1.15.1
Law for Business, 15e
by Ashcroft
Chapter 5:
Nature and Classes
of Contracts
Law for Business, 15e, by Ashcroft, © 2005 West Legal Studies in Business, a Division of Thomson Learning

5.2
Chapter 5 Objectives
 State the five requirements for a
valid contract.
 Describe the types of contracts
and how they differ from
agreements.
 Explain the difference between a
contract and a quasi contract.
click for sound

5.3
Contracts
 A contract can be defined as a
legally enforceable agreement
between two or more competent
persons.
 A breach of contract is the failure of
one of the parties to perform the
obligations assumed under the
contract.

5.4
Requirements of a
Valid Contracts
 Based on a mutual agreement by
the parties
 Made by competent parties
 Supported by consideration given
by each party to the contract.
 Be for a lawful purpose
 Sometimes meet certain formal
requirements

5.5
Void and Voidable
Contracts
 A void contract is an agreement
with no legal effect
It is not enforceable in court.
It is not the same as an
unenforceable contract.
 A voidable contract would be an
enforceable agreement, but,
because of circumstances, one or
both parties may elect to void it
click for sound

5.6
Types of Contracts
Express
and implied
Express
and implied
Executory
and
executed
Executory
and
executed
Unilateral
and
bilateral
Unilateral
and
bilateral
Formal and
simple
Formal and
simple
Quasi
contract
Quasi
contract click for sound

5.7
Contracts:
True or False
 A valid contract can be oral as well as
written.
 A formal contract is created in a
particular form.
 An executory contract has been fully
performed by all parties.
 Most contracts provide a clause in
which one party can receive unjust
enrichment.
Quick
Quiz
Quick
Quiz
Quick
Quiz
Quick
Quiz
Quick
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Quick
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Quick
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Quick
Quiz
click for sound

5.8
Contracts: True or
False (answers)
 A valid contract can be oral as
well as written. - True
A formal contract is created in a
particular form. - True
An executory contract has been
fully performed by all parties. -
False
Most contracts provide a clause in
which one party can receive
unjust enrichment. - False
Quick
Quiz
Quick
Quiz
click for sound

1.95.9
Have any questions?
Be sure you study the cases
in the textbook for a
thorough understanding of
this chapter.
Contract
click for sound

1.105.10
Law for Business, 15e
by Ashcroft
Chapter 6:
Offer and Acceptance
Law for Business, 15e, by Ashcroft, © 2005 West Legal Studies in Business, a Division of Thomson Learning
Sound

5.11
Chapter 6 Objectives
 Discuss the requirements for a valid
contract.
 Explain the difference between an
offer and an invitation to make an
offer.
 Summarize the rules affecting the
duration of an offer.
 Define a counteroffer.
 State the way to accept an offer made
Sound

5.12
Requirements
of a Valid Offer
Offer must be
definite
Offer must be
definite
Offer must be
seriously
intended
Offer must be
seriously
intended
Offer must be
communicated
to the offeree
Offer must be
communicated
to the offeree

5.13
Duration of the Offer
 The offeror may revoke an offer
any time prior to its acceptance.
 An option cannot be revoked at
will.
 A revocation of an offer must be
communicated to the offeree prior
to the acceptance.

5.14
Duration of the Offer
Offer is terminated by:
 Lapse of time specified
 Death or insanity of offeror
 Rejection of the offer by the
offeree
 The performance of the contract
becomes illegal
Sound

5.15
The Acceptance
Acceptance is the assent to an
offer which results in a
contract.
A counteroffer rejects the
original offer, thereby
terminating the offer.
An offeree may make inquiry
without rejecting the offer. Sound

5.16
Manner of
Acceptance
Usually the manner of
acceptance is irrelevant.
An offer may stipulate that
acceptance be written and
received.
Persons can avoid problems by
including the manner of
acceptance in the contract.
Sound

1.175.17
The End!The End!
Don’t forget to check
out the Cornell
University Law School
Web site.
Sound

1.185.18
Law for Business, 15e
by Ashcroft
Chapter 7:
Capacity to Contract
Law for Business, 15e, by Ashcroft, © 2005 West Legal Studies in Business, a Division of Thomson Learning
Sound

