Contracts Offer and Acceptance Business Law Modified: Jan 2013

6-1 Objectives List the elements required to form a contract Describe the requirements of an offer Assignment: Pg , 9 Creation of Offers

Contract Agreement courts will enforce Agreement courts will enforce Contracts are legal links between individuals & companies producing & consuming goods & services. Contracts are legal links between individuals & companies producing & consuming goods & services. 6 major requirements 6 major requirements –Offer & acceptance –Genuine assent –Legality –Consideration –Capacity –Writing (Statutes of Fraud)

Offer Offeror Offeror –Gives proposal Offerees Offerees –Persons to whom offer is made Proposal by offeror to do something Proposal by offeror to do something Tests to determine if legally enforceable: Tests to determine if legally enforceable: 1. Must appear to intend to create legal obligation 2. Essential Terms must be definite & complete 3. Must be communicated to the offeree

Contractual Intent Think you are joking but interpreted as intention then you have made an offer Think you are joking but interpreted as intention then you have made an offer If you are serious but interpreted as joking you have not made an offer If you are serious but interpreted as joking you have not made an offer Objective legal test used by jurors or judges Objective legal test used by jurors or judges –Spoken in jest(joking)- Preliminary negotiations –In terror or anger- Social agreements (Don’t create legal obligations) Concerned with the appearance of the action Concerned with the appearance of the action

Preliminary Negotiations Information communicated without indicating intent Information communicated without indicating intent Advertisements Advertisements –Not usually an offer – invitation to negotiate or make offer –However…  Clearly worded to address numerous people receiving ad for limited inventory (“subject to stock on hand”)  Asks offeree to perform an act as a way of accepting Contractual Intent

Offer Must be Communicated Only intended offeree can accept Only intended offeree can accept Can’t accept if didn’t know offer was made Can’t accept if didn’t know offer was made Essential Terms Must be Complete and Definite Allows court to determine what was intended & identify legal rights and duties Allows court to determine what was intended & identify legal rights and duties

Offer Complete & Definite Complete Complete –Price (if not communicated = current market price) –Full terms for payment –Legal description –Date for delivery of possession –Date for delivery of the deed Definite Definite –Essential term identified clearly

6-1 Activities Pg , 9 Pg , 9 Practice Activity Practice Activity What’s Your Verdict p. 109, p.110 What’s Your Verdict p. 109, p.110 Reteach Reteach

6-2 Objectives Describe the various ways to end offers Describe the various ways to end offers Explain how an offeree can ensure an offer will remain open Explain how an offeree can ensure an offer will remain openAssignment: p , 13 Termination of Offers

6.2 How can offers be ended? Right of revocation Right of revocation –Can withdraw offer before accepted –Not effective until communicated to offeree Time Stated in the Offer Time Stated in the Offer –How & when the offer must be accepted Reasonable length of time Reasonable length of time –If nothing is said, offer will remain open for reasonable length of time

How can offers be ended? Rejection by offeree Rejection by offeree –Clearly rejects = termination Counteroffer Counteroffer –Offeree changes the offer’s terms = termination of original –Counteroffer becomes new offer Death or insanity of either party Death or insanity of either party Destruction of specific subject matter Destruction of specific subject matter

How can an offer be kept open? Options Options –Offeree gives the offeror something of value in return for a promise to keep the offer open  Binding Firm Offers (UCC) Firm Offers (UCC) –Applies to merchants who make offers in writing –Contains a term stating how long it is to stay open

6-2 Activities Assignments: p , 13 Practice Activity 6-2 Reteach 6-2

6-3 Objectives Acceptances Discuss the requirements of an effective acceptance Discuss the requirements of an effective acceptance Determine at what point in time an acceptance is effective Determine at what point in time an acceptance is effectiveAssignments: p , 7

What is Required of an Acceptance? To be enforceable - Acceptance must… 1. Come from the person or persons to whom the offer was made 2. Match the terms in the offer 3. Be communicated to the offeror Only Offerees May Accept Only Offerees May Accept Changes = counteroffer Changes = counteroffer Offeree must accept all terms exactly Offeree must accept all terms exactly Mirror Image Rule Mirror Image Rule –Terms in acceptance exactly match the terms contained in the offer

Acceptance Must be Communicated Silence as Acceptance Silence as Acceptance –Continuing relationship – agree in advance –Not Valid if offer worded in a way in which silent acceptance = offer Unilateral Acceptance Unilateral Acceptance –Promises something in return for the offeree’s performance & indicates performance is acceptance –Only be revoke after reasonable amt of time –IE. Reward for lost item

Acceptance Must be Communicated Bilateral Acceptance Bilateral Acceptance –Most offers –Require that offeree accept by communicating the requested promise to offeror –IE. Delivery of product in return for full payment at time of delivery

Modes of Contractual Communication Telephone? Telephone? Text Messaging? Text Messaging? Mail? Mail? Delivery Service? Delivery Service? ? ? Fax? Fax? Other? Other? UCC permits acceptance of good or service in “any manner and by any medium reasonable in the circumstances” unless clearly “indicated by the language or circumstances.”

When Acceptances are Effective Offeror may require offeree to use a certain communication method to accept. Offeror may require offeree to use a certain communication method to accept. Oral/Spoken Oral/Spoken Mail Mail Telegram Telegram Fax Fax

6-3 Activities Assignments: p , 7 Practice Activity 6-3 Reteach 6-3

Ch. 6 Quiz What are the 6 elements of an enforceable contract? What are the 6 elements of an enforceable contract? What are the requirements of an offer? What are the requirements of an offer? Explain 2 ways that an offer can be terminated Explain 2 ways that an offer can be terminated How could an offeree insure that an offer will stay open for a set period of time? How could an offeree insure that an offer will stay open for a set period of time? What is the Mirror Image Rule? What is the Mirror Image Rule? What are the requirements of an effective acceptance? What are the requirements of an effective acceptance?