Chapter 06 - Overview and Language of Contracts
Chapter 6: Overview and Formation of Contracts
OVERVIEW
This chapter, the first in the Law and Commerce unit, begins a three-chapter
sequence focused on the study of contracts. Chapter 6 is a broad overview of
contract law and the elements of formation. Chapter 7 covers the requirements for
enforceability, rules for performance, and breach issues. Chapter 8 covers sales
contracts under Article 2 of the UCC.
KEY LEARNING OUTCOMES
Outcome Accreditation
Categories
Distinguish between contracts based on categories, and explain Knowledge,
the concept of mutual assent and other elements required for Application
the formation of a valid contract.
Define and apply the correct source of law. Knowledge,
Application
List events of termination and distinguish between termination Knowledge
by the parties and termination through operation of law.
Give examples of when capacity and legality are at issue. Application,
Critical
thinking
TEACHING OUTLINE
A. Definitions and Categories of Contracts
Teaching tip: Everyday contracts
When introducing a topic that is as significant and complex as contracts, the
challenge becomes how to introduce the topic in broad based terms with which
students can readily connect. Students are fascinated when they find out that
contract law is a part of everyday life. This is often a good way to pique interest. I
usually put the definition “promises or set of …” on the board and ask students to
give me examples of contracts that they enter into on campus.
The Legal Environment of Business, 4e ________________ 6-1
Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
,Chapter 06 - Overview and Language of Contracts
“Have any of you entered into a contract in the last week?” They typically come
up with some obvious examples such as simple purchases etc.
“Let’s suppose that you promised your roommate that you would do her laundry
for her if she agrees to drive you to your internship location on Tuesday and
Thursday mornings. Is that a contract? Isn’t it a set of promises? If you perform
your end of the bargain by doing your roommates laundry, but she refuses to drive
you to your internship, can you sue her? If you forget to do her laundry one week,
can she sue you? Are all promises legally enforceable?”
Points to emphasize:
A contract is a promise or a set of promises enforceable by law.
Overview of the elements of a contract
Categories of Contracts: It is important to note that these categories
are not mutually exclusive
o Written versus Oral Contracts: Any agreement, oral or
written, may result in a binding contract so long as it meets
certain requirements
o Bilateral Contracts versus Unilateral Contracts: A bilateral
contract involves two promises and two performances.
A unilateral contract involves one promise, followed by
one performance, which then triggers a second
performance from the offeror.
Case 6.1: Augstein v. Leslie
Facts: Leslie is an American recording artist whose laptop computer, external
hard drive, and certain other belongings were stolen. In videos, news articles, and
online postings, Leslie stated that he would pay a reward to anyone who returned
his property. Specifically, Leslie mentioned a $20,000 reward for the return of his
property in a YouTube video, saying, “I am offering a reward of $20,000.” On
November 6, 2010, a video was posted increasing the reward to $1,000,000. At
the end of the video, a message reads:
The Legal Environment of Business, 4e ________________ 6-2
Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
, Chapter 06 - Overview and Language of Contracts
In the interest of retrieving the invaluable intellectual property contained on his
laptop & hard drive, Mr. Leslie has increased the reward offer from $20,000 to
$1,000,000 USD. The increase of the reward was publicized on Leslie’s Facebook
and Twitter accounts, including a post on Twitter, and an MTV interview.
Augstein found the laptop in a plastic garbage bag while walking his dog returned
the laptop and hard drive to the local police and eventually the laptop was
returned to Leslie in New York. When Augstein contacted Leslie, however, Leslie
refused to pay the reward.
Issue: Were Leslie’s reward offers via You Tube and social media sufficient to
create a unilateral contract offer?
Holding: Yes. The court rejected Leslie’s contention that the videos were merely
an advertisement because Leslie was seeking a performance—not a counter
promise.
Case Questions:
1. There is no bilateral contract because Augstein never gave a counter promise to
find the laptop. He accepted the offer through performance.
2. Leslie claimed it was an advertisement inviting someone to make an offer
rather than an offer from him. The court rejected it because his videos etc could
not reasonably be interpreted to be an invitation to negotiate. He was not
soliciting a promise- he was soliciting the return of the property.
3. Critical Thinking: The intent of this question is to stimulate discussion on
proactive law. Disclaimers, cautionary language, and objective intent are all
implicated.
o Express Contracts versus Implied Contracts versus Quasi-
Contracts: An express contract is created when the parties
have expressly agreed on the promises and performances, an
implied contract is one in which the agreement is reached by
the parties actions rather than their words, and a quasi-contract
is enforceable where one party suffers losses as a result of
another party’s unjust enrichment.
