A contract is a promise or set of promises that the law will enforce and for the breach of which the law will provide a remedy. Contracts help to allocate risk between parties and provide a forum where promises can be enforced. Parties often choose to put their agreements in writing, which are called “express” contracts. Sometimes, however, parties will create obligations that the law will enforce based solely on their conduct. Contracts of this nature are called “implied” contacts.
To form an enforceable contract, whether express or implied, three essential elements must be satisfied: (1) an offer, (2) an acceptance, and (3) consideration. Without them, there is no contract.
An “offer” is a manifestation of a willingness to enter an agreement. Courts use an objective test to determine whether a person’s outward expression is an “offer.” The objective test asks whether the manifestation would justify a reasonable person in understanding the other party wished to enter a bargain.
The general rule for a valid “acceptance” is that an acceptance must be communicated to the person who made the offer (i.e., the offeror) before the offer expires or is revoked.
“Consideration” is a bargained-for exchange that requires a legal “detriment” to the “promisee.” A legal detriment is suffered when a person does something she is not obliged to do, or when a person forbears from doing something she is legally permitted to do. Say, for example, you tell your friend, “I promise to give you $100 two weeks from now.” Two weeks pass and your friend comes to you asking for the $100. She claims you two had a contract. If your promise to give the $100 is not in exchange for anything that your friend will give up, a court will not enforce your promise under a contract theory because there is no “consideration.”
Take the following example — has an contract been formed?
An Arizona golf course runs a promotion by placing a sign on the 18th hole of a local golf course that says, “Make a hole-in-one, win a million dollars!” You see the sign as you approach the 18th tee box. You tee off and make a hole-in-one. You demand your winnings. Golf course refuses, claiming that no contract existed. Is there a contract?
The experienced attorneys at Giordano & Heckele, PLLC can help you answer this question and advise you on other contractual issues like formation, breach, and interpretation. Contact us today for a consultation by calling (520) 352-0008 or email [email protected]