Chapter 7 - Critical Thinking

424 Words2 Pages
1. Define the Objective Theory of Contracts. Objective Theory of Contracts means that the contract will be judged not by the personal or subjective intend, or belief, of a party but by outward, objective facts (like what the party said when entering into the contract, how the party acted or appeared, and the circumstances surrounding the contract) as interpreted by a reasonable person, rather than by the party’s own secret, subjective intentions. 2. On May 1, Brand Name Industries, Inc. (BNI), sent Carol a letter, via overnight delivery, offering to employ her to audit BNI’s financial statements for the current year for $10,000. In the letter, BNI stated that Carol had ten days to accept. On May 5, Carol sent BNI a fax that stated, “The price for the audit seems too low. Would you consider paying $12,000?” BNI received the fax. The next day, Dan offered to conduct the audit for $8,000. On learning of Dan’s offer, Carol immediately e-mailed BNI, agreeing to do the work for $10,000. BNI received this e-mail on May 7. Explain why BNI and Carol do, or do not, have a contract. In this situation, BNI and Carol do not have a contract. A contract is an agreement that can be enforced in court, formed by two or more complete parties who agree, for consideration, to perform or to refrain from performing some legal act now or in the future. With the purpose of forming a contract, there have to be agreement, consideration, contractual capacity, legality, voluntary consent, or genuineness of assent, and a form. In this case, neither party sign any form and the agreement between the two parties are not yet established. 3. Chris promises Dina $40,000 if she graduates from Eagle College. Dina enrolls in Eagle, attends full-time for four years, and graduates. When Dina asks Chris for $40,000, Chris says, “I don’t re¬member promising you $40,000. But if there was a promise,

More about Chapter 7 - Critical Thinking

Open Document