contracts and contract law the elements of a contract

Contracts and Contracts and Contract LawContract Law

The Elements of a ContractThe Elements of a Contract

Learning GoalLearning Goal

To recognize the To recognize the elements of elements of

a contract, including a contract, including offer and offer and

acceptance.acceptance.

ContractContractAny agreement enforceable Any agreement enforceable

by law.by law.

Does NOT have to be written!!!

To be legally complete, a contract must contain 6 Elements.

6 Elements6 Elements of a of a

ContractContract

A proposal made by one party A proposal made by one party

(offeror) to another party (offeror) to another party

(offeree) indicating a (offeree) indicating a

willingness to enter a willingness to enter a

contract.contract.

#1: Offer#1: Offer

3 Requirements of 3 Requirements of an Offeran Offer1.1. Serious IntentSerious Intent

Not merely an “invitation to negotiate” like an advertisement.

2.2. Definiteness and CertaintyDefiniteness and Certainty Vague conditions are not legally

enforceable.

3.3. Communication to the OffereeCommunication to the Offeree MUST be communicated to be legal

#2: Acceptance#2: Acceptance

The agreement of the offeree The agreement of the offeree

to be bound by the terms of to be bound by the terms of

the offer.the offer.

Requirements of Requirements of AcceptanceAcceptance1.1. Unconditional AcceptanceUnconditional Acceptance

Must NOT change the terms of the original offer in ANY way.

If a change is made, it is a “counteroffer” and the original offeror is not obligated to accept.

2.2. Must follow the rules regarding Must follow the rules regarding the Methods of Acceptancethe Methods of Acceptance

Methods of AcceptanceMethods of Acceptance1.1. When negotiating long-distance:When negotiating long-distance:

Acceptance is effective when sent Any communication qualifies Acceptance is implied when using the

same speed as the offeror

2.2. Some offers/acceptances can be Some offers/acceptances can be impliedimplied

3.3. Some offers require specific Some offers require specific performanceperformance

Termination of an OfferTermination of an Offer

1.1. Revocation – Revocation – offeror terminates

2.2. Rejection – Rejection – offeree terminates

3.3. CounterofferCounteroffer

4.4. Expiration of TimeExpiration of Time

5.5. Death or InsanityDeath or Insanity

Contracts and Contracts and Contract LawContract Law

The Elements of a ContractThe Elements of a Contract

Learning GoalLearning Goal

To recognize the To recognize the elements of elements of

a contract, and what a contract, and what makes a defective makes a defective

agreement.agreement.

6 Elements6 Elements of a of a

ContractContract(continued)(continued)

#3: Genuine Agreement#3: Genuine Agreement

When a valid offer is met by a valid When a valid offer is met by a valid acceptance. “A meeting of the acceptance. “A meeting of the minds.”minds.”

When Offer and Acceptance are both When Offer and Acceptance are both present . . . but . . . present . . . but . . .

Agreement can be destroyed if it is found to be not genuine.

1.1. ConcealmentConcealment – – Choosing not to Choosing not to

reveal important information that a reveal important information that a

party is obligated to reveal.party is obligated to reveal.

2.2. Innocent MisrepresentationInnocent Misrepresentation – – Making Making

an innocent statement that turns-out an innocent statement that turns-out

to be false.to be false.

The victim may rescind the contract, but The victim may rescind the contract, but

can NOT collect any damages.can NOT collect any damages.

Defective AgreementsDefective Agreements

3.3. MistakeMistake – – Entering a contract with the Entering a contract with the belief that certain things are true, which belief that certain things are true, which are in fact not true.are in fact not true. Unilateral MistakeUnilateral Mistake – An error on the part – An error on the part

of one party.of one party. The mistaken party might not be able to The mistaken party might not be able to

get out of the contract!get out of the contract! Bilateral MistakeBilateral Mistake – An error on the party – An error on the party

of both parties.of both parties. Either party can get out of the contract!Either party can get out of the contract!

(Defective Agreements)(Defective Agreements)

4.4. DuressDuress – – Overcoming a person’s will by Overcoming a person’s will by

use of force or by threat.use of force or by threat.

