Business law

Contract

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 Equity Theory

courts asked whether the parties to a contract exchanged things of equal value.

The 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.

The Formalist Theory

Then the courts began to study the parties’ actions and words to determine if there was a “meeting of the minds.”

offer

a proposal by one party to another intended to create a legally binding agreement.

acceptance

the second party’s unqualified willingness to go along with the first party’s proposal.

genuine agreement

If a valid offer is met by a valid

acceptance,

Capacity

legal ability to enter a contract.

Consideration

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

valid

contract is legally binding.

void

has no legal effect.

voidable contract.

When a party to a contract is able to

void or cancel the contract for some

legal reason,

unenforceable

contract is one the court will not uphold.

express contract

stated in words and may be either oral or written.

implied contract

comes about from the actions of the parties.

bilateral contract

contains two promises.

unilateral contract

contains a promise by only one person to do something, if and when the other party performs some act.

invitations to negotiate

Advertisements in newspapers, magazines, and catalogs are examples which are invitations to make an offer.

the mirror image rule.

The acceptance must not change

the terms of the original offer in any

way. (contracts for sale of goods are exceptions to the mirror image rule)

counteroffer.

Any change in the terms of the offer

means the offeree has not really

accepted the offer.

Methods of Acceptance

Special rules govern acceptances that

take place when the parties are

separated by a distance and must be

communicated by letters, telegrams,

or fax.

Methods of Acceptance

An acceptance is implied when the

offeree accepts by the same or a

faster means than that used by the

offeror.

Revocation

is the taking back of an

offer by the offeror.

Rejection/ Refusal

of an offer by

the offeree brings the offer to an end.

Expiration of Time

If the offeror sets a time limit for the

acceptance of the offer, it must be

honored.

Death or Insanity

If the offeror dies or becomes insane

before the offer is accepted, the offer

comes to an end.

Elements of a Contract

There are six elements of a contract.

Elements of a Contract

offer

acceptance

genuine agreement

consideration

capacity

legality