Contracts PowerPoint

Contracts
Chapter 6

Contracts
• Think about how many times we make promises
that are legally binding? What excuses are
acceptable for breaking those promises?
▫ Sometimes promises create moral rather than
legal obligations.
Moral obligations do not create legal liability.
▫ Dates are social agreements and are not
enforceable.

Terms
• Contract – legally enforceable agreement to do
OR not to do something
• Offeror – party who makes the offer
• Offeree – party to whom an offer is made

• Contract law is necessary to allow the innocent
party some form of legal remedy (compensation)
▫ UCC is very important to contract law
• Promise – something will/will not happen
▫ Promisor – person making promise
▫ Promisee – person to whom a promise is made

Requirements of a Contract:
• Offer and Acceptance
▫ serious offer to contract and be bound by the
contract. Terms must be definite.
• Consideration
▫ Something of value received or promised
• Legal Capacity
▫ Competent parties
• Legality
▫ must be a legally binding contract
• Genuine (Mutual) Assent
▫ meeting of the minds
• Proper Form
▫ some agreements must be in writing

In Class Activity
• Take out a piece of paper and work
with your “shoulder partner”.
• List the SIX requirements of a
contract!

In Class Activity 2
• You need to create 2 scenarios:
▫ A legally binding contract (with the 6
requirements)
▫ A void/ non enforceable contract

Terms
• Express – fully stated in words (oral or written)
• Implied – implied from conduct of the parties
• Quasi – protest an innocent party, obligation
created by law
▫ ATM machine example
• Formal – requires special form – under seal
• Informal – does not require special form; most
contracts are informal

Terms
Executed – contract that has been fully completed
Executory – contract that has NOT been
completed
• Valid – includes all the essential elements –
completely enforceable
• Void – agreement that cannot be enforced;
lacking an essential element

How is a Contact Not Enforceable?
• Voidable – gives one party the right to cancel the
contract without penalty
▫ ratify – makes valid
▫ voidable at the option of the injured party
▫ mutual mistake, duress, undue influence, minors,
mentally unstable, etc.
• Unenforceable – valid contract but cannot be
enforced because of some legal defense.

• Get into groups 4 groups
• Draw a cartoon strip of one of the following
words:
▫ Bilateral Acceptance
▫ Unilateral Acceptance
▫ Voidable Contract
▫ Unenforceable Contract

• Student Version: Different Types of Contracts

Offer and Acceptance

Offer
• First step in a binding contract
• Offer – promise by offeror to do something
• Acceptance – agreement by offeree to do what was
requested
• Offers –
▫ seriously intended – anger is not legally binding
reasonable person standard
advertisements – are NOT offers, only invitations to make an offer
auctions - invitations to make an offer

Offer
• Offers must be definite
▫ clear and complete
• Must be communicated
▫ writing, orally, or by actions
▫ rewards – is only payable if the offeree KNEW of it
▫ not payable to people who already have a pre-existing duty (police
officers)
• Counteroffer – terminates original offer
• Lapse of time terminates an offer (reasonable time)
• Rejection terminates an offer – writing or words
• Revocation – must be communicated
• Option offers – contracts – keeping an offer open (real estate)
• Death or insanity
• Impossibility of performance

Minors and their contracts
• Age of majority in most states is 18
▫ 17 is a grey area though – be careful
Minor can:
accept (ratify)
disaffirm (deny) a contract
Disaffirmance can take place any time during
minority or a reasonable time after reaching
majority - timely

Minors
• Minors must return goods they received if they
disaffirm
▫ duty of restoration
▫ duty of restitution
• If a minor is disaffirming, must disaffirm the
entire contract

Minors
• Misrepresentation of Age
▫ just lying about age causes disaffirmance
▫ some courts refuse to let minor disaffirm unless
consideration is provided
▫ can disaffirm but held liable for damages.
Defrauded party can sue

Minors
• Emancipation – release of minor by parents –
complete surrender of rights
▫ cancels parental obligations
• Minors are liable for reasonable value of
necessaries

Acceptance
• must be accepted only by the offeree
• agree with the offer
▫ remember that in a unilateral contract, acceptance is the DOING
of the act
and offeror needs to be contacted that the act is completed –
notification
• acceptance must be done in the manner stipulated in the
contract
• silence does not constitute acceptance
• mailbox rule – acceptance is effective when mailed
(postmarked)
• A letter of revocation is not effective until received