Imagination at work. David Echenberg P&W Legal Counsel October 30 th, 2015 Part I – Introduction What is a Contract?

Introduction A contract is an agreement between two Parties to provide a product or service. There are six elements for a contract to be valid: 1.Offer: one Party promises to take a specific action or provide something of value in the future; 2.Acceptance: the offer is unconditionally accepted by the other Party (e.g. without ‘ifs’, ‘but’ or ‘ands’) Art 1326; 3.Consideration, something of value is promised in exchange for the specific action, (e.g., money or effort); 4.There is the mutual intent of both Parties to carry out the agreement; 5.Capacity of the Parties in terms of age and mental ability; 6.Legally enforceable terms and conditions. 2 When a salesperson asks you to sign on the ‘dotted’ line, it is important to understand what you are signing. The agreement you are entering is a contract! Pro – Bono Contract Law| 30 October 2015

Offer & Acceptance When two parties enter into a contract, a couple of things happen. 1.One Party, the offeror, offers to take specific action or something of value in exchange for a promise. 2.The other Party, the offeree accepts or declines the offer. 3.If the offer made by the offeror is accepted by the offeree, there is an agreement. 3 Pro – Bono Contract Law| 30 October 2015

Offer & Acceptance: Example Rocco wants to buy a new kayak and looks at the online classified ads. He notices Mario had a barely used blue kayak for sale for $400. After checking the kayak for seaworthiness, Rocco agrees to buy Mario’s kayak for $400 and after they make arrangements for delivery. Offer and acceptance of the offer are required for a contract to be formed. 4 Pro – Bono Contract Law| 30 October 2015

Offer & Counter Offer An offer is a promise in exchange for performance by another party. When an offer is not accepted and a new offer is made, it is a counter offer. Taking our example, if Rocco had offered $350 for the kayak, then Mario’s original offer of $400 would not have been accepted by Rocco. After, Rocco’s counter offer would be considered as a ‘new’ offer at the new lower price of $350. If Mario accepts the new offer, then there is an agreement.. 5 Pro – Bono Contract Law| 30 October 2015

Consideration Example: Maria is walking down the street and sees 7 kittens in a pet shop window and a sign, 'Kitten Sale - $10 Today Only.‘ Maria goes in the store and agrees to pay Paola $70 and takes the 7 kittens home. This simple transaction represents three elements of a contract - offer, acceptance and consideration. Paola made an offer that Maria accepted and in exchange for the 7 cats, Maria agreed to pay Paola $70 as consideration. 6 The third element required to create a contract is consideration, which means: “Something of value given by both parties that causes them to enter into the agreement to exchange mutual performances.” Pro – Bono Contract Law| 30 October 2015

Intent, Capacity and Legal Terms A contract is an agreement between two Parties who have the mutual intent to fulfill the promises agreed to. In other words, both Parties agree to the same thing. There are a few more elements that are equally important that are legal requirements of contract law which are: Capacity: each party is free of mental illness or intoxication and of legal age; Legal Terms: that none of the promises are unlawful or illegal to perform. Art Pro – Bono Contract Law| 30 October 2015

Intent - Example 8 Example : Laura is planning a family reunion at the Parco di Monza. She calls Umberto I Catering and with Chef Fernando, picks the menu. The contract includes important information, such as the date, location, menu and price. They agree that on Sunday the 25 th of October, Fernando will prepare a rizzoto that will be delivered to the Parco di Monza at 1pm and Laura will pay in advance. The information set out in the contract reflects Laura’s and Fernando’s mutual intent. Pro – Bono Contract Law| 30 October 2015

EXERCISE 1 Giovanni, a homeowner, receives a phone call from a salesman Carlo who wants to sell him Weed Gardening Services. Giovanni responds, “No, thank you,” and hangs up. Two days later, Giovanni returns home from work to find a crew gardening in his yard and a bill for $200 sitting on the porch. When Giovanni tells the Carlo that he never asked for this service, Carlo responds by saying, “It looks much better, doesn’t it? You got the service, now pay for it.” Giovanni agrees that the work was of good quality, but refuses to pay for it. He later receives a notice to appear in court because of this dispute. How should the judge rule? A. For Carlo, because Carlo performed good quality services for Giovanni. Sorry, but that's not the correct answer. Please select another. B. For Giovanni, because he did not accept Carlo's offer. Yes, the correct answer is B. Giovanni never accepted Carol's offer. Without acceptance, no contract was formed. Giovanni does not have to pay for the yard work, regardless of quality. 9 Pro – Bono Contract Law| 30 October 2015

EXERCISE 2 Margarita goes to Massimo’s house and finds him working on his old pickup truck in the driveway. Massimo kicks the truck and says to Margarita, “This piece of junk isn’t worth a tank of gas – you can have it.” Margarita says thanks and the next day comes by with her SUV to tow away the pickup. Massimo stops her and says the truck is working now. Margarita goes to court and claims that the truck Massimo promised him was worth $500 and Massimo should pay him that amount. How should the judge rule? A.For Massimo, because there was no consideration for the transaction. Yes, the correct answer is A. Massimo offered the truck to Margarita, and Margarita indicated her acceptance by saying thanks and attempting to tow the truck away. But Margarita did not provide any consideration in return for the truck. Without consideration, no contract was created. B. For Margarita, because Massimo promised her the pickup truck, and that created a contract. Sorry, but that's not the correct answer. Please select another. C. For Massimo, because Margarita never accepted his offer. Sorry, but that's not the correct answer. Please select another. 10 Pro – Bono Contract Law| 30 October 2015

EXERCISE 3 Maria puts an ad in the newspaper stating that she wants to sell her horse for $500. Luca goes to Maria’s home and tells her that he is interested in buying the horse. After looking at it, Luca gives Maria $500 in cash, which Maria puts in her pocket. Just then, Antonio drives up and tells Maria that he’ll give her $600 for the horse. Maria hands Luca back his $500 and sells the horse to Antonio. Luca sues Maria for breach of contract. How should the judge rule? A.For Maria, because there was no offer and acceptance. Sorry, but that's not the correct answer. Please select another. B. For Maria, because she gave the money back to Luca. Sorry, but that's not the correct answer. Please select another. C. For Luca, because once Maria accepted the money, the deal was closed. C is correct. Maria's ad offered to sell the horse for $500 and Luca accepted the offer by handing Maria the money, which she accepted. At that time, both Maria and Luca intended that Luca would buy the horse. These actions and mutual intention created a contract between Maria and Luca, which Maria breached by selling her horse to Antonio. D. For Maria, because she didn’t specifically say why she was taking the money. Sorry, but that's not the correct answer. Please select another.. 11 Pro – Bono Contract Law| 30 October 2015

EXERCISE 4 Team members of Group A are organizing a graduation party for the end of the school year. Team members of Group B are salespersons for a local disco that offers graduation parties. Group A and Group B are to negotiate a valid contract at the best price that each member of Group A and B can obtain. At the end, the winners between Group A and Group B will be determined as well as a prize will be given for the best written contract. Good Luck! 12 Pro – Bono Contract Law| 30 October 2015

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