CHAPTER 6 Offer and Acceptance 4/27/2019 CHAPTER 6 Offer and Acceptance 6-1 Creation of Offers 6-2 Termination of Offers 6-3 Acceptances LAW

6-1 Creation of Offers GOALS Chapter 6 4/27/2019 6-1 Creation of Offers GOALS List the elements required to form a contract Describe the requirements of an offer Contract definition: an agreement between two parties that creates an obligation Chapter 6 LAW

https://www. youtube. com/watch https://www.youtube.com/watch?v=HPYz2IzIii0&feature=player_detailpage https://www.youtube.com/watch?v=WWWBZ4xD7Rg&feature=player_detailpage Chapter 6

REQUIREMENTS OF A LEGALLY ENFORCEABLE CONTRACT Chapter 6 4/27/2019 REQUIREMENTS OF A LEGALLY ENFORCEABLE CONTRACT Offer and acceptance Genuine assent Legality Consideration Capacity Proper form Why would each of these requirements be necessary in order to form an enforceable contract? Offer and acceptance Offer is made by the offeror Offer is accepted by the offeree Terms of the contract must be definite and without change Genuine assent means no deception or undue force Agreement must be legally binding Consideration: what a person demands and must receive in order to make the contract binding. May be money or services. Must have the legal capacity to agree to a contract. Certain contracts must be in writing in order to be enforceable. Chapter 6 LAW

NATURE AND CLASSES OF CONTRACTS Chapter 6 4/27/2019 NATURE AND CLASSES OF CONTRACTS Executed and executory contracts Express, implied-in-fact, and implied-at-law (quasi) contracts Unilateral and bilateral (multilateral) contracts What is an executed contract? One that all of the terms of the contract have been fulfilled. An executory contract? A contract that has not been fully performed. Express contract? A contract in which all the terms are expressly stated either orally or in writing Implied-in-fact? A contract that does not have its terms expressly stated but the terms can be inferred from the parties’ acts or conduct Quasi or implied-at-law? An obligation that the law creates in the absence of an agreement between the parties. Usually invoked by the courts where unjust enrichment , which occurs when a person retains money or benefits that in all fairness belong to another, would exist without judicial relief. Unilateral contract? A one-sided contract where one party, known as the offeror, makes a promise in exchange for an act or absention from an act, by another party, known as the offeree. If the offeree acts on the offeror’s promise, the contract is legally binding on the offeror; however, the offeree cannot be forced to act or not to act since no return promise was made. Example would be a reward offered for something. Bilateral contract? Both parties exchange mutual promises. Chapter 6 LAW

Chapter 6 4/27/2019 What is a contract? https://www.youtube.com/watch?v=CaJ4Ay1KyMU&feature=player_detailpage https://www.youtube.com/watch?v=qY1M7osZSvw&feature=player_detailpage First video explains express and implied contracts very well. 2nd video clip explains the existence of quasi contracts or contracts in law Chapter 6 LAW

Implied in fact and Quasi Contracts Chapter 6 4/27/2019 Implied in fact and Quasi Contracts http://study.com/academy/lesson/expressed-vs-implied-contracts-differences-examples.html First video describes the differences between express and implied contracts Chapter 6 LAW

CHECKPOINT    What elements are required to form a legally enforceable contract? Chapter 6

REQUIREMENTS OF AN OFFER Chapter 6 4/27/2019 REQUIREMENTS OF AN OFFER Contractual intent must be present Jests Statements made in anger or terror Preliminary negotiations Social agreements Offer must be communicated to the offeree Essential terms must be complete and definite Offerby an offeror to do something provided the offeree does or refains from doing something in return. Jests: be careful. Reasonableness rules. Preliminary negotiations are usually looked upon as invitations to negotiate. Social agreements: cannot sue if you get stood up by a date. Completeness of terms: minimum must identify the price, subject matter and quantity. Chapter 6 LAW

CHECKPOINT    What are the requirements of an offer? Chapter 6

6-2 Termination of Offers GOALS Describe the various ways to end offers Explain how an offeree can ensure an offer will remain open Chapter 6

