T ODAY ’ S O BJECTIVES  Identify the six elements of a contract.  Explain the effects of a contract on a minor.  Identify types of contracts.  Analyze the need for contracts.

How many of you are currently subject to a contractual agreement? What are some examples of contracts?

T HE N ATURE OF A C ONTRACT  A contract is any agreement enforceable by law.  Not all agreements are contracts.

Six Elements of a Contract

E LEMENTS OF A C ONTRACT  Offer  Acceptance  Agreement  Consideration  Capacity  Legality  In order to have a legally enforceable contract, all six elements must be present.  Do contracts have to be in writing to be enforceable by law?

O FFER  Proposal to make a definite and certain deal with serious intent  Must be communicated to another person  Remains open until it is accepted, rejected, retracted, or expires  Counter-offers can be made and close the original offer

A CCEPTANCE  Acknowledgement by the offeree (person receiving the offer) that the offer is accepted unconditionally  Must be communicated to the offeror in a reasonable manner  May be spoken, written, or by action

G ENUINE A SSENT  Reached when a valid offer is met by a valid acceptance  The offer and acceptance together create genuine assent.  Genuine agreements cannot exist if there is fraud, misrepresentation, mistake, undue influence, etc.

C APACITY  Legal ability to enter a contract  Contracts can be disaffirmed by:  Minors  People with mental impairments  People under the influence

C ONSIDERATION  Consideration is what is exchanged as a result of the contract.  May be money, property, or services

L EGALITY  In general, a court will not help any party to an illegal contract.  Neither party can enforce the agreement.  Neither party can get help from the court.

What kinds of contracts are recognized by law?

T HE L AW R ECOGNIZES …  Express Contracts – written or spoken  Executory Contracts – not fully performed  Executed Contracts – completed by both parties  Quasi-Contracts – missing an element, still enforceable  Sales Contracts – sale of property, rent, wills, estates  Employment Contracts – business organizations

W E NEED CONTRACTS …  Because they are important in a free- market economy  Because verbal (handshake) agreements are in decline  Because they have protective power  Because the court can intervene & enforce  Because of the litigious nature of society

B REACHING A C ONTRACT  If one party does not follow through with consideration in a contract, the other party doesn’t have to perform.  Failure to perform is called a breach.

E NFORCEMENT  Damages – the party who is harmed can request money (equal to the amount lost from the breach) from the other party  Specific Performance – if it is still possible to perform the contract, the court can require the party to perform

Certain things can make contracts void, even though both parties agreed on the terms and there was valid consideration.

U NCONSCIONABILITY  If one party tricked another party into agreeing to an unfair contract, the court may not enforce it.  Example: businesses who try to trick poor or uneducated clients

F RAUD OR D URESS  Lying or misrepresentin g something in negotiations  Taking advantage of someone in a bad situation