Chpt. 4 - Contracts

Contract

any agreement enforceable by law. (anytime you agree to exchange things of value)

elements of contracts

offer : a proposal to do something or pay an amount to another party

acceptance : is when a party agrees to an offer made by another party.

capacity : the legal ability to enter into a contract

consideration : is something of value offered or exchanged.

legality : means that a contract may not involve breaking the law

genuine agreement : means that a legal offer is met with a legal acceptance.

ways contracts are classified

valid, void, voidable, or unenforceable

valid contract

A contract is valid if it is legally good

void contract

A contract is void if it lacks one or more of the elements of a contract

voidable contract

A contract is voidable if either party can cancel the contract for a legal reason

unenforceable contract

A contract is unenforceable if it will not hold up in court

express contract

a contract stated in words and may be either written or oral

implied contract

comes about from the actions of the parties

bilateral contract

when both parties promise to do something

unilateral contract

A unilateral contract is when one party promises to do something only if the other party does something

oral contract

created by word of mouth and usually happens when two or more peoples are speaking to each other

written contract

assures both parties know exact terms and provides proof of an agreement in the form of a contract

Statute of Frauds

a state law that requires certain contracts be in writing for evidence that the contract exists and has definitive terms

To be valid an offer must be….

• Made seriously

• definite and certain

• communicated to the offeree

serious intent

Must be serious and not joking, intent to enter into a legal obligation

Requirements of an Acceptance

it must be unconditional

To be unconditional, an acceptance must follow the mirror image rule, which means it must match the terms of the offer.

like an offer, an acceptance must be communicated to the offeror.

At the time the acceptance takes place, the contract comes into existence.

Ways to Terminate an offer

Revocation : Revocation is when the offeror takes back the offer.

Rejection : Rejection is when the offeree refuses the offer.

Counteroffer : A counteroffer is when the offeree changes the terms of the offer.

Expiration of time : Expiration of time if the offeror sets a time limit on an offer, such as one week, it must be accepted by then or the offer is terminated.

Death or insanity : Death or Insanity is also terminated if the offeror dies or becomes insane.