ContractsBCS-LEB-4 The student identifies rights and responsibilities of contract negotiations.

BCS-LEB-8 The student explains the legal rules that apply to personal property and real property.

Understanding Contracts• Most people think a

“contract” is a long, preprinted, formal document that they sign when buying a vehicle, renting an apartment, or purchasing insurance.

• .

• .– However, all agreements

are not contracts.

• Never enter into a contract without understanding the legal responsibilities involved.

• .

Elements of a Contract

Element Description

1. . A proposal made by one party (the offeror) to another party (the offeree) indicating a willingness to enter a contract

2. . The agreement of the offeree to be bound by the terms of the offer

3. A valid offer that is met by a valid acceptance

4. . The exchange of things of value. The mutual exchange binds the parties together.

5. . The legal ability to enter a contract

6. . Parties are not allowed to enter contracts to commit illegal acts.

• .• In writing is NOT an

element.• These elements are the

actions and words courts use to determine if a “meeting of the mind” occurred during a contractual dispute.

OFFER and Acceptance• An offer has three basic requirements:

1. with the intention of entering into a legal obligation, not in the heat of anger or as a joke

2. . Courts can’t enforce a contract with ambiguous wording.3. via phone, fax, letter, email, telegram, etc.

• .– If a store has sold out of the advertised product, the sale rep

will reject the customer’s offer to buy because the store no longer has product in stock.

• .– Buyers have to be able to walk away from estimates or price

quotes

Offer and ACCEPTANCE• Basic requirements of acceptance:

1. that does not change the terms of the offer in any way -- Mirror Image Rule• The UCC set two exceptions to the mirror image rule: 1)

contracts for the sale of goods such as personal property involving a non-merchant and 2) the sale of goods between merchants.

• Any change in the terms of the offer means the offeree has not really accepted the offer but has made a counteroffer.

2. by performing an action, using the same or a faster means than that used by the offeror, or using past practices used by the parties.• A contract is formed at the time of acceptance. Common law

says an acceptance that must be sent over long distances is effective when it is sent.

Termination of an Offer • Even the an offer has been property communicated to the offeree, it

may be terminated in any of the following five ways:1. – taking back of an offer by the offeror.

– If the offeror has a change of mind or circumstances or the contracted object is destroyed, the offeror can decides to communicate the withdrawal of the offer before it has been accepted.

2. – refusal of an offer by the offeree brings the offer to an end3. – ends the first offer and a new offer is made4. – If the offeror sets a time limit for the acceptance of the offer, it

must be honored– If no time for acceptance is stated in the offer, it must be accepted within

a reasonable time. Otherwise no contract exists.

5. – if the offeror dies or becomes insane before the offer is accepted, the offer comes to an end.– Death ends an offer, not a contract.

Firm Offer

A firm offer, made between two merchants, is an offer that

Characteristics of a Contract

• Contracts can be created in different ways and can assume diverse forms.

• A contract can be described by any of the following characteristics:

Valid, Void, Voidable, or Unenforceable• The word valid means legally good, .• A contract that is void .• , it is a voidable contract.– A contract between two minors is voidable.

• An unenforceable contract– If you wait too long to bring a lawsuit for a breach

of contract, the statute of limitations or limit period a contract can be legally enforced may have passed which would make the contract unenforceable.

Express or Implied

Express Contract• An express contract

Implied Contract• An implied contract

– People often enter into implied contracts without exchanging a single word.

Bilateral or UnilateralBilateral Contract• A bilateral contract contains

two promises. – For example: If a friend says,

“I’ll sell you my DVD player for $150,” and you say, “I’ll buy it,” a bilateral contract is created.

Unilateral Contract• A unilateral contract contains .

– For example: If a friend says, “I’ll sell you my DVD player for $150 if you give me the cash before noon tomorrow,” s/he will not be required to keep the promise unless you hand over the cash before noon on the following day.

• A reward offer .

Oral or Written

Oral• An oral contract

– One person usually offers to do something, and the other party agrees to do something else in return.

• Most contracts are oral contracts of this nature.

Written• A written contract assures.• The Statute of Frauds law

requires that certain contracts must be in writing to be enforceable.– For example, a prenuptial

agreement must be in writing.