Business Law: Ch 6 Offer and Acceptance

What Must Be in a Contract Contract – agreement between two or more parties that creates obligations Six requirements to a contract Offer and Acceptance Offeror – person making offer Offeree – person offer made too Terms must be definite and accepted without change by the party to whom it is intended to be offered

Six Requirements for a Contract Genuine Assent – Agreement must not be based on one party’s deceiving another, on an important mistake, or on the use of unfair pressure exerted to obtain the offer or acceptance Legality – What the parties agree to must be legal

Six Requirements for a Contract Consideration – Agreement must involve both sides receiving what the law considers value in some form as a result of the transaction Capacity – Person must have legal ability to contract for themselves Writing – Some agreements must be placed in writing to be fully enforceable in court

Requirements for an Offer Offer – Proposal by an offeror to do something, providing the offeree does or refrains from doing something in return. Requirements Contractual Intent must be present The offer must be communicated to the offeree The essential terms of the offer must be complete and definite

Contractual Intent Jest – Words that take the form of offers but which are spoken as a joke Law is not concerned with what is actually in the mind of a person making what might be considered an offer If your joke is considered an offer by a reasonable person, then you have made an offer If you are serious about your offer, but a reasonable person interprets it as a joke, then we have no legally enforceable offer

Offer Must Be Communicated Person who is not the intended offeree cannot accept the offer Person cannot accept an offer without knowing it has been made

Essential Terms Must Be Complete and Definite Sale of Real Estate Proper legal description of the real estate Price Full term for payment Date for delivery Date for delivery of the deed Essential terms must be definite

6-1 Assessment Turn to page 113 and complete the assessment

6-1 Assessment True B (Genuine dissent) False

6-1 Assessment No contract because the offer was not communicated to the bystander. Bystanders statement is an offer. No, social engagement not a contract No, the credit union is not liable because of no contract. The agreement was missing essential detail. The ad was not an offer because it did not address the problem of a limited quantitu.

How can offers be ended? Revocation by the offeror The right to withdraw an offer before it is accepted At any time before it is accepted by the offeree, the offer can be revoked Revocation is not effective until it is communicated to the offeree

How can offers be ended? Time stated in the offer The offeror may state how and when the offer must be accepted Example: On October 10, the Mercantile Bank sent a letter to Jimmy, who had applied for a loan. In the letter, Mercantile offered to lend $50,000 on specified terms and stated that the acceptance had to be in writing and received no later than October 18. Jimmy mailed his acceptance on October 17 which was not received until October 20. There is no contract

How can offers be ended? Reasonable length of time If no time is stated, the offer will end after a reasonable length of time, which depends on the circumstances Example: different length of time for produce and a bulldozer

How can offers be ended? Rejection by the Offeree Offeree clearly reject the offer, the offer is terminated

How can offers be ended? Counteroffer Offeree changes the offeror’s terms in important ways and sends it back to the offeror. The counteroffer becomes the new offer. Death or Insanity of either offeree or offeror Destruction of the specific subject matter

How can an offer be kept open Option – offeree give something of value in return for a promise to keep the offer open Firm Offer – Same as option that applies to merchants (individuals who regularly deal in the goods being bought or sold) The UCC (Uniform Commercial Code) makes firm offers binding for the time stated, but not for more than three months

6-2 Assessment Turn to page 117 and complete the assessment

What is Required of an Acceptance Acceptance – When a party to whom an offer has been made agrees to the proposal. Acceptance must: Come from the person or persons to whom the offer was made Match the terms in the offer Be communicated to the offeror

Acceptance Communicated Unilateral Acceptance – Offeror promises something in return for the offereee’s performance Example: The offeror publicly promises to pay a $100 reward. Bilateral Acceptance – Both parties promise to do something

6-3 Assessment Turn to page 121 and complete the assessment