5.19
Chapter 7 Objectives
 Identify classifications of
individuals who may not have the
capacity to contract.
 Define disaffirmance.
 Explain how a minor’s contract
can be ratified.
 Discuss reasons which may
impair a person’s ability to
Sound

5.20
Capacity to
Contract
Can a mail-order company void a
contract with a minor if the minor
bought items for personal use?
Can a minor purchase a car then
disaffirm the contract after
wrecking it?
Is a minor who owns a lawn service
responsible to uphold contracts for
the payment of fertilizer?
ActivityActivityActivityActivityActivityActivityActivityActivity

5.21
Capacity to
Contract
 Can a mail-order company void a contract
with a minor if the minor bought items for
personal use?
No
 Can a minor purchase a car then disaffirm
the contract after wrecking it?
Yes, with perhaps some provisions
 Is a minor who owns a lawn service
responsible to uphold contracts for the
payment of fertilizer?
Yes, they are liable for business contracts.
Activity
Answers
Activity
Answers
Sound

5.22
When Contracting
with a Minor...
A minor can sometimes disaffirm
a contract.
The minor may ratify the contract
after attaining majority.
Minors’ business contracts are
enforceable and binding.
Some states prevent a minor from
avoiding some contracts Sound

5.23
Incapacity
 Mentally incompetent
people must be judicially
declared insane.
 Intoxicated persons must
be so intoxicated that they
can’t understand the
meaning of the contract.
 Convicts operate under
laws which vary from state
to state.
Sound

1.245.24
Do you have any
questions about
contractual capacity?
Sound

1.255.25
Law for Business, 15e
by Ashcroft
Chapter 8:
Consideration
Law for Business, 15e, by Ashcroft, © 2005 West Legal Studies in Business, a Division of Thomson Learning
Sound

5.26
Chapter 8 Objectives
 Explain consideration.
 Explain when part payment
constitutes consideration.
 Give three examples of
insufficient or invalid
consideration.
 Recognize when consideration is
not required.
Sound

5.27
Consideration
 Consideration is whatever the
promisor demands and receives for
a promise.
 The promise must impose an
obligation upon the person making
it.
 Consideration may be doing a
certain act or refraining from doing
something.
 Adequacy of consideration is Sound

5.28
Partial Payment as
Consideration
 Partial payment of a past-due
debt cannot be consideration.
 Insufficient consideration
includes

Performing or promising to perform
what one is already obligated to do.

Refraining from doing what one has
no right to do.

Past performance. Sound

5.29
Elements of
Promissory Estoppel
A promise is made.A promise is made.
Promisor reasonably expects the
promise to induce action by promissee.
Promisor reasonably expects the
promise to induce action by promissee.
The promissee does act.The promissee does act.
Justice requires enforcement of the
promise.
Justice requires enforcement of the
promise.
Sound

1.305.30
Any questions?
Sound

1.315.31
Law for Business, 15e
by Ashcroft
Chapter 9:
Defective Agreements
Law for Business, 15e, by Ashcroft, © 2005 West Legal Studies in Business, a Division of Thomson Learning
Sound

5.32
Chapter 9 Objectives
 Describe mistakes that
invalidate a contract.
 State what types of mistakes
normally do not invalidate
contracts.
 Identify situations in which
fraud, duress, or undue
influence are present.
Sound

5.33
Agreement or
Mistake?
Mark agrees to sell Geraldine his car for
$3,000, without specifying it was a 1995
Ford. She could view it by driving to his
home where it would be in the driveway.
Unknown to Mark, his wife had come
home early and parked their Ferrari in
the driveway (worth more than $3,000).
Geraldine sees the Ferrari and thinks it
could be bought for $3,000. She quickly
tells Mark she wants to buy it. Has
there been a meeting of the minds?
ActivityActivityActivityActivityActivityActivityActivityActivity
Sound

5.34
No - the mistake was mutual.
Neither knew exactly what the
other was referring to.
ActivityActivity
Sound
Agreement or
Mistake?

