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CHAPTER 6 MATERIALS TO SUPPLEMENT TEXTBOOK J. Pittman, Instructor 1-1 OVERVIEW • The textbook presents contract law in a summary fashion that may be difficult to follow • The following slides add some details missing from the textbook presentation J. Pittman, Instructor 2 CONTRACT DEFINITION • A contract is an agreement between two or more parties that can be enforced in a court of law • Contract law protects promises that have been made, allowing commerce to function 3 SOURCES OF AMERICAN CONTRACT LAW Court created “common law” regulates contracts involving: • The sale of real property (land) • The sale of services, and • The sale of intangible, personal property • Personal property is everything that is not land • Intangible property does not have a physical existence, for example, patent and copyright ownership The Uniform Commercial Code (UCC) regulates contracts involving: • The sale of tangible, personal property (called “goods”) • Tangible property has a physical existence 4 ELEMENTS OF A CONTRACT • Offer - Proposal to enter into a binding agreement • Acceptance – Definite, clear agreement to the proposal terms • The offer and acceptance create an agreement • The genuineness of the agreement can be challenged by arguing the presence of fraud, duress, and so forth • The offer and acceptance together provide an agreement 5 REQUIREMENTS OF AN OFFER To legally constitute an offer, the following elements must be present: • Intent - offeror is serious, not joking, and intends to be bound by the offer (note the advertising rules, textbook pgs.104-05) • Definite – the offer has reasonably certain and definite terms • Communication – the offer is communicated to the offeree, either actually or constructively • Constructive communication is a reasonable attempt at communicating the offer terms, e.g., a sign on a parking garage wall that the parking garage owners are not responsible for damage to parked cars 6 TERMINATION OF THE OFFER • By action of the parties • Revocation • Rejection • Counter-offer • By operation of law • Lapse of time • Destruction of subject matter • Death or incompetence of either party • Illegality of offer 7 REQUIREMENTS OF AN ACCEPTANCE • An acceptance is a voluntary agreement to be bound by the terms of the offer • Acceptance issues • The mirror image rule • Silence as acceptance – generally your silence is not construed as an acceptance of an offer 8 ELEMENTS OF A CONTRACT In addition to an agreement, the following elements must be present to turn an agreement into a contract: • Consideration (next slide) • Capacity (18 years old and of sound mind) • Legality • Writing (required by the Statute of Frauds) J. Pittman, Instructor 9 CONSIDERATION • Contracts usually involve promises exchanged between the parties • Using a simplified method, the requirement of “consideration” means that each party must suffer a “detriment” with his/her promise • A detriment occurs with a promise to do something the promisor had no duty to do, or a promise to give up a legal right 10 CONSIDERATION EXAMPLE car Tom promises to sell his car to Cindy, a promise that he had no prior legal duty to perform Cindy promises to pay $ for the car, a promise she had no prior legal duty to perform $$ 11