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Chapter 7 Legal Relationship.doc

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Management (MGS)
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Chapter 7 Introduction - In parties comply with the principles laid down for the creation of an enforceable contract, they are free to create specific rights and duties of their own that the courts will enforce Elements of a Valid Contract - A valid contact that is binding must consist of the following: o An intention to create a legal relationship o Offer o Acceptance o Consideration o Capacity to contract o Legality - Contracts must also be free from any vitiating elements such as mistake, misrepresentation, or undue influence Intention to Create a Legal Relationship - The concept of a contracts as a bargain or agreement struck by two parties is based upon the premise that the end results will be a meeting of the parties’ minds on the terms and conditions that will form their agreement with each other - Perhaps to do something for each other or refrain from doing something - Consensus ad idem: agreement as to the subject or object of the contract o The parties must be of one mind and their promises must relate to that subject or object - Some promises are made by people who have no intention of becoming legally obligated to fulfill them – not a contract - The intention to create a legal relationship is a presumption in law and must be proven otherwise, if the intention does not exist - Reason for presumption is essentially an approach that permits the courts to assume that the promises are binding, unless one or both of the parties can satisfy the courts that they were not intended to be so - Ex. Ads are not normally taken as enforceable promises that are binding on the advertiser; treated as a invitation to do business Offer and Acceptance Nature of an Offer - The tentative promise made subject to a condition is therefore not binding on the offering party Communication of an Offer - An offer must be communicated by the offeror to the other party before the offer is capable of being accepted - An offer is not valid until it is received by the offeree, and the offeror is not bound by the offer until such time - No person can agree to an offer of which he or she is unaware - Ex. If acceptance takes place before an offer, the contract does not exist - Only the person to whom an offer is made may accept the offer o When offer made to public, rule does not apply as the identity of the offeree is not important Acceptance of an Offer - Acceptance: statement of act given in response to and in accordance with an offer - The words or conduct must conform to certain established rules before the acceptance will be valid - the acceptance of the offer must be communicated to the offeror in the manner requested or implied by the offeror in the offer - Rationale: the offeror is entitled to some indicatio
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