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Bus 393 - Lecture 4

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Simon Fraser University
Business Administration
BUS 393
Colin Hawes

BUS 393 October 1, 2010 Lecture 4 Contracts Colin Hawes Contract  Contact: Exchange of promises enforceable in court (192)  Freedom of Contract: The freedom to agree to anything  Statute of Frauds: Legislation which requires some agreements to be in writing  Requirements of a Contract:  Consensus: A mutual agreement between the parties  Consideration: What each party must do to participate in the contract  Capacity: Parties to a contract must be legally capable of entering into the agreement (no insane or drunk people, aliens, limited on infants)  Legality: The object and consideration must be legal and not against public policy  Intention: Both parties must be serious and intent that enforceable legal acts can arise Types of  Parol Contracts: Simple verbal or written contracts without a seal Contracts  Express Contract: Contract where the parties have expressly stated their agreement either verbally (193) or in writing  Implied Contract: Contract inferred from the conduct of the party (ex: you put coin in a vending machine)  Valid Contract: A contract which has legal binding on both parties  Void Contract: Contract which does not qualify as there is an element missing  Voidable Contract: A contract which is valid, but one party has the right to escape it  Unenforceable Contract: Contract which is required to be in writing under Statute of Frauds, but is not; Court will not enforce this contract  Illegal Contract: Contract which involves the performance of an illegal act – voided contract b/c of it  Exception: Courts will help an innocent person even when contract is illegal  Bilateral Contract: Contract where both parties make commitments and assume obligations  Unilateral Contract: A promise followed by an act; No exchange of promises (lost and found reward)  Standard Form Contract: An offer with fixed terms, which the customer is invited to accept (airline ticket, anything with a price tag) Consensus (194)  Agreement reached, bargain struck  Terms must be clear and unambiguous  Both parties must have had an opportunity to read and understand the contract Offer (195)  Offer: Tentative promise  Important terms must be defined, else courts can rule that there is no contract  Interim Agreement: Agreement of purchase and sale  “Subject-To” Clauses: Makes the contract conditional to something  Invitation to Treat: No contract power, simply invitations to potential customers to engage in the process of negotiation (advertisements, newspapers, etc) The End of an  Offer vs Invitation: Invitation is suggesting something and Offer is taking the suggestion Offer (201)  Offer ends when:  When specified  After a reasonable time  Upon the death or insanity of offeror  When revoked (revocation must be communicated)  When rejected or counteroffer is made  Request for information is not a counteroffer Offers which cannot be revoked (201)  Where an option exists, offer cannot be revoked  Unilateral offer cannot be revoked once performance begins Acceptance (203)  Acceptance must
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