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Section 5.1

Section 5.1. Chapter. How Contracts Arise. 5. Section 5.1 Contracts Section 5.2 Offer and Acceptance. What You’ll Learn. How to identify a contract’s elements (p. 108) How to identify valid, void, voidable, and unenforceable contracts (p. 110). What You’ll Learn.

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Section 5.1

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  1. Section 5.1

  2. Chapter How Contracts Arise 5 Section 5.1 Contracts Section 5.2 Offer and Acceptance

  3. What You’ll Learn • How to identify a contract’s elements (p. 108) • How to identify valid, void, voidable, and unenforceable contracts (p. 110)

  4. What You’ll Learn • How to distinguish between express and implied contracts (p. 111) • How to identify unilateral and bilateral contracts (p. 111)

  5. What You’ll Learn • How to distinguish between oral and written contracts (p. 112)

  6. Why It’s Important Identifying a contract’s elements will help you manage your affairs in an intelligent and effective manner.

  7. Legal Terms • contract (p. 106) • offer/acceptance (p. 109) • genuine agreement (p. 109) • capacity (p. 109) • consideration (p. 109) • legality (p. 109)

  8. Legal Terms • void/voidable contract (p. 110) • unenforceable contract (p. 111) • express/implied contract (p. 111) • bilateral/unilateral contract (pp. 111, 112)

  9. Section Outline Understanding Contract Law The Nature of a Contract The Three Theories of Contract Law The Elements of a Contract

  10. Section Outline Characteristics of a Contract Valid, Void, Voidable, or Unenforceable Express or Implied Bilateral or Unilateral Oral or Written

  11. Pre-Learning Question How would you define contract?

  12. The Nature of a Contract • A contract is any agreement enforceable by law. • Not all agreements are contracts, however. • Whether or not it’s a contract, depends on the circumstances of the agreement.

  13. The Three Theories of Contract Law The evolution of contract law shows how its focus has changed.

  14. The Equity Theory In the past, courts asked whether the parties to a contract exchanged things of equal value. This approach was called the equity theory of contract law.

  15. The Will Theory The advent of industrial capitalism forced the courts to shift their focus.They began to ask if the parties had agreed to the terms in the agreement of their own free will.

  16. The Formalist Theory Then the courts began to study the parties’ actions and words to determine if there was a “meeting of the minds.”

  17. The Formalist Theory This led to certain fixed elements in a contract. It is called the formalist theory because it relies on the form of the agreement.

  18. Elements of a Contract There are six elements of a contract. • Offer • Acceptance • Genuine agreement • Consideration • Capacity • Legality

  19. Elements of a Contract • An offer is a proposal by one party to another intended to create a legally binding agreement. • An acceptance is the second party’s unqualified willingness to go along with the first party’s proposal.

  20. Elements of a Contract • If a valid offer is met by a valid acceptance, a genuine agreement exists. • Capacity is the legal ability to enter a contract.

  21. Elements of a Contract • Consideration is the exchange of things of value. • Legality means that people can only enter into contracts for legal purposes. People cannot enter into contracts to commit illegal acts.

  22. Pre-Learning Question What is one characteristic that you think a contract must have?

  23. Characteristics of a Contract Contracts can have any of the following characteristics: • Valid, void, voidable, or unenforceable • Express or implied • Bilateral or unilateral • Oral or written

  24. Valid, Void, Voidable, or Unenforceable • A valid contract is legally binding. • A contract that is void has no legal effect.

  25. Valid, Void, Voidable, or Unenforceable • When a party to a contract is able to void or cancel the contract for some legal reason, it is a voidable contract. • A contract between 2 minors. • An unenforceable contract is one the court will not upholdbecause some rule of the laws—statues of limitations

  26. Express or Implied • An express contract is stated in words and may be either oral or written. • An implied contract comes about from the actions of the parties. • Buying gas from the gas station.

  27. Bilateral or Unilateral • A bilateral contract contains two promises. • A unilateral contract contains a promise by only one person to do something, if and when the other party performs some act. • Ex: Reward offer

  28. 5.1 How Parties Reach Agreement

  29. 5.1 How Parties Reach Agreement

  30. Oral or Written • An oral contract is created by word of mouth and comes into existence when two or more people form a contract by speaking to each other. • Sometimes, however, it is desirable to put contracts in writing.

  31. End of Section 5.1

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