CONTRACTS
Goal: List and explain the 5 elements of
a valid contract
WHAT IS A CONTRACT?A legally binding agreement between two or more people.
Five Elements MUST be present in order for a contract to be valid.
1. Eating at a restaurant 2. Hiring the 13 year old next door to baby-sit3. Asking a girl to the prom4. Getting married5. A wager on a football game with your friend 6. Turning the heat on in your house 7. Taking a class at LCC8. Buying a house 9. Friday night poker game
Think - Are these contracts?
FIVE ELEMENTS OF A CONTRACT 1. Offer & Acceptance
A. Offer Definite offer or proposal Person placing the offer (the offeror) intended to
be bound by it Proposal must be communicated
Written , Oral, or Assumed
B. Acceptance: Reasonable communication
Cannot accept with silence unless agreed in advance
Must come from the person to whom the offer was
made (the offeree)
CONTRACTS
2. Genuine AssentAgreement NOT based on lie, mistake, or
unfair pressure
3. LegalityNo contracts for stolen/illegal goods or
items What if you didn’t know??
CONTRACTS 4. Consideration
Exchange of services Benefit and detriment (gain or loss) What about Promises: are they enforceable?
NO – no mutual gain/loss 5. Capacity
Must be mentally able to enter contractMay not be competent:
Minor, there are exceptions! Intoxicated Mentally impaired
CONTRACTS – SOMETIMES 6TH ELEMENT
6. Proper Legal Form Assumed Oral Written
Should be in writing:Over $500Covers a period of one year or moreReal Estate
Routine medical services need NOT be in writing
TYPESExpress: Written or oral wordsImplied: Assumed by Actions
CONTRACTS
AdvertisementsAre they legal offers to sell? NO! They are an Intent to SellMistakes in written ads Incorrect Store Price
It’s the store’s decision!
UNIFORM COMMERCIAL CODEFederal mandate encouraging States to create laws which create consistency relative to sales purchasesRULES REGARDING CONTRACTS AND SALES ARE THE SAME STATE TO STATE!
OTHER THINGS TO KNOW
Cooling Off RuleRight to cancel contract within 3 business
days if signed at location other then seller’s place of business
Mailbox RuleAccept offer by mail
If it is mailed = it is a dealAccepting materials NOT ordered
Do NOT have to pay for it And Do NOT have to ship back on own dime
1. Eating at a restaurant 2. Hiring the 13 year old next door to baby-sit3. Asking a girl to the prom4. Getting married5. A wager on a football game with your friend 6. Turning the heat on in your house 7. Taking a class at LCC8. Buying a house 9. Friday night poker game
Are these contracts?
CHAPTER 8, 10 & 14Goal: Explain when contracts are voidable.
List what contracts a minor can legally enter into.
Explain how contracts are enforced.
CAN I GET OUT OF A CONTRACT?
Valid: Both parties are bound by contract
Voidable: Someone can get out of it
Void: Contract doesn’t exist
DEFECTIVE AGREEMENTS
DuressUse improper threat or act to obtain
an agreement Undue Influence
One party is in a position of trust and misuses itGrandchild forces Grandma to sell car for $1
CONTRACT MISTAKES
Unilateral: (one-sided)CONTRACT IS VALID
Mutual Mistake: (both parties made an error)CONTRACT IS VOIDABLE!
CHAPTER 10 & 14
CONTRACTS – WHEN ARE YOU BOUND BY A CONTRACT?
Age 18 Day after birthdayAge of majority binds prior contract
Marriage terminates minority status Emancipated minor Necessity = Contract
Court-Approved, Major Commitments, Banking, Insurance, Work-Related, Sale of Realty, Apartment
REMEDY
3 Basic Remedies for breach of contract To get all parties must act reasonably and
fairly 1. Rescission & Restitution
Cancel the contract Return what has been received
2. Money Damages Compensatory
3. Specific Performance Court order contract to be finished
Must mitigate damages Minimize your injury
MONEY DAMAGES
Compensatory, Consequential, Liquidated All meant to replace injured to same financial
position if no breach Punitive
Meant to punish Nominal
Small punishment, even if no injury
CONTRACTS CHAPTER 8,10, & 14 GOALS
DEFECTIVE AGREEMENTSNot Enforceable! Misrepresentation (Fraud)
“This car is a V8” Undue Influence
“Sweet, conniving nephew” Concealment of vital facts
House was flooded at one time Threat or force
Sign this contract or else……
Explain when contracts are voidable.List what contracts a minor can legally enter
into.Explain how contracts are enforced.Minors can enterCourt-Approved, Major Commitments, Banking, Insurance, Work-Related, Sale of Realty, Apartment
BOOK WORK
Chapter 7 Vocabulary, page 110 Chapter 8 Vocabulary, page 124 Chapter 10 Think Critically Chapter 14 Think Critically
Due Monday Chapter 17 on Monday
BOOK WORK –MARK WRONG & WRITE CORRECT ANSWER
Chapter 7 Vocab:1. Unilateral contract2. Revocation3. Offeree4. Firm offer5. Counteroffer6. Mirror image rule7. Acceptance8. Option9. Contract10. Offer
CHAPTER 8 VOCABULARY
1. Mutual mistake2. Genuine assent3. Voidable4. Unilateral mistake5. Fraud6. Ratification7. Undue influence8. Duress9. Rescission
CHAPTER 10 THINK CRITICALLY ABOUT EVIDENCE
22. Jaymie can disaffirm because this car is, for her, a non-necessary
23. Laurisa may not be able to disaffirm if the computer is judged to be a necessary
24. June’s consumption of 8 drinks is evidence of intoxication and may be able to disaffirm.
25. Larson’s listing the property for more than its appraised value, his counteroffer, and reduction of price all indicate mental competence
CHAPTER 14 THINK CRITICALLY ABOUT EVIDENCE18. Elsen is entitled only to nominal damages. Hoglund did commit a legal wrong by failing to perform his duty, however there was no actual injury19. Yes, liquidated damage clause can be enforced. The amount is reasonable in relation to the overall size of the contract and a reasonable attempt to forecast the resulting damages. The amount is not punitive.20. Yes Sterm is entitled to compensatory damages. Stern is entitled to the value of the work not done but not punitive since there was no intentional tort or fraud. 21. No, Smythe is not legally obligated to pay for the goods. Statue of limitations passed. He is ethically obligated to pay.
CHAPTER 17.1
Let the buyer beware Class action lawsuit: One person sues for
group Unfair Trade Practices: Any method of
business that is dishonest or fraudulent or that illegally limits free competition
FTC Guidelines: Would be creditors must explain their terms Written warranties in certain circumstances Door-to-door must be allowed to be canceled
(over $25 purchase)
CHAPTER 17.2 & 17.3
Let the seller beware Warranty: Statement about products qualities
or performance that seller assures is true
WARRANTIES
Written Warranties must have: Name and address of warrantors What is covered Step-by-Step procedures for getting warranty
honored Legal remedies Duration of the warranty
WARRANTIES – FOUR TYPES!
Expressed Warranty: Assurance of Quality or Promise of Performance by Seller. ex. “This product will perform well” (history shows…)Trade Puff: “This sound system is the best you
can buy” Implied Warranty: Obligation by Law
Keeps companies from selling bad products Full Warranty: Everything is covered for the
time stated. Limited Warranty: Must state limitations:
certain things are not covered.