Introduction to Contracts and Their Formation

1
Introduction to Contracts and Their Formation
Its a deal, Ill take it

• OBE-118, Section 10
• Fall 2004

2
Basic Elements of a Contract

• Usually looked at as six elements
• Agreement (or Mutual Assent)
• Consideration
• Capacity
• Legality
• Genuineness of assent
• Writing and Form

3
Classifying Contracts

• Bilateral versus Unilateral

• Express versus Implied

• Formal versus Informal

• Valid, Void, Voidable, and Unenforceable

4
Formation

• Mutual Agreement or Mutual Assent
• Requires acceptance of an offer
• The objective theory of contracts resolves
  issues as to what was an offer,

5
Offer

• Basic Elements of an offer
• Serious objective intent by offeror
• Terms reasonable definite and certain
• Offer communicated to offeree

• No Want to buy my car?
• My car is for sale
• I want to sell my 2000 BMW for 40,000

6
Acceptance

• Voluntary act that expresses assent or agreement
  to terms of offer
• Unequivocal or absolute
• Communicated to the offeror

No Maybe Okay but only if Yes if
you increase the the price by
7
Did the Offer Survive to be Accepted?
Offer Terminated?
Offer
Acceptance
Revocation?
Rejection?
Counteroffer?
Operation of Law?
Was offer non-revocable?
8
Revocation of Offers

• Direct repudiation

• Behavior conforming to repudiation

• Generally, revocation must be received by
  offeror or offerors agent.

• Irrevocable offers

Firm Offers
Option contract
9
Termination by Rejection

• Words or acts that convey no

Termination by Counteroffer

• A rejection with a new offer

• Watch out for inquiries Would you accept 50?

• Mirror-image rule (common law)

10
Termination by Operation of Law

• Lapse of time

• Destruction of Subject matter

• Death or incompetence of offeror

• Illegality of proposed contract