Offer and Acceptance Chapter 6

Creation of Offers Lesson 6-1

What is a contract? Contract-agreement between two or more parties that create obligations an agreement that courts will enforce.

Six Requirements of a Contract Offer and acceptance-serious, definite offer. Term must be accepted by the party to whom the offer was communicated. Genuine assent-no deception, important mistake, or unfair pressure. Legality Consideration-both sides receive something of legal value

Capacity-must be able to contract for themselves Capacity-must be able to contract for themselves. For example, 18 or over. Proper form-some contracts MUST be in writing to be enforceable

Offeror-party making the offer Offeree-person to whom the offer is made

Nature and Classes of Contracts Executed and executory contracts Executed-fully performed (completed) Executory-not fully performed Express, implied-in-fact and implied at-law contracts Express contracts-all terms are stated in writing or orally Implied in fact-terms can be inferred from parties’ acts

Implied-at-law (quasi) contracts-a fiction created by the law to allow the enforcement of a contractual remedy where justice warrants such a remedy Unilateral and bilateral contracts Unilateral-offeror promises something in return for offeree’s performance. Bilateral-mutual exchange of legally binding promises.

Requirements of an Offer Offer-a proposal by an offeror to do something, provided the offeree does something in return. To create an offer: Offeror must appear to intend to create a legal obligation The offer must be communicated to the offeree The essential terms must be definite and complete

Expression of Intent to Create a Legal Obligation Test of the Reasonable Person-appearing to be serious, not what the person is thinking or intending. Avoids trying to determine what person is thinking Facts and circumstances-statements made while joking, in terror or in anger Preliminary negotiations- Would you take…? Anyone interested…?

Addresses the issue of limited stock. Advertisements-usually considered a invitation to make an offer due to limited number of stock and unlimited possible responses When is an ad an offer? Addresses the issue of limited stock. Sold to the first person to accept terms or “subject to stock on hand” Asks the offeree to perform an act to accept. Sold “to the first person to appear at the main floor of the shopping mall on Saturday morning after 6:00 a.m.” False advertising

Social agreements-not breech of contract to break a date, not an intended legal obligation

Offer must be Communicated to the Offeree Person who is not the intended offeree cannot accept offer. Cannot accept an offer without knowing it was made and acting in response to it (claiming reward if you didn’t know there was one )

Offer Must be Complete and Definite To determine what the parties intended and identify parties’ rights and duties Complete-must contain all essential info (price, subject matter, quantity directly or indirectly). Amount of info depends on complexity of transaction.

Real estate requires: A legal description Price Full terms for payment Date of possession Date of delivery of the deed

Definite For example, someone offers to sell “their” car but they own more than one. For those who regularly buy or sell a product, current market price will be used if not price specified.

Lesson 7-2 Termination of Offers

How can offers be ended? Revocation (the right to withdraw a offer before it is accepted)by the offeror-can be revoked even if offer was for a specific time Time stated in offer- time is up Reasonable length of time-based on type of transaction

Rejection by the offeree Counteroffer-offeree changes the offeror’s term in important ways Death or insanity of either the offeror or offeree Destruction of the specific subject matter

How can an offer be kept open? Offerer does not have to keep offer open even if promised (no consideration) Options-give the offeror something of value in order to keep offer open Options remain valid even upon death of offerer.

Firm Offers-(applies to merchants who regularly buy or sell) in writing that specifies how long an offer is open UCC makes these offers binding (no more than 3 months) Generally, death or insanity does not terminate firm offers or options.

Acceptance Lesson 6-3

What is required of an acceptance? Acceptance-party to whom an offer has been made agrees to the proposal Be made by party to whom offer was made Match the terms of the offer Be communicated to the offeror

Who can accept the offer? Anyone it was directed towards! One person, particular group, or public

Acceptance must match offer Cannot change terms even if change is advantageous to offeror Mirror image rule-acceptance must be the exact same of the offer Goods-any change is a counteroffer except: If party is a consumer (not merchant) new terms are proposals and not part of contract unless agreed to by offeror

If both are merchants, new terms not part of offer if offeror objects or if terms are material If both are merchants, new terms become part of offer if offeror is silent and terms are not material

Acceptance must be communicated to the Offeror Silence as acceptance- only if continuing relationship and agreed to in advance (record or book club) Standing order

Promises as acceptance Bilateral acceptances-mutual exchange of legally binding promises. Example- agreeing to deliver a load of gravel for $120. Performance as acceptance Unilateral acceptance-requirement of the offeree to indicate acceptance by performing obligation such as a reward. Must be aware of reward. When performance has started, must give offeree reasonable time to complete performance.

Modes of Contractual Communications Offers, acceptances, rejections, revocations, and counteroffers, may be communicated orally or in writing (letter, e-mail, fax, telegram, etc.) UCC-”any medium reasonable in the circumstances” unless clearly indicated.