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6 PARTS OF A CONTRACT Offer and Acceptance- Both sides
agree on mutual terms Genuine Assent- Entering under your
own free will (Not being forced) Consideration- both sides gain
something Capacity- Understanding your actions Legality- legal agreement Writing- some contracts must be
written to be considered valid
OFFER AND ACCEPTANCE Agreed on “mutual” terms Only person offer was made to
(Offeree) may accept If a group, offeree is the person
WHO accepts Terms of the offer must be clear,
detailed and complete
ELEMENTS OF OFFER AND ACCEPTANCE
OFFER ACCEPTANCE
Agreement is “serious” and legal
The terms of the agreements are clear, definite and complete
Communicated to offeree
Only the offeree can accept
Terms agreed to by offeree match the offer’s terms (Mirror image rule)
Communicated back to offeror (Acceptance)
CONTRACTS Agreements “Courts” will enforce Social Agreements are not legally
enforceable contracts (Taking someone on a date)
Contracts create legal links between individuals, businesses and anyone involved in a legal agreement
All serious agreements are “not” considered contracts “unless” all 6 parts of contract are satisfied
TEST OF A REASONABLE PERSON Since you can never really
know what is in the mind of a person, you need a test to determine if you can agree what someone “thought” another person was thinking
This is a legal test to determine what someone meant when they entered a contract
FACTS AND CIRCUMSTANCES These are the things going on when an
offer was made to determine if the person who made the offer was in fact “serious”
If a person looks mad and the circumstances of their offer was made when they were mad, the offer will not be determined as serious.
For example, if a person grabs a $2000 watch and throws it on the ground, then tells a friend “This thing never works, I’d give it to you for free” they are not serious.
PRELIMINARY NEGOTIATIONS These are the things 2 people
say to each other to determine if the other person is serious about selling an item and if they can get it for the price they want.
Ex) “I see you want to sell your home. Would you take $200,000 for it?” The person responds “No, that is well below what I am asking”. Response “What would you take then?”
ESSENTIAL INFORMATION All important items needed to
make the contract terms complete
Names, dates, times, money, description of items
If any key item is missing, the contract is considered too vague or incomplete to be a valid agreement
ADVERTISEMENTS “Usually” NOT considered
offers, as they would need to make sure they are clear about the number of items for sale and make the customer do something to accept
Ads are considered “invitations” to an offer, as the consumer would need to come in to accept and can still negotiate the price.
ACCEPTANCE OF OFFER “Only” allowed to be done by the
person who the offer is made it (Offeree)
Cannot have a friend or relative say “She will accept, I’ll do it for her”
No person other than the one the offer was made to may accept unless its made to a group
ACCEPTANCE RULES MUST accept the final offers
terms exactly as they were offered (Mirror Image rule)
Must be made within the time frame allowed (If time is agreed)
Only offeree can accept Acceptance must be
communicated back in some way
HOW CAN OFFERS END? Revocation- the offeror takes back
offer Time stated- If time ends, so does
offer Reasonable time ends- If what
would be a reasonable time elapses, offer ends
Rejection by Offeree- once the Offeree rejects the offer, they cannot change their mind at a later date and accept
Counteroffer- Any “Change in terms” ends the original offer
Death or Insanity- Either party
KEEPING OFFERS OPEN
Common law Oversees non-
business contracts
Options (Collateral) must be given to keep offer open
UCC Law Oversees
business contracts (Retailers)
Firm Offers (Signed written agreements)
Good for 3 months
OPTIONS “Only” used with common law agreements (Non-Business related)
Based on collateral (Money or property used to keep offer open to buy time to decide)
Part of agreement
FIRM OFFER “Only” used with UCC Law based agreements (Retailers or business)
NO collateral is needed Usually in form of rain check or small written contract
Protected for 3 months or more
MIRROR IMAGE RULE Means the
acceptance must match the offer “exactly” as its offered
Any change in the offer’s terms is a counteroffer and therefore ends the original offer
UNILATERAL ACCEPTANCE If the offeree must
perform in some way to accept an offer
Ex) If I tell an employee “If you decide to work overtime this weekend, I’ll pay you double-time even though I only need to pay you time and a half”
BILATERAL ACCEPTANCE Most offers are bilateral A promise for a promise Ex) Going to the store and
paying for goods at the cash register. I get the goods and the store gets the money
WHEN THESE TAKE EFFECT
OFFERS Take effect
when received Can be made in
person, mail, email, etc..
ACCEPTANCES
Take effect when Sent
If mailed, acceptance is based on mail stamp or email through time and date
ACCEPTANCES Offeror may require
way acceptance must be made (For example, in writing through the mail)
Offeror may tell offeree acceptance does not take effect until it is received
SILENCE An offeror may NOT word a
contract offer to trick a person into agreeing by saying nothing
Illegal Silent acceptance only work
when you have a relationship with person or business
Ex) Stocking Pepsi on store shelves
IMPLIED TERMS Things that are understood
without being spoken or agreed to Its understood that you will pay for
goods before leaving a store Clear offers means the terms are
explained in a way both parties understand
I am selling a 2009 GE refrigerator