Contract Formation Basics

Study Notes

Formation of Contracts

Definition of a Contract
- A contract is a legally enforceable agreement between two or more parties.
Essential Elements of a Contract
- Offer: A clear proposal made by one party (the offeror) to another (the offeree).
- Acceptance: Unconditional agreement to the terms of the offer by the offeree.
- Consideration: Something of value exchanged between the parties (can be money, services, goods).
- Capacity: Parties must have the legal ability to enter into a contract (age, mental competency).
- Legality: The contract's purpose must be legal and not against public policy.
Types of Contracts
- Bilateral Contracts: Both parties make promises to each other.
- Unilateral Contracts: One party makes a promise in exchange for a specific act by another party.
- Express Contracts: Terms are explicitly stated, either orally or in writing.
- Implied Contracts: Terms are inferred from actions or circumstances rather than written or spoken words.
Formation Process
- Invitation to Treat: An initial communication that invites offers but is not itself an offer.
- Offer and Counteroffer: The original offer can be rejected and a counteroffer made, which negates the original offer.
- Acceptance: Must mirror the offer; any changes constitute a counteroffer.
Communication of Acceptance
- Acceptance must be communicated to the offeror.
- Postal Rule: Acceptance is effective when sent (in the case of postal communication), not when received.
Revocation of Offer
- Offers can be revoked before acceptance, but not after acceptance has occurred.
- Revocation must be communicated to the offeree.
Termination of Offers
- Offers can be terminated by:
  - Expiration of time.
  - Revocation by the offeror.
  - Rejection by the offeree.
  - Counteroffer by the offeree.
  - Death or insanity of either party.
Mistakes in Contract Formation
- Mutual Mistake: Both parties are mistaken regarding a fundamental aspect of the contract.
- Unilateral Mistake: Only one party is mistaken, which typically does not affect the enforceability of the contract.
Undue Influence and Duress
- Contracts signed under undue influence or duress (threats, coercion) may be voidable.
Statute of Frauds
- Certain contracts must be in writing to be enforceable, such as those involving real estate or contracts that cannot be performed within one year.

Contract Definition and Essentials

A contract is a legally binding agreement between two or more competent parties.
Key elements include a clear offer, unconditional acceptance, valuable consideration (exchange), legal capacity of parties, and a lawful purpose.

Contract Types and Formation

Bilateral contracts involve mutual promises; unilateral contracts involve a promise for an act.
Express contracts have explicitly stated terms; implied contracts are based on actions and circumstances.
An invitation to treat is not an offer, but a step towards one. Offers can be rejected or countered, creating new offers.
Acceptance must exactly mirror the offer; changes create counter-offers. For postal acceptance, it's effective when sent, not received.

Offer Termination and Contract Mistakes

Offers can be revoked before acceptance but not after. Revocation requires communication to the offeree.
Offers terminate upon expiry, revocation, rejection, counter-offer, or party death/insanity.
Mutual mistake (both parties mistaken) can impact enforceability; unilateral mistake (one party mistaken) usually doesn't.

Avoiding Contract Disputes

Undue influence or duress (coercion) can void contracts.
The Statute of Frauds mandates written contracts for certain agreements (e.g., real estate, contracts lasting over a year).

Description

This quiz covers the key concepts and elements involved in the formation of contracts. Participants will explore definitions, essential elements such as offer, acceptance, and consideration, and types of contracts, including bilateral and unilateral contracts. Test your understanding of the legal foundations of agreements!