HOW CAN OFFERS BE ENDED? Revocation by the offeror Revocation Chapter 6 4/27/2019 HOW CAN OFFERS BE ENDED? Revocation by the offeror Revocation Can be done by the offeror anytime before the offeree accepts the offer. Promise to keep offer open is not legally binding. Revocation: withdrawing an offer before it’s accepted. Chapter 6 LAW

Time stated in offer Offeror may state how and when the offer must be accepted. Chapter 6

Reasonable length of time Offer ends after a reasonable length of time when not specifically stated. Reasonableness depends on the circumstances surrounding the offer Set time table for acceptance of offer. Chapter 6

Rejection by the Offeree If the offeree rejects the offer, he cannot later try to accept. If offeree approaches offeror to accept after rejecting, this is a new offer that the offeror either can accept or reject. Chapter 6

Counteroffer Offeree’s response to an offer which modifies the original offer. Terminates the original offer and a new offer is made. Chapter 6

Counteroffer Video https://www.youtube.com/watch?v=Gc_UiMWxVbM&feature=player_detailpage Chapter 6

Death or insanity of Either the Offeror or Offeree Both of these eliminate control over the contract. Chapter 6

Destruction of the Specific Subject Matter If the offer relates to something specific and that item is destroyed, the offer is terminated Chapter 6

   CHECKPOINT Explain two ways in which offers can be terminated. Chapter 6

HOW CAN AN OFFER BE KEPT OPEN? Options Separate contract arising when the offeree gives the offeror something of value in return for a promise to leave an offer open. Mailbox rule; proper dispatch https://www.youtube.com/watch?feature=player_detailpage&v=l_4BKm2uhSI Chapter 6

HOW CAN AN OFFER BE KEPT OPEN? Firm offers Applies to merchants who make offers in writing. A proposal in writing made by a merchant stating how long the offer is to stay open Chapter 6

Firm offers § 2-205. Firm Offers An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror Chapter 6

CHECKPOINT    How could an offeree ensure that an offer will stay open for a set period of time? Chapter 6

6-3 Acceptances GOALS Discuss the requirements of an effective acceptance Determine at what point in time an acceptance is effective Chapter 6

WHAT IS REQUIRED OF AN ACCEPTANCE? Chapter 6 4/27/2019 WHAT IS REQUIRED OF AN ACCEPTANCE? Only offerees may accept The acceptance must match the offer Acceptance must be communicated to the offeror Silence as acceptance Promises as acceptance Performance as acceptance Modes of contractual communication When acceptances are effective Acceptance is when a party to whom an offer has been made agrees to the proposal. Chapter 6 LAW

Only Offeree May Accept Offer made to one person must be accepted by that person Made to the general public or a group Any member who knows of the offer may accept Chapter 6

Acceptance must be mirror image Chapter 6 4/27/2019 Acceptance must be mirror image Must exactly match the terms contained in the offer. Including how the acceptance is made. Normally only applied when the when the term altered is considered to be “material” and related to providing service or sale of real estate. If the contract stipulates how the contract is to accepted, the acceptance must be made in that manner. Chapter 6 LAW

Contracts: What is the Mirror Image Rule? Chapter 6 4/27/2019 Contracts: What is the Mirror Image Rule? https://www.youtube.com/watch?feature=player_detailpage&v=ama0epDkt6c USALawEssential: Contracts: What is the Mirror Image Rule? (2:18) Chapter 6 LAW

What is the Uniform Commercial Code? Chapter 6 4/27/2019 What is the Uniform Commercial Code? https://www.youtube.com/watch?feature=player_detailpage&v=ewP_QiinJ_g USALawEssential: What is the Uniform Commercial Law? (2:11) Chapter 6 LAW

Uniform Commercial Code: Changes to Mirror Image Rule Chapter 6 4/27/2019 Uniform Commercial Code: Changes to Mirror Image Rule https://www.youtube.com/watch?feature=player_detailpage&v=ZG9cyqluC54 Are the two parties merchants or not? USALawEssential: How Does the UCC modify the Mirror Image Rule Part I (2:41) Chapter 6 LAW

