Commercial Transactions

Abstract

This paper examines the elements of a legal contract and how advertisements are not viewed as legal contracts in most cases. It will review the case of Leonard vs. Pepsico to determine what happens when an advertisement is viewed as a valid offer and responded to with such view. How rewards and auctions are viewed in legal terms. Finally, how this applies to the creative idea to boost tourism by auctioning Bigtown on eBay.

Elements of a Legal Contract

In order to have a contract that is legally binding, it must be valid and involves at least two parties. They are the offeror, the party making the offer, and the offeree, the party accepting the offer. A contract exists only if the offer is made and accepted. It must be clear and specific. They can be unilateral, meaning the offer's offer is accepted only by the performance of a requested act by the offeree, or bilateral where the offeror's offer can be answered either agreeing or rejecting the offer. The bilateral contract is binding as a promise for a promise. Additionally, there are four elements of a valid contract: Agreement, Consideration, Contractual Capacity, and Lawful Object (Cheeseman, 2006).

The first element of a legally binding contract is agreement. Agreement deals with a clear understanding on all parties involved as to what the offer is and the resulting acceptance. This is called mutual assent (Cheeseman, 2006).

The second element covers consideration. Consideration is a benefit or right, something of legal value, bargained for and agreed upon in exchange for another benefit or right. This could be something as simple as mowing the lawn for $10 per week or something as complicated as building a house. The consideration is money in exchange for a service. Both are of value to all parties involved so qualify as consideration. This supports the fact that both parties entered into the contract willingly and mutually agree (Consideration, 2006).

The third element involves contractual capacity. Capacity involves whether the parties are able by law to enter into a contract. Minors, mentally impaired people, and intoxicated people are not legally able to enter into a contract. This is due to the incapacity of the person or persons involved to completely understand the terms. It is therefore not legal and no contract exists. If a party enters into a contract against their will, this is called duress and is not legal (Cheeseman, 2006).

The fourth element of a valid contract is lawful object. Every part of the contract must be lawful. If any part of it is unlawful, the contract is void and unenforceable. For instance, if one party offers another party a certain sum of money to buy alcohol for a minor, since it is unlawful to do so, the contract is void and unenforceable. Another thing is if the money offered has been secured by illegal means, this too voids the contract and deems it unenforceable (Cheeseman, 2006).

The objective theory of contracts determines the intent of a person to enter a contract. If a reasonable person in the same circumstances concludes that both parties intended to be legally bound by the contract, it is deemed a legal contract. However, a statement made in anger, undue excitement or jest does not qualify as intent. Additionally, an inquiry into the possibility of entering a contract such as, "Are you open to selling your business for $10,000?" is considered an invitation to make an offer. It is not a binding contract (Cheeseman, 2006).

Advertisements