Physical DuressPhysical Duress

Emotional Duress Emotional Duress (threat of physical force)(threat of physical force)

Economic DuressEconomic Duress

Threatening legal action is NOT a form Threatening legal action is NOT a form

of Duress!!! of Duress!!!

(Defective Agreements)(Defective Agreements)

5.5. Undue InfluenceUndue Influence – – When a person When a person

uses unfair or improper persuasive uses unfair or improper persuasive

pressure to force someone to enter pressure to force someone to enter

into an agreement.into an agreement.

A Dependency RelationshipA Dependency Relationship

Unfair or Improper PressureUnfair or Improper Pressure

A Beneficial ContractA Beneficial Contract

(Defective Agreements)(Defective Agreements)

(Defective Agreements)(Defective Agreements)

6.6. FraudFraud – Deliberate deception – Deliberate deception

intended to secure an unfair or intended to secure an unfair or

unlawful gain.unlawful gain.

Fraud MUST contain 5 Elements!!!Fraud MUST contain 5 Elements!!!

1.1. Must be a false representation of Must be a false representation of factfact..

2.2. The party making it must The party making it must knowknow it is false. it is false.

(Defective Agreements)(Defective Agreements). . . 5 Elements of Fraud . . .. . . 5 Elements of Fraud . . .

3. The false representation must be made

knowing it is relied upon by the other

party.

4. The innocent party must reasonably rely

upon the false representation.

5. The innocent party must actually suffer

some monetary loss.

Contracts and Contracts and Contract LawContract Law

The Elements of a ContractThe Elements of a Contract

6 Elements6 Elements of a of a

ContractContract(continued)(continued)

Learning GoalLearning Goal

To recognize the To recognize the elements of elements of

a contract, including a contract, including capacity, consideration capacity, consideration

and legality.and legality.

#4: Capacity#4: Capacity The legal ability to enter a The legal ability to enter a

contract.contract. MinorsMinors

Mentally Impaired PersonsMentally Impaired Persons

Intoxicated PersonsIntoxicated Persons

Aliens & ConvictsAliens & Convicts

Minors Minors Contracts are voidable if the minor

chooses. Even if the minor has damaged an

item purchased. Necessities are an exception

Minor lies about age = FELONY Contracts are ratified when minor

becomes an adult, and continues contract.

Mentally ImpairedMentally Impaired Contracts are voidable

If declared insane or incompetent by a court, and a guardian is appointed, contracts are all valid.

Intoxicated PersonsIntoxicated Persons SometimesSometimes able to disaffirm a able to disaffirm a

contract, if intoxicated at the contract, if intoxicated at the time the contract was entered.time the contract was entered. Must have been so intoxicated at

the time as to not understand the purpose, nature or effect of the agreement.

A court decides the person’s condition.

Aliens & ConvictsAliens & Convicts Limitations placed on contracts.Limitations placed on contracts.

Foreign-born people from non-allied countries are denied legal capacity during war.

Sometimes there are limitations during peace.

All states differ in limitations on these people.

#5: Consideration#5: Consideration A thing of value promised to one A thing of value promised to one

party in exchange for another thing party in exchange for another thing of value.of value.1. Giving up something you have the legal

right to keep.

2. Doing something you have the legal right to not do.

3. Not doing something you have the legal right to do.

Types of ConsiderationTypes of Consideration1.1. MoneyMoney

2.2. Property and ServicesProperty and Services

3.3. Promise not to SuePromise not to Sue “Forbearance” Lawsuits are often settled in this way

4.4. Charitable PledgesCharitable Pledges Legally enforceable – no matter how

small!

#6: Legality#6: Legality Parties are not allowed to Parties are not allowed to

enforce contracts that involve enforce contracts that involve illegal acts by crime, tort or illegal acts by crime, tort or statutory law.statutory law. This is called “conspiracy”

Can apply to entire contracts, or to parts of contracts.

Learning GoalLearning Goal

To recognize the To recognize the elements of elements of

a contract, including a contract, including capacity, consideration capacity, consideration

and legality.and legality.