There are 6 elements of a Contract

Elements of a Contract

Capacity

Legality

• Legal ability to enter a contract
• Minors
• Mentally Incapacitated
• Intoxicated

• Person serving a prison sentence lacks capacity

Offer

By: Jenny Phan

Business Law Honors

2nd Period

• Proposal by one party to another with intent to create a logical binding agreement
• Offeror- makes the offer
• Offeree- the offer made to this person

Termination of an Offer

• Revocation- taking back an offer by offeror
• Rejection- refusal by the offeree
• Counteroffer- any change in the terms of the offer
• Death- offeror dies
• Insanity- offeror is declared insane
• Expiration of time- if the offer is put on a time limit and the offer has passed
• Destruction of Subject Matter and Firm Offers
• Option- the offeree gives the offeror something of value in return for a promise to keep the offer open for a set period of time
• Firm Offer- written offer for goods that states the period of time during which the offer will stay open
• No additional consideration is required
• Maximum period of time is set by the UCC- 3 months
• Offeror must be a merchant who deals in related goods of a daily

• Illegal Contracts
• Civil criminal
• Agreements to commit a crime/tort are legal
• Usury
• State sets a max interest rate
• Interest- fee the borrower pays to the lender for using money
• Charging too high of an interest rate
• Gambling
• Legal gambling varies from state to state
• Licensing
• States require that persons in certain occupations obtain a license to practice that occupations
• Public Policy
• Agreements that unreasonably restrain trade
• Agreements not to compete
• Agreements for price-fixing
• Agreements to eliminate competitive bidding or bid rigging
• Agreements to induce breach of duty or fraud
• Statutes of Frauds
• Requires that certain contracts be in writing to be enforceable

Genuine Agreement (Assent)

• Valid offer has been made by the offeror and a valid acceptance has been exercised by the offeree
• Several causes for a genuine agreement to be lacking in a contract
• Duress
• Undue Influence
• Unilateral of mutual mistake
• Innocent misrepresentation
• Fraudulent misrepresentation

Fraudulent Misrepresentation

Innocent Misrepresentation

• Party to a contract deliberately makes an untrue statement of facts
• Deliberate- done with or marked by full consciousness of the nature of effects; intentional
• Deception- the fact or state of being deceived
• Gain- to secure as profit or reward
• In order to prove fraud, you must prove the above 3 definition

Consideration

Proving Fraudulent Misrepresentation

Unilateral Mistake

Materiality

Proving Fraudulent Misrepresentations

• Innocent statement of supposed fact that turns out to be false
• Statement must be one of fact
• Statement must be material
• Statement must be relied upon
• Injured party has the right to rescind (take back) the offer
• No rights to damage

• Reasonable reliance
• One party must reasonably rely on statement
• Intentional or reckless
• One party deliberately lies or conceals a material fact
• One party recklessly makes a false statement of fact, without knowing whether it is true or false
• Statement must be intended to induce party to enter into contract
• Resulting Loss
• Must cause an injury

Undue Influence

• Statement would cause reasonable person to contract
• If one party knows the other party would rely on the statement
• If one party knows the statement is false

• Untrue statement of fact
• must be one of fact, not opinion
• Active concealment
• Silence- may stay silent about defects
• Statement is about material fact
• True statement is made false by subsequent events
• One party knows the other party has made a basic mistaken assumption

Duress

• Error on the part of once of the parties
• Does not affect validity of the contract
• Cannot get out of contract
• Nature of the agreement
• Signing a contract you don't understand or have not read
• Signing a contract in a language you don't understand
• Mutual Mistake (Bilateral Mistake)
• Both parties are mistaken about an important fact
• Impossibility of performance
• Contract is impossible to perform
• Contract is void
• Subject matter
• Either party can void
• Existing law
• Contract is valid
• Parties are expected to know the law

• Unfair and improper persuasive pressure within a relationship of trust
• Must be able to prove
• Relationship of trust, confidence, or authority
• Unfair persuasion

• Overcoming a person's free will by use of force or by threat of force or bodily harm
• Threats of illegal conduct
• Threats to report crimes
• Threats to sue
• Threats to sue made for purpose unrelated to the suit
• Economic duress
• Threats to a person's business or income

There are 6 elements of a Contract

Acceptance

• Exchange of benefits and detriments by the parties to an agreement
• Requirements of consideration
• Must involve a bargained for-exchange (promise made in return for another promise
• Benefits
• Something that a party was not previously entitled to receive
• Detriments
• Any loss suffered; anything given up
• Forbearance
• Bit doing something that you have the right to do

• Offer
• Acceptance
• Genuine Agreement/Assent
• Consideration
• Capacity
• Legality

• Unqualified willingness by the offeree to go along with the offer
• Mirror Image Rule
• Terms of acceptance must match exactly, the terms of offer
• Any change means there is no acceptance

Methods of Acceptance

• Bilateral
• Unilateral
• Silence

Silence

Unilateral

• Does not represent acceptance
• Offeror cannot word offer in a way that silence would be considered acceptance

Bilateral

• Offeror promises something in return for offeror's performance and indicates that performance represents acceptance

• Offer is accepted by offeree through communication of the promise to the offeror
• Only requires giving a promise to perform not performance itself
• Most offers are bilateral