Business Law

Unit 2/Chapter 7/Contracts

Section 7.1 Goals

List the elements required to form a contract

Describe the requirements of an offerStandards

PCCG OUTCOME: 7PCCG STANDARDS: C: 1.1c, 1.1d,

1.1e, 1.1d, 1.2a, 1.3a, 1.4d, 1.6a, 1.6c, 1.6d, 1.6e, 1.7c, 1.8b, 1.8c, 2.2b, 5.1a, 5.1j, 5.1l, 5.2a, 5.3a, 5.3g, 5.4a,, 13.1e, 13.2b, 13.3b

What’s Your Verdict?

Pedro and Seamus were chatting during the break between classes. “Remember, ‘Great Moments in Sports,’ the video that I showed you last week?” asked Pedro. “You thought it was great and said you wished it was your. I’ll let you have it for fifteen bucks. Want it? “Sure!” Seamus answered. “Bring it to school tomorrow, okay?”

Did the two friends create a contract?

What is a Contract?

ContractAn agreement that courts will enforce.Basis of all economic activity

6 RequirementsOffer and AcceptanceGenuine AssentLegalityConsiderationCapacityWriting

Offer and Acceptance

There must be serious, definite offer to contract. The terms of the offer must be accepted by the party to whom it was communicated

Genuine Assent

The agreement must not be based on one party’s deceiving another, on an important mistake, or on the use of unfair pressure exerted to obtain the offer or acceptance.

Legality

What the parties agree to must be legal.

So an agreement to pay someone to commit a crime or tort cannot be a contract.

Consideration

The agreement must involve both sides receiving something of legal value as a result of the transaction.

Capacity

To have a completely enforceable agreement, the parties must be able to contract for themselves rather than being obligated to use parents, or legal representatives

Writing

Some agreements must be placed in writing to be fully enforceable in court.

What or Who Are Contracts?

Contracts Result from exchange of valuable promises

Offeror Party who makes an offer to form a contract

Offeree Party to whom and offer is made

Offer Proposal by an offeror to do something provided

the offeree does something in return Without Offer or Acceptance there is no

contract.

What’s Your Verdict?

Anchor’s Aweigh, a boat retailer, placed an ad in a local newspaper announcing a one-day sale of cabin cruisers for the “bargain price” of $22,500 each. The dealer had five cruisers in stock, and they all were sold within one hour. During the rest of the day, seven other would-be buyers came in to purchase a bargain cruiser.

Did the Anchors Aweigh advertisement make offers to the would-be buyers?

Requirements of a Valid Offer

The offeror must appear to intend to create a legal obligation

The terms must be definite and complete

The offer must be communicated to the offeree

Expression of Intent to Create a Legal Obligation

Test of the Reasonable Person Objective legal test used by jurors or judges to

determine whether the offeror has shown an intent to contract

Facts and Circumstances To actually know when the offer is valid aside

from examples and things. Preliminary Negotiations

Information presented without the intent to contract

Social Agreements Do not require legal obligations (Going on a

date)

Offer Must Be Complete and Clear

CompleteFollows all the guidelines of the contract

ClearSpecific way to which it is handled

Implied TermsExample: Current Market Price

AdvertisementsInvitations not offersKeeping business relations most places

will provide a rain check.

Offers Must Be Communicated of the Offeree

A person not the intended offeree cannot accept the offer.

Nor can you accept an offer without knowing that it was made.

ExampleReward

Section 7.1 Goals

List the elements required to form a contract

Describe the requirements of an offerStandards

PCCG OUTCOME: 7PCCG STANDARDS: C: 1.1c, 1.1d,

1.1e, 1.1d, 1.2a, 1.3a, 1.4d, 1.6a, 1.6c, 1.6d, 1.6e, 1.7c, 1.8b, 1.8c, 2.2b, 5.1a, 5.1j, 5.1l, 5.2a, 5.3a, 5.3g, 5.4a,, 13.1e, 13.2b, 13.3b

