CONTRACT

LAW

May not create a legal obligation but a moral obligation

Promise: a declaration that something will or will not happen in the future

Why learn about contracts? Financial – checking/debit/credit College – housing contract/college loans Young Adult – apartment, employment, car

loan, utilities Putting Down Roots – marriage, real estate Protecting it All – insurance, retirement Through it All – vacation rentals, sale of

property, hiring for services

Slide 3

Chapter 6

THESE ALL REQUIRE A CONTRACT!

CONTRACT -- defined

Agreement between 2 or more parties that creates an obligation

An agreement that can be enforced in court

Like what? What contracts have you formed? What contracts have older siblings formed? Your Parents? Mrs. Sigsworth?

Court System Resources are Limited

1. Greatest Importance – Criminal Law & Torts

a. Necessary to Keep PEACE in Societyb. Correct damage done to injured party

2. Court more selective in contractual disagreements

a. Can’t look at every disagreementb. Elements of contract specifically defined

Slide 5

Chapter 6

6 Essential Elements of a Contract

**Offer & Acceptance

•**Genuine Assent

•**Legal Purpose

•**Consideration

•**Capacity

•**Writing

Objective Theory of Contracts Party’s intention to enter contract is

judged by outward, objective facts as interpreted by a reasonable person, rather than the party’s secret, subjective actions1. what was said when entering contract2. how party acted or appeared3. circumstances surrounding the

transaction

Types of Contracts

2 Mutual Promises Offeree accepts by

words

1 Promise from Offeror

Offeree accepts by action

Bilateral Contract Unilateral Contract

Types of Contracts

Terms are fully and explicitly stated in words Written Oral

Conduct of parties creates & defines contract Limited terms Limited words

Express Contract Implied Contract

Types of Contracts

Require special form Any other contract that does not need special form

Formal Contract Informal Contract

Types of Contracts

Fully performed on both sides

Not fully performed on either side

Executed Contract Executory Contract

A contract can beExecuted on one side

Executory on the other

Valid all elements present

Enforceable no legal defense

against it

Voidable party has option of

avoiding/enforcing it

Unenforceable court cannot

enforce due to legal defense

Void no contract

exists, missing essential element

No Contract

Offer & Acceptance

Offer

Proposal by offeror to do something, provided the offeree does or refrains to do something in return

1. Contractual intent must be present in offer

2. Offer must be communicated to the offeree

3. Essential terms of offer must be complete and definite

When is an Offer NOT an Offer?

I am so hungry and have no cash

– I will sell my truck to the first

person who brings me a

pizza!

WHEN IN JEST

Contractual Intent Must Be Present

When is an Offer NOT an Offer?

I have to fix this truck AGAIN! I

will sell this piece of junk to the

first person who brings me $100.

WHEN IN ANGER

Contractual Intent Must Be Present

When is an Offer NOT an Offer?

WHEN IT IS AN

INVITATION TO

NEGOTIATE!

Contractual Intent Must Be Present

Offer

A social engagement is NOT a legal obligation

Contractual Intent Must Be Present

Offer

Must Be Communicated

I’ll sell you my

truck for $3000.

I’ll take it!

Offer

Lot 23 in White Oaks subdivision, being a subdivision of part of the southeast quarter of the northeast quarter of section 7, township 43 north, range 9 east of the third principal meridian, according to the plat thereof recorded on August 10, 1998, as document #98R00052325 in McHenry County, Illinois

Essential Terms: Complete & Definite

AKA:1212 ARDMORE DRIVE

CARY, IL

Offer

Essential Terms: Complete & Definite

I’ll sell you my truck

for $3000.

Termination of Offer

Revocation

I’ll sell you my

truck for $3000.

On Second

thought, never mind.

Termination of Offer

Time Stated in Offer

I’ll sell you my

truck for $3000.

Let me know by

December 15th.

Termination of Offer

Reasonable Length of Time

Termination of Offer

Rejection by Offeree

I’ll sell you my

truck for $3000.

No Thanks.

Termination of Offer

Counteroffer

I’ll sell you my

truck for $3000.

I’ll give you

$2500.

Termination of Offer

Death/Insanity of Either Party

I’ll sell you my

truck for $3000.

He was a nice guy.

Termination of Offer

Destruction of Specific Subject Matter

I’ll sell you my

truck for $3000.

Offer & Acceptance

Acceptance

Offeree agrees to the proposal

1. Comes from the person(s) to whom offer was made

2. Match the terms in the offer 3. Be communicated to the offeror

Acceptance

Only Offeree Can Accept

I’ll sell you my

truck for $3000.

I’ll take it!

Acceptance

Mirror Image Rule

I’ll sell you my

truck for $3000.

I’ll give you

$2500.

Acceptance

Pleased accept this proven

fitness tool and try it free for 30 days. Failure to

return the ABCircle within 30

days, will be considered your acceptance and

you will be billed $199.99.Must be Communicated

Acceptance

2 Mutual Promises Offeree accepts by

words

1 Promise from Offeror

Offeree accepts by action

Bilateral Contract Unilateral Contract

Must be Communicated

Acceptance

Any method of communication for making an offer, counteroffer, revocation, rejection or acceptance may be made by any reasonable medium for the circumstance unless specifically indicated by language

Must be Communicated

Acceptance

When effective? Usually when sent unless specified in

offer Oral acceptance: immediate Mailbox Rule: when posted

Offeror might state acceptance is complete when s/he receives it – avoids confusion and lost messages

Must be Communicated