CUSTOMIZED for
PROFESSOR LUDLUM
Oct. 12, 2016
Contracts: Part One
Elements for D2L
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
think think think
TANK TANK TANK
All promises are legal contracts
a. True
b. False
Contract Law
Contract need not be a formal, written
document
Contract = the agreement between the parties
Written paper = evidence of the agreement
between the parties
Sources of Contract Law
Contract law
comes from either
Legislation
Common Law
•Uniform Commercial •Judges’ decisions
Code
•State Statutes
Contract Terms
Bilateral
Unilateral
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Contract Terms
Express
Implied
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Contract Terms
Executed
Executory
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Introduction
Six Elements of a Contract
Offer
Acceptance
Consideration
Capacity
Legality
Statute of Frauds
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Simple Example
Buy Nuggets from Chick-Fil-A
Hello Kind Sir,
I would like to buy
8 nuggets for $5
OFFER
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Simple Example
Buy Nuggets from Chick-Fil-A
Thank you,
Mr. Friendly
Customer.
I would like to sell
8 nuggets for $5
ACCEPT
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Simple Example
Consideration
Give you $5
Receive Nuggets
Give you Nuggets
Receive $5
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Offer
Acceptance
Consideration
All expressed in the transaction
But often terms are implied
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3 Elements of the Offer
• Offeror’s serious intention.
• Definiteness of terms.
• Communication to Offeree.
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Offer-Communication
Offeree’s knowledge of the offer:
– Directly by the Offeror, or
– Use of Agents.
– Examples: Realtors, Attorneys, Car Max, eBay,
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Offer-Serious Intention
Contract is judged by what a reasonable person in
the Offeree’s position would conclude about the
offer.
Offers made in anger, jest, or undue excitement
are usually not offers BUT MIGHT BE!!!!.
Expressions of opinion (___________________)
are not offers.
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Offer
_________________________, catalogues,
price lists, and circulars are treated as
invitations to negotiate, and not as offers.
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• Contract must STATE the terms or give
REASONABLY CERTAIN methods for
obtaining the terms!
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• What one term will NEVER
be filled in if not clear?
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Termination by
Action of the Parties
• Revocation by the Offeror:
– Offer can be withdrawn anytime before
Offeree accepts the offer.
• Rejection by the Offeree:
– Rejection terminates the offer.
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Termination by
Action of the Parties
• A counteroffer by the Offeree is a
rejection of the original offer and
making of a new offer.
• Example: Counteroffer on selling your
house!
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Termination by Operation of Law
•
•
•
•
Lapse of a reasonable period of time.
Destruction of the Subject Matter.
Death or Incompetence.
Supervening Illegality.
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Acceptance
Acceptance is the:
– Voluntary act that,
– Shows agreement to the terms of an offer.
The “Mirror Image” Rule.
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Silence as Acceptance
Acceptance of Services by Silence.
– I didn’t order this pizza…
Solicited Offers (You asked it to be sent).
– Offeree has a duty to reject.
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Timeliness of Acceptance
Mail Box Rule - Acceptance becomes effective
on dispatch, providing that authorized means of
communication is used.
‘mailbox rule’ does not apply online.
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§1: Elements of Consideration
• Consideration must have “legally sufficient value” and a
“bargained-for-exchange.”
• BOTH SIDES must give something and receive
something
• Difference between a contract and a gift
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§1: Elements of Consideration
• “Legal Value” can mean:
– Promise,
– Performance, or
– Forbearance.
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§2: Adequacy of Consideration
Law does not protect a person from entering into an
unwise contract.
In extreme cases, a court may find the contract was
_____________________________________.
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Hamer v. Sidway
124 N.Y. 538 (1891)
Is abstaining from drinking, tobacco, gambling,
etc., sufficient consideration for a contract?
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Consideration Issues
Pre-Existing Duties
Past Consideration is no consideration because the
bargained-for exchange element is missing.
Illusory Promises.
– Promisor has not definitely promised to do anything (no
promise at all).
Requirements and Output Contracts.
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Clifton-Davis v. State
930 P.2d 833 (Okla., 1996)
Court held:
No implied contract between student and college
There is an EXPRESS contract (college catalog)
Terms of the express contract are clear
“When it involves a student and academic credentials, almost
absolute discretion for decision making is left with the
university.”
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– Exceptions:
Detrimental Reliance
When Offeree relies on offer to his or
her detriment, the Offeror is barred
from revoking the offer.
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§1: Contractual Capacity
The legal ability to enter into a contractual
relationship.
• Full competence.
• No competence.
• Limited competence.
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Issue
Show never had a
“_____________________________”
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Oklahoma Law
• 12 O.S. Section 11 - Persons Authorized to Contract.
• All persons are capable of contracting, except
minors, persons of unsound mind, and persons
deprived of civil rights, however, persons sentenced
to imprisonment under the Department of
Corrections for any term, during confinement under
said sentence, may make employment contracts,
subject to the approval of the Director of the
Department of Corrections, when this benefits the
vocational training or release preparation of the
prisoner; provided however, such persons during
confinement shall not be eligible to receive benefits
under the unemployment compensation law.
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Minors
In most states, a person is no longer a minor
for contractual purposes at the age ________.
A contract entered into by a minor is voidable
at the option of that minor.
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Oklahoma Law 12 O.S. 13
Definitions of Minors - Calculation of Period of
Minority.
