1

ASPECTS OF CONTRACT AND NEGLI GENCE

FOR BUSI NESS
Contract Requirements
Outcome 1.1: Explain the importance of the essential
elements required for the formation of a valid
contract.
2
Topics
What is a contract
Required elements of a contract
Examples of contracts.
Discussion
Would you lend money to someone you do not know
well, without a contract?
Would you let someone live in your home, while you
live in another country, without a contract?
Would you buy a book without a contract?
Would you buy a house without a contract?
Would you agree to marry someone without a
contract?
Would you accept a job without a contract?
3
What is a Contract?
An agreement which legally binds the parties
Written
Example?
Verbal
Example?
Implied
Example?
Discussion
What should a contract include?
Details in writing (consideration)
E.g., trade one iPad 3 for one iPhone 4
Clear intention of offer and acceptance
Alice offers to trade her iPhone 4 to Bob in return for his iPad
3 and Bob agrees to this trade
Clear statement of capacity
Alice is an adult, Bob is an adult, each owns what they give up
Signatures
Just writing it down may not be enough.
4
Elements of a Contract
Agreement
Offer and acceptance
Consideration
Each party gives, each party gets
Intention to create legal relationship
Not on accident
Capacity
Its not for everybody.
Discussion - Are these contracts valid?
A verbal contract for the purchase of a house
A written contract, signed by both parties to pay a
bribe to allow importation of some product
A written, signed contract between a 25 year old and
a 15 year old where the teen will buy the others car
You buy a new computer sold by Pico (no warranty
in writing or spoken) and it does not work
5
Why does it matter?
Can you sell what you have?
If Alice bought an iPad from Bob in trade for her
iPhone, can she then sell that iPad to Charley?
Alice
Bob Charley
Invalid Contracts
If Alice bought an iPad from Bob in trade for her
functioning iPhone on 5 May. On 10 May Alice sells
the iPad to Charley and on 11 May Bob finds out that
Alices iPhone never worked. Can Bob reclaim his
iPad?
6
Verbal Contracts
Alice opens a line of credit from ABC Bank but Bob
at the bank fails to put anything in writing. Alice
then uses the line of credit to purchase a new iPad. If
Alice never repays the debt, can Bob reclaim the
iPad, the money, or neither?
Homework
Read chapter 4, pages 65-76 before the next class.
7
Questions?