5.35
Unilateral Mistakes
 Usually has no effect on a contract
 However, a unilateral mistake of a
fact may entitle a mistaken party to
relief
If the nonmistaken party has caused
the mistake or knew of the other
party’s mistake and the mistaken party
exercised ordinary care.
Courts show extreme unwillingness to
allow one party to hold the other to a
contract if the first party knows that

5.36
Contract Terms
Govern
 Contract terms govern, no matter
how the law would apply to
mistakes
 The contract could also indicate
which party assumes the risk that
the facts are not as believed.
 The law as to mistake applies only
in absence of a governing provision
in the contract, so long as that
governing provision is not Sound

5.37
A mutual mistake will render a
contract defective except in these
types of mistakes:
a. Value, quality, or price
b. Terms of the contract
c. The law
d. Expectations
Mutual Mistakes
Sound

5.38
Kinds of Fraud
Fraud in the
Inducement
Fraud in the
Inducement
Fraud in the
Execution
Fraud in the
Execution
Active
Fraud
Active
Fraud
Passive
Fraud
Passive
Fraud
Innocent
Misrepresentation
Innocent
Misrepresentation
Sound

5.39
Duress and
Undue Influence
 Types of duress
 Physical
 Emotional
 Economic
 Undue influence is exercised when
no force or threat of harm is used,
but one party exerts so much
pressure on the other that the
second party’s free will cannot be
exercised Sound

5.40
Remedies for Breach
of Contract
• Sue to recover money, goods,
or other things of value.
• If the contract is executory on
your part, sue to perform.
• Sue to have the contract
judicially declared void.
Sound

5.41
Remedies for Breach
of Contract
• Sue for reformation (correction)
of the contract.
• Sue to have the contract
rescinded (voided)
Sound

1.425.42
The End !
Be sure you understand this
chapter before continuing to
the next.
Sound

1.435.43
Law for Business, 15e
by Ashcroft
Chapter 10:
Illegal Agreements
Law for Business, 15e, by Ashcroft, © 2005 West Legal Studies in Business, a Division of Thomson Learning
Sound

5.44
Chapter 10 Objectives
 Explain the consequences of a
contract for an unlawful purpose
or a purpose achieved illegally.
 Explain what types of contracts
are void for illegality.
 Identify the types of contracts
that are contrary to public policy.
Sound

5.45
Prohibited Contracts
 Gambling contracts
 Sunday contracts
 Usurious contracts
 Contracts of an unlicensed operator
 Contracts for the sale of prohibited
articles
 Contracts in unreasonable restraint
of trade Sound

5.46
Usurious Contracts
 Usury is the limit of interest that
may be charged.
 The maximum contract rate is
the highest rate that can be
legally charged.
 The legal rate applies to all
situations in which interest may
be charged but in which the
parties were silent as to the Sound

5.47
Contracts in
Restraint of Trade
Contracts
not to
compete
Contracts
not to
compete
Contracts
to restrain
trade
Contracts
to restrain
trade
Unfair
competitive
practices
Unfair
competitive
practices
Contracts to fix
the resale price
Contracts to fix
the resale price
Sound

5.48
Contracts Contrary
to Public Opinion
 Contracts limiting the freedom of
marriage include:
 Promising never to marry.
 Refraining from marrying for a definite
time.
 Agreeing not to marry a certain person.
 Contracts obstructing the administration of
justice.
 Contracts injuring the public service.
Sound

1.495.49
Do you have any questions
about illegal agreements?
Be sure to check the
websites mentioned
in the textbook for
further explanations
Sound

1.505.50
Law for Business, 15e
by Ashcroft
Chapter 11:
Written Contracts
Law for Business, 15e, by Ashcroft, © 2005 West Legal Studies in Business, a Division of Thomson Learning
Sound

5.51
Chapter 11 Objectives
 Identify which contracts
the Statute of Frauds
requires to be in writing.
 Distinguish adequate
from inadequate writings
when a written contract is
required.
 Explain parol evidence
rule.
Sound

5.52
The existence and terms of the
contract cannot be denied
The existence and terms of the
contract cannot be denied
One or more parties may die or
become insane or incapacitated
One or more parties may die or
become insane or incapacitated
Witness testimony of an
oral contract may vary
Witness testimony of an
oral contract may vary
Reasons for
Written Contracts
Sound

5.53
Written Contracts
Contracts which must be in writing
include the following:
 Agreements to sell land or any
interest in land.
 Agreements which cannot be
performed within a year.
 Agreements to become
responsible for the debts of
another Sound

5.54
Written Contracts
 Agreements of an executor to pay
debts of estate from executor’s
personal funds.
 Agreements in which promise of one
person is made in consideration of
marriage.
 Agreements to sell goods for $500 or
more.
Sound

