Student __________________________________________ Date ____________ Period _______

CHAPTER 5 How Contracts Arise

Reviewing Legal Terms: DIRECTIONS: Fill in the blank with the correct vocabulary term.

1. an acceptance 5. an express contract 9. a void contract

2. a bilateral contract 6. an implied contract 10. a unilateral contract

3. a contract 7. an offer

4. a counteroffer 8. a valid contract

Answer

1. A contract that is legally binding and fully enforceable is mown as 8

2. A proposal made by one party that he or she is willing to enter a contract is known as 7

3. A contract that has no legal effect is known as 9

4. Any agreement that is enforceable by law is known as 3

5. A contract that comes about by the acts of the parties is known as 6

6. An unqualified agreement by the offeree to be bound by the offer is known as 1

7. An offer that has been changed by the offeree is known as 4

8. A contract stated in oral or written words is known as 5

9. A contract in which both parties make promises is known as 2

10. A contract in which one party makes a promise in exchange for an act is known as 10
You're the Judge
DIRECTIONS: For the following cases, circle Yes or No to indicate your decision. Then, in your
own words, state the principle or legal reason that applies in the case.
Answer

1. Anne Samuels offered John Goodwin $25 if Goodwin would polish her car. Goodwin Yes or No
said nothing but started to work and polished the car. Is there a contract?

Legal Principle: The unilateral contract consists of an offer that is accepted by an act. When the
act is done the contract is complete.

2. Annette Ramsey, a sales representative for the Carlin Boat Company, wrote to Harry Duffin, Yes or No
offering to sell him a boat for $600 and agreeing to hold the offer open for one week. Two days
later, before Duffin made an acceptance, the boat company withdrew its offer. Could the
company legally do this?

Legal Principle: The offer to sell goods was written and signed by the rep merchant assure that
the offer is held open during the stated time. This is a firm offer.

3. Arlene Burns, a dealer in preowned cars, telephoned Samuel Firman and offered to sell him a Yes or No
preowned car for $2,000. Firman told her he wanted to think it over and would let her know later.
That afternoon Firman sent Burns a letter by express mail stating that he would buy the used car.
Did this result in a valid contract?

Legal Principle: An offer to make a contract can be accepted in any manner reasonable under
the circumstances.

4. Bob Keefer wrote to Ed Ramirez offering to sell him the restaurant that Keefer owned. Ramirez Yes or No
wrote back to Keefer accepting the offer. He mailed the letter of acceptance on March 17 at
10:30 A.M., and Keefer received it on March 18 at 11 :00 A.M. Keefer had decided to revoke his offer,
however, and had mailed a second letter to Ramirez on March 16 at 11:00 A.M., which stated his
decision to revoke. Ramirez received this letter on March 17 at 10:00 A.M. Was there a contract?

Legal Principle: The revocation took affect on March 17 at 10:00 AM when it was received, ½
Hour before the acceptance was mailed

5. Betty Allen offered to sell Cynthia Blaustein her skis for $100. She wrote to Blaustein, saying, Yes or No
"If I do not hear from you in two weeks, I will assume that you accept my offer." If Blaustein does
not answer, must she pay Al1en $100 for the skis?

Legal Principle: A person cannot be compelled to speak or write in order to avoid a binding
agreement and is under no obligation to reply to the offer.
Understanding Legal Concepts
DIRECTIONS: Answer the following questions and explain each of your answers.

1. What are the three requirements of an offer? Explain your answer.

The offer must be seriously intended, definite and certain, and communicated to the offeree.

2. Identify the five ways in which an offer can come to an end.

Revocation, rejection, counteroffer, expiration of time and death or insanity.

3. Identify the six elements of a contract.

Offer, acceptance, genuine agreement, consideration, capacity and legality.

4. Contracts can be classified in what four ways?

(a) void, valid, voidable and unenforceable; (b) bilateral and unilateral; (c) oral or written; (d) express or implied

5. What is the difference between a void contract and an unenforceable contract?

A void contract has no legal affect. An unenforceable contract will not be upheld in court.
How Contracts Arise: Understanding Legal Concepts (continued)

6. What is the difference between a void contract and a voidable contract?

A void contract has no legal affect. A voidable contract can be voided or rescinded by at least one of the parties.

7. What is the difference between a bilateral contract and a unilateral contract?

A bilateral contract is one where both parties make promises, while a unilateral contract is one where only one of
the parties makse a promise.

8. What is the difference between an express contract and an implied contract?

A contract stated in oral or written words is known as an expressed contract. A contract that is formed by actions or
lack of action alone is an implied contract.

9. OBJECTIVE: To learn what constitutes a legally effective offer.

Sunbury Enterprises sent a fax containing an offer to the owners of the Routledge Refinery and Oil Company, a
company located in Springboro, Pennsylvania. The fax stated, "Please consider this our offer to purchase between
20,000 and 200,000 barrels of either your Grade A Pennsylvania crude oil or your Grade B Pennsylvania crude.
Our offering price is between $20 and $200 per barrel. Please respond soon." Is this fax a legally effective offer?
Why or why not? Explain your answer.

No. The fax is not legally effective because the terms are much too vague.

10. For the next activity we will be going to the computer lab. The activity is for you to find a basic sales contract
example or template and complete it as if you were selling an item, say a DVD player, computer, books, CD’s, etc.
You may partner with someone to complete the contract, however both or you have to work together to complete
the contract and each have to submit their work. Be sure you write somewhere in the margin of the contract the 6
key parts of a contract, found on page 108 in the text. You may use the following Web site and link.

www.formsguru.com/free-legal-forms/free-bill-of-sale.html