Contracts

Elements of a Contract A contract is an agreement between

two or more persons to exchange something of value

What does it do? It legally binds parties to do what

they promise. If someone fails to live up to the

promise it is called breach of contract.

Elements of a Contract Must be an offer by one party and an

acceptance by another.

Exchange of consideration-something of value is given for something else of value.• Do not have to be of same value.

Those entering into a contract must be legally competent.

Minors and Contracts Minors can make contracts but cannot be

forced to honor them. Can back out.

Therefore, minors have a hard time getting credit.

If credit is offered, it requires a cosigner(adult). If contract continues to age of majority, it is considered ratified(formally a contract)

Written and Oral Contracts When you place an order for food in a

restaurant-oral contract The law favors written contracts

Certain contracts must be written

• Real estate, land• Agreements to pay another person’s debt• Agreements for services that will not be

performed within one year.

Illegal Contracts A law is violated as part of the

contract.

Unconscionable contract-unfair, harsh or oppressive enough that it should not be enforced• Consumer is presented with a take it or

leave it choice• There is uneven bargaining power

Fraud A false statement about an important

fact that is made to induce or persuade a person to agree to a contract

Salespersons may not lie about a product they are not required to reveal negative aspects unless they are asked.

Breach of Contract In Civil Court:

• Expectation Damages-difference between the full value of what you were promised and what you received.

• Rescission and Restitution-ask the court to cancel or rescind the contract and order the person to refund you any money owed to you.

• Specific Performance-Buyer asks the court to have the seller to carry out the terms of the contract

Duty to Mitigate Mitigate means to make less severe

Law requires the injured person to take reasonable steps to mitigate damages.

Agree to buy some good for $150, find out it has been sold for $100 by other buyers. You refuse to pay. The seller must mitigate to $100 since he could ask that and sell it to another for that price.