© South-Western Educational Publishing GOALS LESSON 2.2 OFFER AND ACCEPTANCE  Know how to create a valid offer  Describe how an offer can be terminated before acceptance  Understand the importance of acceptance and consideration to contract formation

© South-Western Educational Publishing The Offer Generally, to create a valid offer the following must occur. 1.The offeror must appear to intend to create a legal obligation 2.The terms must be definite and complete 3.The offer must be communicated to the offeree

© South-Western Educational Publishing Test of the Reasonable Person  If you are joking but a reasonable person would interpret that you are making a contract, then you have made an offer  On the other hand, if you are serious, but the other person thinks you are joking, then no offer is made.

© South-Western Educational Publishing Invitation to Negotiate  Newspapers, Magazines, Radios, TV, direct offer mailings advertise items for sale.  These are not offers  Something is advertised and it is an invitation to negotiate.  This is not a contract – this is an offer to negotiate a contract to buy and sell an item. If an advertisement says clearly in writing that it is an offer and a car will be sold to the first person who accepts the terms of the offer, then this is an offer and acceptance.

© South-Western Educational Publishing Offer Must be Complete and Definite  An offer must have the essential information to be legally effective 1.Identify the item to be sold 2.Price 3.Full terms of payment 4.Date of delivery of possession 5.Date for delivery of title or deed (if there is one)

© South-Western Educational Publishing Offer Must be Communicated to the Offeree  The offeror must tell the offeree about the offer  Sarah lost her backpack, it had a calculator, wallet, driver’s license and other valuables  Sarah posted a $25.00 reward  Carlos found the backpack, he returned it to Sarah  Carlos never saw the reward poster  Can Carlos get the reward?  The courts claim that any one who claims the reward must have known of the offer and acted in response to the offer. So no, Carlos cannot get the reward.  What do you think?

© South-Western Educational Publishing Possible Termination of the Offer before Acceptance  Revocation  Anytime before the offer is accepted, the offeror may withdraw or revoke the offer. The revocation must be communicated to the offeree.  Expiration of a set period or a reasonable time  Will the offer expire at the end of a specific time?  If not, it will expire in a reasonable amount of time.  Example: if you are selling food that will spoil, what is a reasonable amount of time?  If you are selling bathing suits and September is coming soon, what is a reasonable amount of time?

© South-Western Educational Publishing Possible Termination of the Offer before Acceptance  Rejection by the offeree  If someone refuses the offer then the offer is terminated.  Even if you say no and then change your mind the original no terminates the offer  Counteroffers  Treated the same as a rejection.  A counteroffer takes place when the offeree changes the terms of the original offer.  Example: John wants to sell Pam his car for $7,000. Pam says no, but I’ll buy it for $6,000. That is a counter offer.  Other circumstances  Death, insanity, destruction of the item for sale.  Example: The offeror’s house burns down before the offeree can accept the offer.

© South-Western Educational Publishing Acceptance and Consideration  An acceptance is the agreement by an offeree to the terms of the offer.  Consideration is what the offeror demands, and generally must receive, in order to make her or his offer legally enforceable.

Hot Debate  Trenton and Elisa were college students taking a class on movie production. Knowing that the final movie in the Alien Cheerleader trilogy was about to come out, Trenton camped out overnight at the theater. He bought two tickets, and then asked Elisa to go with him.  Elisa agreed. To be able to go, however, she had to call in sick to her evening job as a waitress. Not working that evening would cost her more than $100 in wages and tips. Nonetheless, she made the call.  When Trenton did not show up to get her, she confronted him. He admitted he had sold the tickets to someone else for $50 each. © South-Western Educational Publishing

Where Do You Stand? 1. Should Elisa be allowed to sue Trenton for not taking her to the movie? 2. Would your answer change depending upon whether or not Trenton knew Elisa would lose income by going? © South-Western Educational Publishing

Answer 1.Almost every state would not allow Elisa to sue  Social invitations do not produce legally enforceable contracts 2.Courts do not have time to involve themselves in these issues  However in two states there have been cases where the “injured” party has resulted in the person being able to recover their losses © South-Western Educational Publishing

 Because of its limited resources, the court system is very selective in what it will enforce.  Criminal laws and laws allowing recovery for certain private injuries (torts) are highest on the list for enforcement as they are necessary for keeping peace in society.  However, when it comes to contracts, generally defined as agreements between two or more parties that create obligations, the courts are far more selective. © South-Western Educational Publishing

WHAT'S YOUR VERDICT?  Diaz, 16, contracted to sell his full drum set to his classmate Martin, also 16, for $450. They concluded their contract with a handshake in front of a couple of friends.  If one of them later decides he does not want to go through with the deal, can the contract nonetheless be enforced in court against him? Why or why not? © South-Western Educational Publishing

Answer  The contract would be unenforceable against either party because the parties were under age.  If the parties had been old enough to contract, even though it was not put in written form, the contract would be enforceable because it was for a small enough amount and could be proven by oral testimony of the witnesses. © South-Western Educational Publishing

Where Do You Stand?  Anchors Aweigh, a boat retailer, placed an ad in a local newspaper announcing a sale of 25-ft. cabin cruisers for $35,500 each.  When seven would-be buyers were waiting for the business to open in order to purchase a cruiser at that price, the owner of Anchors Aweigh raised the price to $40,000.  Can the original price be enforced against the dealership by a customer who showed up to buy a cabin cruiser for $35,500? © South-Western Educational Publishing