowd say, “$300.”  Is there a contract?

81. Class Work Situation Analysis  An auctioneer says, “Do I hear a bid for this antique sofa? Someone in the crowd say, “$300.”  Is there a contract?  NO…No contract has been made. WHY?  Auctioneer said “What am I bid” which is an invitation to make an offer…  The $300 bid is only an offer…

82. Class Work Situation Analysis  Annette Ramsey, a sales rep. for the Carlin Boat Company, wrote to harry Duffin, offering to sell him a boat for $600 and agreeing to hold the offer open for one week. Two days later, before Duffin made an acceptance, the boat company withdrew its offer.  Could the company legally do this?

83. Class Work Situation Analysis  Annette Ramsey, a sales rep. for the Carlin Boat Company, wrote to harry Duffin, offering to sell him a boat for $600 and agreeing to hold the offer open for one week. Two days later, before Duffin made an acceptance, the boat company withdrew its offer.  Could the company legally do this?  No. … But Why?  An offer to sell goods written and signed by the merchant’s rep. assures that the offer is held open during the stated time. This is a firm offer.

84. Class Work Situation Analysis  Arlene Burns, a dealer in pre-owned cars, telephoned Sam Firman and offered to sell him a pre-owned car for $2,000. Firman told her he wanted to think it over and would let her know later. That afternoon Firman sent Burns a letter express mail stating he would buy the used car.  Did this result in a valid contract?  Yes….But Why?  An offer to make a contract can be accepted in any manner reasonable under the circumstances.

85. Class Work Situation Analysis  Bob Keefer wrote to Ed Ramirez offering to sell him the restaurant that Keefer owned. Rameriz wrote back to Keefer accepting the offer. He mailed the letter of acceptance on March 17 at 10:30AM., and Keefer received it on March 18 at 11:00AM. Keefer had decided to revoke his offer, however, and had mailed a second letter to Ramirez on March 16 at 11:00AM., which stated his decision to revoke. Ramirez received his letter on March 17 at 10:00AM.  Was there a contract?  No. The revocation took effect at March 17 th 10:00AM.

86. Class Work Situation Analysis  Betty Allen offered to sell Cynthia Blaustein her skis for $100. She wrote to Blaustein, saying, “If I do not hear from you in two weeks, I will assume that you accept my offer,”  If Blaustein does not answer, must she pay Allen $100 for the skis?  No.  A person cannot be compelled to speak or write in order to avoid a binding agreement and is under NO obligation to reply to the offer.

87. Using MS Word, respond to the challenges using concepts and ideas from Chapter 5. Cite specific concepts and make sure you explain how it applies. Use exact information from the case to back up your assumptions…

88. 1. What are the 6 elements of a contract? 2. Who can accept an offer? 3. What is the Mirror Image Rule?

89.  Finish Chapter 5 Packet and Vocabulary  Review Thursday…  Exam will be Monday……