Contract Law Forming a contract (The Elements) Validity Contract Types

Elements of a Contract Terms of the contract are the promises made by each side. –I promise to sell my car in the condition you see it, when … –You promise to give me $1000 for it. Consensus ad idem: the clear understanding between both (or all) parties of the terms of the contract and the willingness to abide by them. –I won’t damage the car before you pick it up –You will pay me the full amount

Elements of a Contract, Con’t Offer: a proposal to another party to enter into an agreement on certain terms –I’m proposing to sell my car to you. Offeror: person making the offer –Me in this example. (In an alternate example using the car, it could be someone coming up to me offering to buy my car.) Offeree: person who receives the offer –You in this example. (In the alternate example the offeree could be me.)

Forming a Contract A contract is an agreement or promise the law will enforce Contract Law is based in common law All contracts involve agreements, not all agreements are contracts Courts have created specific rules to guide people to making contracts Agreements that are legal contracts impose rights and responsibilities on each party

Five elements are required to form a valid contract: 1.Offer and Acceptance: one party offers you a product and accepts your money in return 2.Consideration: something of value must be exchanged 3.Capacity: appropriate age and state of mind to enter into an agreement 4.Consent: both parties entered in agreement in good faith w/o coercion 5.Legal Object: nothing illegal about the contract

Validity A contract is valid only if all elements of a contract are satisfied Courts will enforce a legal contract Any contract that lacks one or more of the essential elements is considered void – no party may enforce it

Contract Types Two main types: simple and under seal Simple contracts include most day-to-day transactions Can be written, implied, or verbal Most should be in writing (easier to prove) Simple contract need not be formal as long as basic requirements are met

Simple contracts (cont’d) All contracts are expressed or implied Expressed contracts occur where all terms and conditions are specified clearly in writing (may be verbal or written) Implied Contracts occur where nothing is stated or written precisely – these are agreements made through actions

Contracts Under seal Some contracts must be in writing, dated, signed, witnessed and under seal The seal tells the courts that great deal of serious thought went into the contract It tells that both parties were aware of their rights and responsibilities and both fully intend to meet obligations Common contracts under seal include: wills, home purchases, and mortgages