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Section 4: Legal Aspects of Business
The definition of a Contract contract 1) n. an agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration. Since the law of contracts is at the heart of most business dealings, it is one of the three or four most significant areas of legal concern and can involve variations on circumstances and complexities. The existence of a contract requires finding the following factual elements: a) an offer; b) an acceptance of that offer which results in a meeting of the minds; c) a promise to perform; d) a valuable consideration (which can be a promise or payment in some form); e) a time or event when performance must be made (meet commitments); f) terms and conditions for performance, including fulfilling promises; g) performance. A unilateral contract is one in which there is a promise to pay or give other consideration in return for actual performance. (I will pay you $500 to fix my car by Thursday; the performance is fixing the car by that date). A bilateral contract is one in which a promise is exchanged for a promise. (I promise to fix your car by Thursday and you promise to pay $500 on Thursday). Contracts can be either written or oral, but oral contracts are more difficult to prove and in most jurisdictions the time to sue on the contract is shorter (such as two years for oral compared to four years for written). In some cases a contract can consist of several documents, such as a series of letters, orders, offers and counteroffers. There are a variety of types of contracts: "conditional" on an event occurring; "joint and several," in which several parties make a joint promise to perform, but each is responsible; "implied," in which the courts will determine there is a contract based on the circumstances. Parties can contract to supply all another's requirements, buy all the products made, or enter into an option to renew a contract. The variations are almost limitless. Contracts for illegal purposes are not enforceable at law. 2) v. to enter into an agreement. Offer and Acceptance Contractual agreement has traditionally been analyzed in terms of offer and acceptance. One party, the offeror, makes an offer which once accepted by another party, the offeree, creates a binding contract. Key concepts that you need to familiarize yourself with in relation to offer and acceptance include the distinction between an offer and an invitation to treat - you need to be able to identify specific examples of where an offer or an invitation to treat exists. Also it is important to know the difference between bilateral and unilateral contracts. An offer needs to be distinguished from an invitation to treat. Whereas an offer will lead to a binding contract on acceptance, an invitation to treat cannot be accepted it is merely an invitation for offers. Competence of Parties The law generally presumes that everyone has the capacity to contract. But if a party does lack capacity, then the contract is usually voidable and the party without capacity may avoid the contract. Parties to an agreement must have contractual capacity before the agreement will be binding on both parties. Contractual capacity is the ability to understand that a contract is being made and to understand its general nature. The fact that a person does not fully understand the full meaning and all ramifications of a contract does not mean that the person lacks contractual capacity.

Some classes of persons such as people under the age of 21, or in most states, under the age of 18, are deemed by law to lack contractual capacity. The common law rule was, and is, that anyone under the age of 21 years is a minor. However, many states have reduced the age limit from 21 to 18 years. Some states have the age of majority as 19. Intention to create legal relations