___________________________________________________
The Legal Environment of Business, 4e ________________ 6-3
Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Chapter 6: Overview and Formation of Contracts
OVERVIEW
This chapter, the first in the Law and Commerce unit, begins a three-chapter
sequence focused on the study of contracts. Chapter 6 is a broad overview of
contract law and the elements of formation. Chapter 7 covers the requirements for
enforceability, rules for performance, and breach issues. Chapter 8 covers sales
contracts under Article 2 of the UCC.
KEY LEARNING OUTCOMES
Outcome Accreditation
Categories
Distinguish between contracts based on categories, and explain Knowledge,
the concept of mutual assent and other elements required for Application
the formation of a valid contract.
Define and apply the correct source of law. Knowledge,
Application
List events of termination and distinguish between termination Knowledge
by the parties and termination through operation of law.
Give examples of when capacity and legality are at issue. Application,
Critical
thinking
TEACHING OUTLINE
A. Definitions and Categories of Contracts
Teaching tip: Everyday contracts
When introducing a topic that is as significant and complex as contracts, the
challenge becomes how to introduce the topic in broad based terms with which
students can readily connect. Students are fascinated when they find out that
contract law is a part of everyday life. This is often a good way to pique interest. I
usually put the definition “promises or set of …” on the board and ask students to
give me examples of contracts that they enter into on campus.
The Legal Environment of Business, 4e ________________ 6-1
Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
,Chapter 06 - Overview and Language of Contracts
“Have any of you entered into a contract in the last week?” They typically come
up with some obvious examples such as simple purchases etc.
“Let’s suppose that you promised your roommate that you would do her laundry
for her if she agrees to drive you to your internship location on Tuesday and
Thursday mornings. Is that a contract? Isn’t it a set of promises? If you perform
your end of the bargain by doing your roommates laundry, but she refuses to drive
you to your internship, can you sue her? If you forget to do her laundry one week,
can she sue you? Are all promises legally enforceable?”
Points to emphasize:
A contract is a promise or a set of promises enforceable by law.
Overview of the elements of a contract
Categories of Contracts: It is important to note that these categories
are not mutually exclusive
o Written versus Oral Contracts: Any agreement, oral or
written, may result in a binding contract so long as it meets
certain requirements
o Bilateral Contracts versus Unilateral Contracts: A bilateral
contract involves two promises and two performances.
A unilateral contract involves one promise, followed by
one performance, which then triggers a second
performance from the offeror.
Case 6.1: Augstein v. Leslie
Facts: Leslie is an American recording artist whose laptop computer, external
hard drive, and certain other belongings were stolen. In videos, news articles, and
online postings, Leslie stated that he would pay a reward to anyone who returned
his property. Specifically, Leslie mentioned a $20,000 reward for the return of his
property in a YouTube video, saying, “I am offering a reward of $20,000.” On
November 6, 2010, a video was posted increasing the reward to $1,000,000. At
the end of the video, a message reads:
The Legal Environment of Business, 4e ________________ 6-2
Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
, Chapter 06 - Overview and Language of Contracts
In the interest of retrieving the invaluable intellectual property contained on his
laptop & hard drive, Mr. Leslie has increased the reward offer from $20,000 to
$1,000,000 USD. The increase of the reward was publicized on Leslie’s Facebook
and Twitter accounts, including a post on Twitter, and an MTV interview.
Augstein found the laptop in a plastic garbage bag while walking his dog returned
the laptop and hard drive to the local police and eventually the laptop was
returned to Leslie in New York. When Augstein contacted Leslie, however, Leslie
refused to pay the reward.
Issue: Were Leslie’s reward offers via You Tube and social media sufficient to
create a unilateral contract offer?
Holding: Yes. The court rejected Leslie’s contention that the videos were merely
an advertisement because Leslie was seeking a performance—not a counter
promise.
Case Questions:
1. There is no bilateral contract because Augstein never gave a counter promise to
find the laptop. He accepted the offer through performance.
2. Leslie claimed it was an advertisement inviting someone to make an offer
rather than an offer from him. The court rejected it because his videos etc could
not reasonably be interpreted to be an invitation to negotiate. He was not
soliciting a promise- he was soliciting the return of the property.
3. Critical Thinking: The intent of this question is to stimulate discussion on
proactive law. Disclaimers, cautionary language, and objective intent are all
implicated.
o Express Contracts versus Implied Contracts versus Quasi-
Contracts: An express contract is created when the parties
have expressly agreed on the promises and performances, an
implied contract is one in which the agreement is reached by
the parties actions rather than their words, and a quasi-contract
is enforceable where one party suffers losses as a result of
another party’s unjust enrichment.
___________________________________________________
The Legal Environment of Business, 4e ________________ 6-3
Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
