5.

Law for Business, 17e

by Ashcroft and Ashcroft

Chapter 5:
Nature and Classes
of Contracts
 5.2

Chapter 5 Objectives

• State the five requirements for a

valid contract.
• Describe the types of contracts and
how they differ from agreements.
• Explain the difference between a
contract and a quasi contract.
 5.3

Contracts

• A contract can be defined as a

legally enforceable agreement
between two or more competent
persons.
• A breach of contract is the failure
of one of the parties to perform the
obligations assumed under the
contract.
 5.4

Requirements of a Valid
Contracts
1. Based on a mutual agreement by
the parties
2. Made by competent parties
3. Supported by consideration given
by each party to the contract
4. Be for a lawful purpose
5. Sometimes meet certain formal
requirements
Activit 5.5

y Capacity to Contract

● Can a mail-order company void a

contract with a minor if the minor
bought items for personal use?
❷ Can a minor purchase a car then
disaffirm the contract after
wrecking it?
❸ Is a minor who owns a lawn
service responsible to uphold
contracts for the payment of
fertilizer?
 5.6
Activity
Answers Capacity to Contract

● Can a mail-order company void a contract

with a minor if the minor bought items for
personal use?
No
❷ Can a minor purchase a car then disaffirm
the contract after wrecking it?
Yes, with perhaps some provisions
❸ Is a minor who owns a lawn service
responsible to uphold contracts for the
payment of fertilizer?
Yes, they are liable for business contracts.
 5.7

When Contracting
with a Minor...

• Minors’ business contracts are

enforceable and binding.
• Some states prevent a minor from
voiding some contracts.
• A minor can sometimes disaffirm a
contract.
• The minor may ratify the contract
after attaining majority.
 5.8

Other Considerations
Concerning Minors
• Businesspeople must know how to
be protected when contracting with
minors.
• Have an adult join in the contract as a
cosigner
• Sometimes businesspeople accept
the risk of contracting with minor
because few minors exercise their
rights to void contracts.
 5.9

Minors’ Torts

• As a rule, minors are as liable for

torts as adults are.
• If minors misrepresent their age,
they are guilty of a tort.
 5.10

Incapacity

• Mentally incompetent people must be

judicially declared insane.
• Intoxicated persons must be so
intoxicated that they can’t
understand the meaning of the
contract.
• Convicts operate under laws which
vary from state to state.
 5.11

Multiple Purchases

• All contracts for the sale of goods

must be in writing when the price is
$500 or more.
• Multiple sales would fall under the
Statute of Frauds when several
items are part of the same sales
transaction.
 5.12

When Proof of Oral

Contract is Permitted
1. If it can be proven that goods were
delivered by seller and were received
and accepted by buyer;
2. If full payment has been made;
3. If a person voluntarily acknowledges a
fact under oath during a legal
proceeding;
4. If the goods in question are of
nonresellable nature;
5. If goods are sold during auction.
 5.13

Nature of Writing
Required
• Terms
• The writing need only give assurance
that a transaction existed.
• Signature
• A suit brought to an individual in
which the terms must be in writing
must be signed by the person being
sued or an authorized agent.
 5.14

Nature of Writing Required

• Time of execution
• A writing may be made at or any time
after the sale.
• Particular writings
• Formal writings such as bills of sale,
letters, formal contracts, and
telegrams will satisfy the Statute of
Frauds.
 5.15

Contract or Agreement?

All contracts are

agreements, but not all
agreements are contracts.
 5.16

Void and Voidable

Contracts
• A void contract is an agreement
with no legal effect
• It is not enforceable in court.
• It is not the same as an unenforceable
contract.
• A voidable contract would be an
enforceable agreement, but,
because of circumstances, one or
both parties may elect to void it
 5.17

Types of Contracts

• Express and implied

• Unilateral and bilateral
• Written and oral
• Executory and executed
 5.18

Have any questions?

Be sure you study the

cases in the textbook
for a thorough
understanding of this
chapter.