Minors, except as otherwise provided by law, are
persons under eighteen (18) years of age. The
period thus specified must be calculated from
the first minute of the day on which a person is
born to the same minute of the corresponding
day completing the period of minority.
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Minor’s Right to Disaffirm
A contract can be disaffirmed at any time during
minority or for a reasonable period after the
minor comes of age.
Minor must disaffirm the entire contract.
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Oklahoma Law
• Section 19 - Disaffirmance of Minor's Contract.
• In all cases other than those specified herein, the contract of a
minor may be disaffirmed by the minor himself, either before
his majority or within one (1) year's time afterwards; or, in
case of his death within that period, by his heirs or personal
representatives. Provided, that any minor between the ages
of sixteen (16) and eighteen (18) who has paid for any
repairing, supplying or equipping on any type of a motor
vehicle may disaffirm said contract in like manner only by
restoring the consideration to the party from whom it was
received.
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Minor’s Obligations
on Disaffirmance
• Majority rule: minor need only return the
goods (or other consideration) subject to the
contract, provided the goods are in the
minor’s possession or control.
• Minority rule: increasing number of states
hold the minor must restore the adult to the
position held before the contract was made.
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Exceptions to Minor’s
Right to Disaffirm
Contracts for Necessaries.
– Contracts for food, clothing, shelter may be disaffirmed by
minor, who remains liable for the reasonable value of
goods or services.
– (___________________________________________)
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Oklahoma Exceptions
• Section 20 - Contracts Involving Minors that
Can't be Disaffirmed.
• A minor cannot disaffirm a contract, otherwise
valid, to pay the reasonable value of things
necessary for his support, or that of his family,
entered into by him when not under the care
of a parent or guardian able to provide for him
or them.
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Ratification
• Occurs when a minor, on or after reaching
majority, indicates an intention to become
bound by a contract made as a minor.
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Parent’s Liability
Contracts.
– Parents not liable (This is why parents are usually
required to sign any contract made with a minor).
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Mental Incompetence
____________________: If a person has been
adjudged mentally incompetent by a court of law and a
guardian has been appointed.
________________________________: If the person
does not know he or she is entering into the contract or
lacks the mental capacity to comprehend its nature,
purpose, and consequences.
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Legality
• A contract to do something prohibited by
federal or state statutory law is illegal and
therefore void (never existed).

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Contracts Contrary to Statute
•
•
•
•
Usury.
Gambling (online).
Sabbath (Sunday) Laws.
Licensing Statutes.
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Effect of Illegality
Generally, the rule is that the contract is void.
Exceptions:
Severable or Divisible Contracts.
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§2: Contracts That Fall within
The Statute of Frauds
• To be enforceable, the following types of
contracts must be in writing and signed:
– Contracts involving interest in land.
– Contracts involving “One-Year Rule.”
– Collateral or Secondary Contracts.
– Promise made in consideration of marriage.
– Contracts for the sale of goods priced at $500 or
more.
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OKLAHOMA LAW
• Section 136 - Statute of frauds.
• The following contracts are invalid, unless the same, or some note or
memorandum thereof, be in writing and subscribed by the party to be
charged, or by his agent:
• 1. An agreement that, by its terms, is not to be performed within a year
from the making thereof.
• 2. A special promise to answer for the debt, default or miscarriage of
another, except in the cases provided for in the article on guaranty.
• 3. An agreement made upon consideration of marriage, other than a
mutual promise to marry.
• 4. Repealed.
• 5. An agreement for the leasing for a longer period than one (1) year, or
for the sale of real property, or of an interest therein . . . .
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Contracts Involving
Interests in Land
• Land includes all physical objects that are
permanently attached to the soil: buildings,
fences, trees…
• All contracts for the transfer of other interest
in land: mortgages, easements, and leases.
• Oklahoma:
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The One-Year Rule
• A contract that cannot, by its own terms,
be performed within one year from the
date it was formed must be in writing to be
enforceable.
–Test:
Whether performance is possible
(although unlikely) within one year.
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Promises Made in
Consideration of Marriage
Prenuptial agreements must be in writing and
signed to be enforceable.
Prenuptial agreements may not be enforceable
if the agreement is not voluntary.
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Contracts for the Sale of Goods
UCC requires a writing or memorandum for the
sale of goods priced at $500 or more.
Goods, not services
Since Oklahoma adopted the UCC (_________),
this is part of Oklahoma law as well!
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Exceptions
Completely performed contracts (executed)
Performance demonstrates there was a meeting
of the minds
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Exceptions
• Exceptions of Applicability of the Statute of
Frauds:
– Partial Performance.
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Exceptions
• Exceptions of Applicability of the Statute of
Frauds:
– Partial Performance.
– Custom Made Goods
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Sufficiency of the Writing
• Under the Statue of Frauds.
– Must have:
•
•
•
•
•
Names
Subject matter
Consideration
Other essential terms, and
Signed by the party against whom enforcement is
sought.
• May be _____________________________!
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The Parol Evidence Rule
If you have a written contract, oral
representations or promises made prior to the
contract’s formation will not be admitted in
court.
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Exceptions to
the Parol Evidence Rule
Contracts containing ambiguous terms.
Prior dealing, course of performance, or
usage of trade.
KEY: Is this the “__________________”?
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