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ENTERING INTO
CONTRACTS
Elements of a Contract
• Contract – agreement enforceable at law.
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Offer
Acceptance
Genuine Agreement
Consideration
Capacity
Legality
• To be legally complete a contract must
include all 6 elements. Not all contracts
have to be in writing to be enforceable.
Characteristics of a Contract
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Valid, void, voidable or unenforceable
Express or implied
Bilateral or unilateral
Oral or written
Characteristics
• Express Contract – stated in words
and may be oral or written
• Implied Contract – one that comes
from the actions of the parties,
sometimes without exchanging a word.
Characteristics
• Bilateral – contains two promises, one
by each person
• Unilateral – contains only one promise;
promise for an act
Characteristics
• Oral – by word of mouth
• Written – provides proof that the
agreement was made
Requirements of an Offer
• Must be seriously intended
– No jokes
– An invitation to negotiate or trade is not an
offer(store advertisements, price tags, signs in
the window)
• Must be definite and certain
– Example. If someone agrees to pay “a share” this
is not definite or certain
• Must be communicated to the offeree
– By phone, letter, fax machine, etc.
Requirements of an Acceptance
• Unconditional Acceptance – “Mirror Image Rule“–
Must not change the terms of the original offer in
any way.
• Counteroffer – acceptance that changes the terms
of the original offer and terminates the offer.
• UCC – Uniform Commercial Code – unified set of
statutes that covers the law of sales, etc.
Methods of Acceptance
• Same form = contract comes into existence when the
acceptance is sent.
• Different form = contract comes into existence when the
acceptance is received.
• If the offeror states in the offer the method that the
oferree must use that method of acceptance must be
followed.
• The offeror cannot impose silence on the offeree as the
means of acceptance unless the offeree has agreed to
this.
Termination of an Offer
Revocation – taking back of an offer
• An offer can be revoked any time before acceptance
• A revocation becomes effective when it is received or
communicated to the offeree
Rejection – the offeree does not want to accept the offer; refusal
Counteroffer – ends the first offer
Expiration of time – if a time frame is listed in the offer, and that
time frame ends, the offer ends too.
– Option – payment to keep the offer open for a period of time.
Death or Insanity – if the offeror dies or becomes insane before
the offer is accepted, the offer comes to an end.