Transcript Business Law Chapter 5- Sherpinsky

Entering Into Contracts
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Justice Journal
 Imagine you have your own website design
company. You have several contracts with small
businesses in your community. In addition to
doing design work, you host Web sites, keep the
information updated, and troubleshoot problems
for these companies.
 In your Justice Journal, write about the
importance of having a contract, what type of
information is included in your contract, and how
to bring your contract to an end.
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Mr. Benes
Alena
Viktor
Hana
Emil
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contract (p. 106)
offer/acceptance (p. 109)
genuine agreement (p. 109)
capacity (p. 109)
consideration (p. 109)
legality (p. 109)
void/voidable contract (p. 110)
unenforceable (p. 111)
express/implied contract (p. 111)
bilateral/unilateral contract (pp. 111, 112)
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Following through on a promise is
an important underlying assumption
in a contract between people and
businesses.
Certain key elements must exist for
a contract to be legally binding.
What types of elements do you
think must exist between two
parties so that a contract is
binding?
How would you define contract?
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A contract is any agreement
enforceable by law.
Not all agreements are contracts,
however.
Whether or not it’s a contract,
depends on the circumstances of the
agreement.
The evolution of contract law shows how its focus
has changed
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Equity Theory: Parties to a contract exchanged
things of equal value. This approach was called the
equity theory of contract law.
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Free Will Theory: The advent of industrial capitalism
forced the courts to shift their focus. They began to
ask if the parties had agreed to the terms in the
agreement of their own free will.
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Formalist Theory: Then the courts began to study
the parties’ actions and words to determine if there
was a “meeting of the minds.”
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Offer
Acceptance
Genuine Agreement
Consideration
Capacity
Legality
***All six elements must be present
in order to constitute a
contract***
An offer is a proposal by one party to
another intended to create a legally
binding agreement.
 An acceptance is the second party’s
unqualified willingness to go along
with the first party’s proposal.
 If a valid offer is met by a valid
acceptance, a genuine agreement
exists.
 Capacity is the legal ability to enter a
contract.
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Consideration is the exchange of things of
value.
Legality means that people can only enter
into contracts for legal purposes. People
cannot enter into contracts to commit illegal
acts.
What is one characteristic that
you think a contract must
have?
 Contracts can have any of the
following characteristics:
 valid, void, voidable, or
unenforceable
 express or implied
 bilateral or unilateral
 oral or written
Valid, Void, Voidable, or Unenforceable
 A valid contract is legally binding.
 A contract that is void has no legal
effect.
 When a party to a contract is able to
void or cancel the contract for some
legal reason, it is a voidable contract.
 An unenforceable contract is one the
court will not uphold.
Express or Implied
 An express contract is stated
in words and may be either oral
or written.
 An implied contract comes
about from the actions of the
parties.
Bilateral or Unilateral
 A bilateral contract contains two promises.
 A unilateral contract contains a promise by
only one person to do something, if and when
the other party performs some act.
Oral or Written
 An oral contract is created by word of mouth
and comes into existence when two or more
people form a contract by speaking to each
other.
 Sometimes, however, it is desirable to put
contracts in writing.
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Concept Development – Elements of a
Contract
Contract Development – Express/Implied
Contracts
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Vocabulary – Chapter 5, Section 1
Assessment, pg. 113, #’s 1-5
Offer and Acceptance
Evaluating Intent
 “Janine and Sedrick were joking about how
difficult it was to go back in college after the
summer break. Janine said that she wished she
were back at home and would sell all her books to
the first person who gave her $100. Sedrick pulled
out $100 and offers it to Janine for her books.”
 Should Janine be required to sell her books to
Sedrick?
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What do you think is the difference between
an offer and an invitation to negotiate?
1.
2.
3.
Must be made seriously
Has to be definite and certain
Must be communicated to the offeree
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The intention of entering into a legal
obligation.
 Example: Janine and her books
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Advertisements (price tags, signs in windows
or on counters, prices marked on
merchandise)…unless it contains a specific
promise, Example: “first come, first served”
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Example 3, pg. 114
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Not a certain offer if something is too unclear
or vague
 Example 4, pg. 115-116
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Telephone, letter, telegram, fax, e-mail, or
any other method that communicates the
offer to the offeree.
 Example 5, pg. 116
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Must be
Unconditional
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The mirror image rule
Counteroffer
Must follow all rules
regarding the method
of acceptance
Example 6, pg. 117
2.
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The time at which
an acceptance takes
place is important
because that is
when the contract
comes into
existence.
 Example 7, pg. 119
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May occur in any of 5 ways
1.
2.
3.
4.
5.
Revocation – example 8, pg. 120
Rejection – example 9, pg. 120
Counteroffer – ends the first offer
Expiration of time
Death or Insanity
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Vocabulary Section 2
Assessment 5.2, pg. 121