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ENTERING INTO CONTRACTS Elements of a Contract • Contract – agreement enforceable at law. • • • • • • 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 • • • • 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.