Uniform Commercial Code If the two parties to the contract are merchants: Additional terms are proposals that become part of the contract between merchants unless………… The offer says the offeree CANNOT add terms The additional terms materially alter the contract The offeror objects Chapter 6

Uniform Commercial Code: Changes to Mirror Image Rule Chapter 6 4/27/2019 Uniform Commercial Code: Changes to Mirror Image Rule https://www.youtube.com/watch?feature=player_detailpage&v=44HlgjyQSV8 USALawEssential: How does the USS modify the mirror image rule? Part 2 Chapter 6 LAW

One of three approaches to dealing with changes Knockout rule Contradictory terms are “knocked out” of the contract Use the UCC to fill in for the contradictory terms Chapter 6

If both parties are merchants, the new terms are not part of the contract If the offeror objects or If the terms are material If both parties are merchants, the new terms are considered part of the contract if the offeror is silent about the changes and the terms are not material. Chapter 6

Acceptance Must Be Communicated to the Offeror 1 Silence as acceptance: DOES NOT WORK!!! 2 Promises as acceptance: can give a promise instead of performing the contracted act. This for that (bilateral contracts) 3 Performance as acceptance: Unilateral contract. If one performs the act, the contract is valid (finding a lost dog) Chapter 6

4. Modes of contractual acceptance “may be made by telephone, fax, email, text, mail, delivery service.” UCC: acceptance of offer may be made in any manner and by any medium reasonable in the circumstances unless otherwise clearly indicated by the language of the circumstances. A set of principles that the UCC attempted to put into law to cover contracting by computer was overwhelmingly turned down by the states. Chapter 6

When acceptances are effective All forms of contractual communications take effect when received EXCEPT FOR: Acceptance! Effective when sent. Chapter 6

Use the “customary” method for that type of acceptance: Stock market uses hand signals Next-day delivery When customary service is used, the acceptance is effective when sent unless the contract states otherwise. Chapter 6

What if there is no specified or customary method? Use the same method used by the offer. UCC: If the acceptance of an offer for the sale or purchase of goods is sent by “reasonable” means, it is effective when sent. Chapter 6

Questions: When is an oral acceptance effective? When spoken directly to the offerer When is a posted or telegraphed acceptance effective? When it is irretrievably separated from the offeree by it being placed in a mail box or given to a clerk to send Chapter 6

Questions: When is an acceptance by fax effective? Immediately upon being sent __________ occurs when a party to whom an offer has been made agrees to the proposal. True or false: If an offeror specifies in the offer that the acceptance must be made by fax, an e-mailed acceptance will not be effective. True Chapter 6

Questions: True or False: All forms of acceptance take effect only when received. False If the parties to a contract have mutual obligations to perform it, the contract is termed A. unilateral B bilateral Neither of these Chapter 6

Questions True or False: When there is no specified or customary means for communicating acceptances, a faster means than that employed by the offeror to make the offer would be considered effective by the courts True Chapter 6

   CHECKPOINT What are the requirements of an effective acceptance? Chapter 6

PREVENT LEGAL DIFFICULTIES When you seek to enter into a contract . . . When negotiating, assume the worst and include terms in the contract addressing potential problems. For important contracts, put offers and acceptances in writing. If either an offer or an acceptance is made orally, promptly confirm it in writing. Obtain and keep a copy of every important document you sign. Express your intentions in offers and acceptances with clear, complete, and understandable language. Continued on the next slide Chapter 6

PREVENT LEGAL DIFFICULTIES Remember that the offeror may specify how and when the offer must be accepted. Otherwise the offeree may use the same means used by the offeror, a faster means, or other reasonable means. When appropriate, buy an option, if one is available, to keep the offer open for as long as you need. Remember that for an offeror to withdraw or revoke an offer, the offeree must receive notice. For speed, use the telephone, e-mail, or fax machine to withdraw or revoke an offer. Chapter 6