End of Section 7.1 Questions

Think About Legal ConceptsThink Critically About Evidence

Section 7.2 Goals

Describe how an offeror can end an offer Tell how an offeree can end an offer Explain how the parties can create offers

that cannot be ended by the offeror Standards

Reading and Writing1.1.11 CDEFG, 1.2.11 AB, 1.3.11 C, 1.4.11 BCD,

1.5.11 ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC Civics and Government

5.1.12 ABCDEFHIJM, 5.2.12 ABCDEFG, 5.3.12 AB

What’s Your Verdict? Melissa offered her collection of baseball

cards for sale for $3,000 to her friend and fellow collector, Raoul. Raoul asked if he could think it over and Melissa agreed. While Raoul was trying to raise the money, Melissa has second thoughts. So she called Raoul and said I’ve changed my mind. I’m not interested in selling the cards. Raoul responded, “it’s too late, you promised to sell them to me and I’ve got the money, so I accept.

Was Melissa’s offer terminated before Raoul tried to accept?

How Can Offers Be Ended? Revocation by the Offeror

Decided not to do it Time stated in the offer

One Week Reasonable Length of Time

Within Reason Rejection by the Offeree

Does not accept offer Counteroffer

Changing the offer terms in any way Death or Insanity of either the offeror or

offeree

How Can An Offer Be Kept Open?

What’s Your Verdict? Pg. 104Options

Giving the Offeror something in order for them to give you a promise that cannot be completed at the time of the contract

Firm OffersBinding offer stating in writing how long

it is to be held open.

Section 7.2 Goals

Describe how an offeror can end an offer Tell how an offeree can end an offer Explain how the parties can create offers

that cannot be ended by the offeror Standards

Reading and Writing1.1.11 CDEFG, 1.2.11 AB, 1.3.11 C, 1.4.11 BCD,

1.5.11 ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC Civics and Government

5.1.12 ABCDEFHIJM, 5.2.12 ABCDEFG, 5.3.12 AB

End of Section 7.2 Questions

Think About Legal ConceptsThink Critically About Evidence

Section 7.3 Goals

Discuss the requirements of an effective acceptance

Determine at what point in time an acceptance is effective

Standards Reading and Writing

1.1.11 CDEFG, 1.2.11 AB, 1.3.11 C, 1.4.11 BCD, 1.5.11 ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC

Civics and Government5.1.12 ABCDEFHIJM, 5.2.12 ABCDEFG, 5.3.12 AB

What’s Your Verdict?

Darrow offered to trade his digital camera to Monette in exchange for her camcorder. Schorling, who had a camcorder of the same make and model, overheard the offer and said she would make the swap.

Did a contract result from Schorling’s statement?

How Are Acceptances Created?

AcceptanceOccurs when a party to whom an offer

has been mde agrees to the proposal.Acceptance Must:

Be made by the person to whom the offer was made

Match the terms in the offerBe communicated to the offeror

Who Can Accept An Offer?

RewardOffer to the general public, anyone that

knows about it can accept it.Offeree

Person/Individual who the offer is presented. No one can accept an offer unless it is directed to them

Acceptance Must Match Offer

Due to specific terms stated in the contract, Acceptance must fall within the guidelines of the contract

Mirror Image RuleRequires that the terms in the

acceptance must exactly match the terms contained in the offer.

If varied, it is a counteroffer.

Acceptance Must Match the Offer

GoodsSale of Goods

Read on page 106 (Blue Box)

Acceptance Must Be Communicated to the Offeror

Silence as Acceptance Signal that its okay unless someone rejects it is

considered acceptance Unilateral Acceptance

Indicating acceptance by performing something, promise from offeror to give something for performance

Bilateral Acceptance Giving a promise instead of performance

Acceptance Effective Orally, written, sent by mail, email, fax only

effective when received

End of Section 7.3 Questions

Think About Legal ConceptsThink Critically About EvidenceChapter In Review

Section 7.3 Goals

Discuss the requirements of an effective acceptance

Determine at what point in time an acceptance is effective

Standards Reading and Writing

1.1.11 CDEFG, 1.2.11 AB, 1.3.11 C, 1.4.11 BCD, 1.5.11 ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC

Civics and Government5.1.12 ABCDEFHIJM, 5.2.12 ABCDEFG, 5.3.12 AB