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CHAPTER 6

MATERIALS TO SUPPLEMENT TEXTBOOK

J. Pittman, Instructor

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

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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

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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

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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

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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

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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

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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

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

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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

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CONSIDERATION EXAMPLE

Cindy promises to pay $ for the car, a promise she had no prior legal

duty to perform

Tom promises to sell his car to Cindy,

a promise that he had no prior legal duty to perform

car

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