Contract Definition Paper Essays - Contract Law, Contract

Contract Definition Paper Essays - Contract Law, Contract Contract Definition Paper Brian Olson Business Law 8 January 2001 A contract is a binding agreement made between two competent parties that can be written verbal or implied. The purpose of a contract is to create an agreement that can be supported by the law (Wests Encyclopedia). As we enter the new millenium, and with the increase in the number of businesses (including e-commerce), we need to know more and more about contract law. Knowledge of contract law can also protect consumers and businesses from misunderstandings. The six elements of a contract are: binding agreement, competent parties, form required by law, legal in purpose, consideration, and genuine assent. Binding Agreement A binding agreement is a contract, verbal or written, between parties that is bound by law. When two competent parties make an agreement, it is considered binding. A binding agreement must have an offer and an acceptance. An example of a binding agreement would be if Kelly told Jamie that she would buy her car for $6,000 and they both agreed to it. This agreement is legal in purpose, supported by consideration, is in the form required by law and is made by two competent parties who gave genuine assent. Competent Parties To make an agreement a legal contract, both parties have to be competent. All adults are assumed to be competent. Its important for people who are making contracts to be of sound mind. This means that the people involved cannot be under the influence of any substances or be mentally ill. Convicts and enemy aliens are also considered to lack capacity. Capacity means the ability to understand ones actions and the effects of those actions. It is legal for minors to enter into contracts, but they cannot be bound by law because younger people have limited experience and are more vulnerable than adults (Mietus 163). The purpose of competency is so people dont take advantage of those who are not competent when entering into contracts. When an adult makes a contract with a minor, the minor is the only one who can disaffirm the contract. The adult is bound by law (Mietus 163). An example of a contract that cannot legally be bound would be if John wanted to buy Ryans car for $2000 and Ryan refused. Later that day, John took Ryan out to a bar and offered him several drinks. John offered to buy Ryans car again and Ryan agreed because he was under the influence of alcohol. Due to Ryans lack of competency, this contract is void. Consideration Consideration is the promise or action that one person (the promisor) gives in exchange for the promise or action of the promisee (Mietus 198). A promise of giving without receiving is not a legal contract and would be called lack of consideration. An example of lack of consideration would be if grandpa said he would pay for your college tuition if you get straight As in high school and then decides not to do it. That promise would not be legally binding because he is not getting anything in return. Both parties must get something in return for the contact to be legal. An example of consideration is if two competent parties traded a pen for a watch. Each party is giving and receiving something of value, which is called consideration. One of the exceptions to consideration is promissory estoppel. An example of this would be if your dad said he would buy you a brand new car if you paid your way through law school. Because you suffered an economic loss to hold up your end of the bargain, the other party could be legally bound by promissory estoppel. Another exception to consideration are charitable contributions. For example, if I told Red Cross that I was going to donate $500 per year, then I could be legally bound to do so. Genuine Assent Genuine assent exists when consent is not clouded by fraud, duress, undo influence or mistake (Mietus 212). For example, if Billy pulled out a gun and got Ed to agree to sell his bike for $5, Ed is under duress and is not giving genuine assent to sell the bike. Genuine assent must be communicated clearly in some way (written, verbal or strongly implied). An example of not