Essentials Of Business Law Chapter 7 Offer, Acceptance, And Mutual Agreement McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Essentials of Business LawChapter 7-2 Characteristics Of A Valid Offer Offer must be definite and certain  Specify all terms and conditions  Should include: who, what, where, and when Offer must be communicated  Orally, written, or implied Offer must be made with serious intent  Can not be made in anger, in jest, or under emotional strain

Essentials of Business LawChapter 7-3 Bids, Advertising, And Public Offers Bids and estimates  Request for proposal Not an offer, rather it is a request for an offer Can be accepted or rejected Advertising  Invitation to trade Generally not a valid offer

Essentials of Business LawChapter 7-4 Bids, Advertising, And Public Offers Public offers  General offer to public Example: reward for information that leads to the arrest of a criminal Example: reward for the return of a lost pet  Performance of act is considered acceptance  Results in an enforceable contract

Essentials of Business LawChapter 7-5 Characteristics Of A Valid Acceptance Must be communicated to offeror Must be unconditional

Essentials of Business LawChapter 7-6 Must Be Communicated To Offeror General rule: acceptance becomes effective when the parties so intend Method of communication  Telephone, letter, or other form Sometimes specific form is requested  Example: “reply by registered mail”

Essentials of Business LawChapter 7-7 Must Be Communicated To Offeror May be explicitly stated as either:  Effective when it is sent by the offeree  Effective when it is received by the offeror When offer is silent about effective time  Mailbox rule is in effect  If sent via the postal system or by courier acceptance is effective when sent

Essentials of Business LawChapter 7-8 Must Be Communicated To Offeror Acceptance is effective when received when communicated by:  Telephone, fax, or telex Acceptance sent via  Courts are divided as to whether it is effective when sent or when received

Essentials of Business LawChapter 7-9 Acceptance Must Be Unconditional General rule: acceptance of an offer must be the same as the offer  No material differences can exist UCC provides exception between merchants  Additional terms are to be considered proposals in addition to the contract  Additional terms then become part of the contract  Acceptance cannot be conditional on assent to the additional or different terms

Essentials of Business LawChapter 7-10 Termination Of An Offer Lapse of time  Failure to accept an offer within the time specified  After a reasonable time period, if time is not specified in an offer Rejection  Refusal to accept offer  Terminates offer  Offer cannot be revived or made into a counteroffer

Essentials of Business LawChapter 7-11 Termination Of An Offer Revocation  Offer is withdrawn by offeror  Must be prior to offeree’s acceptance  Can be communicated verbally or in writing  Written offers by merchants must be held open for time specified Cannot be revoked during this time period If no time period is specified, until a reasonable time has elapsed

Essentials of Business LawChapter 7-12 Defective Agreements Voidable contract results if agreement of either party is obtained by:  Fraud  Misrepresentation  Mistake  Undue influence  Duress  If contract is one of adhesion  If contract is unconscionable

Essentials of Business LawChapter 7-13 Fraud Must prove that the statement or act:  Was a misstatement or non-disclosure of a material fact  Was made with knowledge of its falsity or with reckless disregard of its truth  Was made with the intention of causing the other party to enter into the agreement  Was relied on by the injured party  Resulted in loss to the injured party Injured party can cancel the contract and bring suit for damages

Essentials of Business LawChapter 7-14 Puffing Expression of opinion usually made by salespeople  Not considered to be fraud  Typically directed at the five senses  Examples: the dress looks great, the stereo sounds terrific, the fabric feels soft

Essentials of Business LawChapter 7-15 Misrepresentation Unintentional misstatement or non- disclosure of a material fact  Results in inducing another to enter into an agreement to his or her injury  Not made knowingly or recklessly  Contract can be canceled  Injured party cannot sue for additional damages

Essentials of Business LawChapter 7-16 Mistake Belief that is not in accord with the facts  May be concerned with the nature of the subject matter  May be concerned with the quality of the subject matter  Must concern an existing fact  Not a belief about a possible future event  Mistake must be mutual Made by both parties

Essentials of Business LawChapter 7-17 Undue Influence Improper use of pressure by dominant member of confidential relationship  Power to control the actions of another  Contract is voidable at the option of the party wrongfully influenced  Examples include: Employer and employee Physician and patient Teacher and student Attorney and client

Essentials of Business LawChapter 7-18 Duress Applying unlawful or improper pressure to gain agreement to a contract  Threat of bodily harm  Threat of serious loss or damage to his or her property  Contract may be dissolved by the injured party

Essentials of Business LawChapter 7-19 Contract Of Adhesion Parties have unequal bargaining power Take-it-or-leave-it contract Unenforceable if it results in a significant hardship for one of the parties Prepared by one party and simply presented to the other without negotiation  Insurance policies  Disclaimers printed on ticket stubs  Dry cleaning receipts  Routine contracts

Essentials of Business LawChapter 7-20 Unconscionable Contract Shockingly unjust or unfair UCC clause originally intended to apply only to sale of goods Recently clause has been applied to consumers in various kinds of contracts  Making home improvements  Opening a checking account  Leasing an apartment  An agreement written in a way that takes unfair advantage of someone who does not know English