5.55
Have any
questions?
Sound

1.565.56
Law for Business, 15e
by Ashcroft
Chapter 12:
Third Parties and
Contracts
Law for Business, 15e, by Ashcroft, © 2005 West Legal Studies in Business, a Division of Thomson Learning
Sound

5.57
Chapter 12 Objectives
 Discuss the difference between a
third-party beneficiary contract
and a novation.
 Explain the difference between
assignment of a contract and
delegation of duties under it.
 Describe the different types of
contracts involving more than two
people. Sound

5.58
Third Party
Beneficiaries
 Creditor beneficiary: promisee
owes an obligation or duty that
will be discharged to the extent
that promisor performs promise
 Donee beneficiary: promisee
owes no legal duty but to whom
performance is a gift
 Incidental beneficiary:
incidentally benefits promisee Sound

5.59
Ways to Involve
Third Parties
 Novation is the termination of a
contract and substitution of a
new one with the same terms but
with a new party.
 Assignment is the conveyance of
rights to a person not a party.
 Delegation is the transfer of
duties.
Sound

5.60
Technicalities of
Assignment
 Notice – notice need not be given
to other party in order to make
the assignment effective as
between the assignor and the
assignee
 Form – an assignment may be
made either by operation of law
or by the act of the parties
 Effect – assignee does not
receive any greater right or Sound

5.61
Implied Warranties
of the Assignor
 That the assignor is the true
owner of the right
 That the right is valid and
subsisting at the time the
assignment is made
 That there are no defenses
available to the debtor that have
not been disclosed to the
assignee Sound

5.62
Types of Third Party
Contracts
Joint contracts - obligate two or more
people together toward performance
Joint contracts - obligate two or more
people together toward performance
Several contracts - when parties agree to
perform the same obligation
Several contracts - when parties agree to
perform the same obligation
Joint and several contracts - bind two or
more people jointly and severally
Joint and several contracts - bind two or
more people jointly and severally
Sound

1.635.63
Make sure you
understand the concepts
in this chapter.
Sound

1.645.64
Chapter 13:
Termination of
Contracts
Law for Business, 15e, by Ashcroft, © 2005 West Legal Studies in Business, a Division of Thomson Learning
Law for Business, 15e
by Ashcroft
Sound

5.65
Chapter 13 Objectives
 Describe the requirements for
terminating a contract by
performance.
 Recognize the circumstances that
discharge a contract by operation
of law.
 Explain what breach of contract is
and the potential remedies for
breach. Sound

5.66
Performance
of the
contract
Performance
of the
contract
Operation
of the
law
Operation
of the
law
Voluntary
agreement of
the parties
Voluntary
agreement of
the parties
Acceptance
of a breach of
contract
Acceptance
of a breach of
contract
Impossibility
of performance
Impossibility
of performance
Termination of
Contracts
Sound

5.67
1. Time of1. Time of
performanceperformance
1. Time of1. Time of
performanceperformance
2. Tender of2. Tender of
performanceperformance
2. Tender of2. Tender of
performanceperformance
3. Tender of3. Tender of
paymentpayment
3. Tender of3. Tender of
paymentpayment
5. Substantial5. Substantial
performanceperformance
5. Substantial5. Substantial
performanceperformance
4. Satisfactory4. Satisfactory
performanceperformance
4. Satisfactory4. Satisfactory
performanceperformance
Explain each of the following factors
which determine whether there has
been performance:
ActivityActivityActivityActivityActivityActivityActivityActivity Termination by
Performance
Sound

5.68
Discharge by
Operation of the Law
 Bankruptcy
 Running of the statute of
limitations
 Alteration of written contracts
 Impossibility of performance
Contract
Sound

5.69
Impossibility of
Performance
 Destruction of the subject matter
 New laws making the contract
illegal
 Death or incapacity of person to
render personal services
 Acts of other parties
Contract
Sound

5.70
Remedies for
Breach of Contract
 Suit for damages
 Nominal damages
 Compensatory damages
 Punitive damages
 Liquidated damages
 Suit to rescind the contract
 Suit for specific performance
Sound

1.715.71
This concludes the unit on
contracts. Do you have a
better understanding of how
contracts work now?
Sound