2. Formation of the contract
– the offer
Chapter 2
Chapter Outline
• 2-1 Types of Contracts
• 2-2 Contract formation: Offer
• 2-3 What elements are necessary for
an effective offer
3. Learning Objectives
1. What are the type & the formation of
contract?
2. What is the Offer ?
3. What elements are necessary for an
effective offer?
4. 2-1 Types of Contracts
– Bilateral versus Unilateral Contracts
• Bilateral Contracts: Promise given in
exchange for return promise
• Ex; Any sales agreement is an example of
a bilateral contract.( car )
• Unilateral Contracts:
is an agreement with only one promise.
That is, one party promises a future action
if the other party performs whatever is
requested of her.
5. An example of a
unilateral contract
:is an insurance policy contract,
which is usually partially unilateral.
6. 2-1 Types of Contracts
Formal versus Informal Contracts
Formal Contract: An agreement that by law
requires a specific form for its validity.
Ex:A formal contract is a written contract that
contain several elements, including: An offer made
by one party to another party in exchange for
goods or services.
Informal (or Simple) Contract: A contract that
does not require a specific form or method of
creation to be valid.
Informal contract can be in written or oral
form and is not recorded with the court, Ex:like
the purchase of food at your favorite restaurant.
7. Express versus Implied Contracts
Express Contract:an expressed contract requires
that the elements are specifically stated, including
offer, acceptance and consideration. There are
other elements like mutual assent, capacity and
legally accepted terms.
Ex:the sale of real estate, employment contracts.
Implied Contract: A contract formed in whole or
in part from the conduct of the parties.
Ex: an individual enters a restaurant and
orders food. A contract to receive the food,
service, and the payment for the same is
established
9. Formation of Contract
• Generally, the contract must include:
1. The identification of the parties.
2. The identification of the object or subject matter of
the contract, including the work to be performed,
with specific identification of such items as goods,
services, and land.
3. The consideration to be paid.
4. The time of payment, delivery, or performance.
10. 2.2 Contract formation: Offer
Contract formation =
- Offer
- Acceptance
- Consideration
Agreement arises as a result of offer
and acceptance
11. 2-2 Offer:Meaning
Before a contract can be executed, it starts with
one party making an offer to the other. Offers
are also referred to as proposals. Under the
Contract Act, Section 2(a), an individual has
made an offer when implying the readiness to
do or not do a specific action that will mutually
benefit the other party involved in the
agreement. An offer must be made with the
intention to become legally binding upon
acceptance. A contract becomes binding when
the offer has been unconditionally accepted.
12. LEGAL RULES FOR OFFER
Offer must be given with an intention to
create a legal relationship
Offer must be definite.()
There is a clear cut difference between offer,
invitation to offer, invitation to sale. (
Offer must be communicated. (Fitch Vs.
Snedkar)
Mere statement of price of price is not an
offer.
13. 2-4 Elements of effective offer
There are 3 elements needed for it to be effective:
1. There must be a serious, objective
intention by the offeror.
2. The terms of the offer must be reasonably
certain, or definite, so that the parties and
the court can ascertain the terms of the
contract.
3. The offer must be communicated to the
offeree.
