In this lesson, we introduced the topic of Contracts, the very most important topic in business law, that we will learn. So, in this lesson will lay the foundations and learn what is a contract, and the basic elements of contract, and in future lessons, we'll expound upon what those elements are, and what they mean. We're here in my favorite coffee shop. Because no business can operate without using contracts. Contracts is the most important legal topic that a business owner, or anyone who works in business needs to understand. You can operate a business without employees, you can operate a business without worrying about securities, or antitrust, or a lot of the other topics we talk about in this course, but you cannot operate any business without using contracts. So, let me start with an example. Suppose you go out to dinner with an old college friend of yours, and you happen to be working for a company, and your friend works for another company, and you realize, oh, I'm in charge of buying some sort of supplies we'll call widgets for my company. My friend actually happens to sell widgets for his company or her company. So you go out to dinner with the friend you say "Hey wouldn't it be awesome if we could do business together? I really need to buy a thousand widgets." And your. Friend says "Hey we sell widgets, I could sell you a thousand widgets for $10 a widget." You say, "That's awesome." That's a deal. Did you just form a contract? Well, there's a lot of things to be considered. Were you authorized to make that deal on behalf of your company? Was your friend authorized? Did you actually form an agreement? Whether or not you formed an enforceable contract, we probably actually don't even have enough information from that little snippets. No. But that's where we're headed in this next series of lessons. We will be able to understand when you have formed an agreement, and when it's enforceable. So, what is a contract? At it is very essence, a contract is nothing more than an enforceable agreement. So, an agreement, two or more people just agree to do something or give something to one another. And the key thing is that it's enforceable. An enforceable agreement means you can go to court or some other governmental body, and they will make you perform your duties under the contract. Now, a quick note about terminology. In contracts, we usually talk of two parties, the Offeror an Offeree. The person who makes an offer is called the offeror. So, if I say, I'll sell you my bike for $100, I'm the offeror because I just made you the offer. You are the Offeree. The Offeree has power. The power to form a contract, to accept or reject the offer. So, know offeror is the person who makes the offer, offeree is the person receiving the offer, who has the power to accept. And those two people can actually flip-flop. So, if I make you an offer, and you make me a counter offer, we have just changed places, you have now become the offeror, and I've have become the offeree. So, just a quick note on terminology. Now, in terms of the types of contracts that we're going to be talking about, there's basically three categories. Valid contracts. That's what you want when you form a contract you always want it to be a valid contract. That means satisfies all the elements it needs to satisfy, either party can enforce it, and you are obligated to perform your duties under that contract. Now, a void contract is on the other end of the spectrum from a valid contract. It's unenforceable by either party. In fact, if you take a void contract in the court and ask a judge to give you some sort of relief, the judge will say "This contract is void. I won't even do anything for you." The courts leave the parties exactly in whatever situation they are when dealing with the void contract. Now, someone in the middle between valid and void contracts, are voidable contracts. Now, these are generally enforceable by one party, and we're going to see some examples of avoidable contracts coming up in a couple of lessons from now. So, to wrap up this lesson, let's talk about what the five key elements for every valid contract are. First, agreement. Every contract has to have an offer, and an acceptance, and assent. Agreement, the parties have to agree on something. Second, consideration. Consideration is not a complicated topic, it just means that each party has to bring something of value to the contract. Third, contracts sometimes have to be in writing. This is what we call the Statute of Frauds. Contracts must satisfy the Statute of Frauds, meaning in certain instances they must be in writing, but in certain instances oral contracts are okay. Fourth, capacity. All parties to a contract must have what's called contractual capacity, meaning they have the ability to understand the nature of the transaction. And finally, legality. Contracts to commit crimes, or otherwise violate the law cannot be invalid and enforceable contract. So, in a future lesson dig a little bit more and see what the legality probably means.
