American InterContinental University
International Legal and Ethical Issues in Business
Instructor Kerri Holloway
April 3, 2011
This paper will discuss the four elements that make up a valid contract and the objective theory surrounding contracts. This paper will discuss how the objective theory applies to the Leonard v. Pepsico, Inc. case. The paper will also discuss how the court reached its decision to claim that there was not a valid agreement made between the two parties, and it will discuss why all advertisements are not considered offers.
Unit 3 Individual Project-Rights and Obligations
In order for a contract to be valid, it must meet four conditions. Henry R. Cheeseman, a professor who has degrees in both business and law, has stated that a valid contract must have at least two parties entering into some type of agreement (2009). The parties should meet the legal requirements, such as age limits, and have a complete understanding of what the contract is and the details surrounding it. Both parties should receive consideration, or value, from the agreement. Such an agreement usually includes, but is not limited to, money given in exchange for goods and services. Lastly, a valid contract must be created for legal activities. Any illegal activities or provisions in the contract that violate any existing laws make the contract invalid.
The objective theory of contracts is the principle that determines whether a person, being reasonable in understanding, viewing the circumstances and details in a contract, would conclude that the parties intended to be legally bound to the contract between them (2009). The objective theory is a principle used to determine the intent of entering into a contract. An example of the objective theory of contracts can be seen in a statement such as the one that follows: “I will purchase your house for $100,000.” This is a valid...