1. Lesson 7-1 (Creation of a contract offer)
UNIT 2: Contracts
Lesson (Creation of a contract offer)

2. What will you learn?
What are the 6 parts needed to create a valid contract?
What is an offer?
What requirements must be met to create a valid offer?

3. Contract

4. What is a contract?
A contract is a “legal” agreement that courts will enforce
Courts become involved if there is a contract disagreement
Contracts between 2 or more people is the basis of “ALL” economic activity
Contracts are the legal links between individuals, companies, producers and consumers of goods and services

5. What requirements must be met for “every” contract to be valid?
Offer and Acceptance: The offer must be serious, terms definite and complete and accepted to be valid
Genuine Assent: Acceptance must be made without force or false facts
Legality: Contract must be legal
Consideration: Both sides must gain something fair
Capacity: Both parties must have the ability to understand the contract
Writing: Some contracts must be in writing to be valid (Most not)

6. Why are contracts created?
Contracts frequently are based on the exchange of “valuable” promises
Ex) If I want my roof replaced on my home and find someone willing to do the work, I get the new roof, they get paid for their services
Since I wanted the work done, I am called the “Offeror”
The Roofer would be the “Offeree” because they accepted the offer

7. How do negotiations create a contract then?
An offer is made and the party the offer is made to has a choice
Accept the offer as it stand
Change the terms of the offer (Counteroffer)
Decline the offer
All final agreements must be made on “Mutually Acceptable Terms” by both parties with no particular language needed

9. What “3” requirements must be met for every offer?
The offerer must appear to intend to create a serious, legal obligation (Offer being made was not a joke or in anger)
The terms of the offer being made must be definite and complete (Terms are what the offeror is selling or buying)
The offer must be communicated in some way to the offeree (Spoken, , mail, etc..)

10. How do we know the offeror was serious when making the offer?
Test of a Reasonable Person: The “appearance” of how the offer was being made, means how was the offer accepted by the person it was made to
Facts and Circumstances: “How” and “When” was an offer made. For example, was the person joking or mad, therefore NOT making an offer
Preliminary Negotiations: “NOT” an offer, but rather a way to find out if someone would buy your item or sell you their item

11. How do preliminary negotiations work?
Preliminary negotiations are a persons way of “feeling” out another party to determine if they are interested in selling an item, negotiating a price or even buying something from you
Ex) You are walking down the street and see a 1968 Pontiac GTO in someone's driveway. The person is out and you ask them “Hey, would you take $20,000 for that GTO” That is a preliminary negotiation. Change that phrase to make that an official offer for me???

12. Can a date be considered a contract?
Taking someone on a date is called a “Social Agreement” and therefore is NOT a contract
So, you CANNOT sue someone for breaking a date, not showing up to pick you up or even putting you into a financial situation where you think you lost money because a person did not date you or go out with you as a friend

13. How are the duties and rights determined in a contract?
The terms of a contract must be clear and complete
Purpose is so courts can determine what the 2 parties to a contract wanted and agreed to
Complete means the agreement contained all “Essential Information”
Essential information is every fact about the agreed product or service
Ex) Name, payment method, year product was made, color, size, etc..

14. Why must essential information be included?
Each essential term must be “Clear”
Clear means it can identified as accurate or factual
Ex) I am selling a black 2010 Dodge Mini Van with a light grey cloth interior and 56,000 miles, and it runs like new for $13,000. Is this a clear offer?

15. What are implied terms in a contract?
Implied terms are things that are understood without being discussed
If I go into a store and want to buy an item, its “Implied” that I will pay for it before I leave (Law states you must pay), therefore the retailer does not have to tell you this.
Contract terms can be implied by law or by common practice

16. Now, lets watch this….

17. Are advertisements considered valid offers to contract?
Most Advertisements are considered “invitations” to an offer, rather than an official offer
If all Advertisements were offers, retailers could be sued for running out of goods
Invitations means the customer gets the price if the good is there and they decide they want to buy

18. Can an advertisement ever be an official offer?
Yes, under 2 conditions
#1: If its worded to address the problem of numerous people wanting a limited product
#2: If the ad asks the person who accepts (Offeree) to perform in a way to accept

19. Why must the offer be communicated to the offeree?
Only the person who the offer was made to (Offeree) can accept the offer (Unless it was made to a group)
Ex) If I am in a classroom and I ask “1” student to buy me a Frontier T-shirt, they are the only one who can accept
Offers can be made verbally, in writing, through or over the phone
Offeree must be made aware of the offer

20. Ticket out the door quiz
Complete the practice quiz and turn in before end of class
Review and quiz within next 3 classes