1. Chapter 5 Contracts Instructor: Erlan Bakiev, Ph. D.

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Introduction
Contracts are voluntary agreements between the parties
One party makes an offer that is accepted by the other party
Without mutual assent, there is no contract
10-2
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Agreement
Agreement: Manifestation by two or more persons of the substance of a contract
Requires mutual assent to perform current or future contractual duties
10-3
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Case 10.1: Contract
Case
The Facebook, Inc. v. Winklevoss
Web 2011 U.S. App. Lexis 7430 (2011)
United States Court of Appeals for the Ninth Circuit
Issue
Is the settlement agreement enforceable?
10-4
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Offer
Offer: The manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it
Offeror: The party who makes an offer
Offeree: The party to whom an offer has been made
10-5
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Offer
Requirements for an effective offer
The offeror must objectively intend to be bound by the offer
The terms of the offer must be definite or reasonably certain
The offer must be communicated to the offeree
10-6
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Offer
Objective theory of contracts
Intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties
Express Terms
The terms of an offer must be clear enough to the offeree to be able to decide whether to accept or reject the terms of the offer
Terms must be definite
10-7
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Offer
An offer must contain the following terms
Identification of the parties
Identification of the subject matter and quantity
Consideration to be paid
Time of performance
10-8
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Offer
A sends a letter dated March 5 to B offering to sell its house for $1000, saying the offer is open until March 9 and it must have heard from B by then. B receives it on March 6 and immediately prepares letter of acceptance. Before B delivers his acceptance in the morning of March 7, A changes its mind and calls B saying it cancels the offer.
10-8
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Offer
Revocation is valid.
10-8
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Offer
Implied Terms
The court can supply a missing term if a reasonable term can be implied
Terms supplied in this way called implied terms
10-9
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Case 10.2: Contract
Case
Marder v. Lopez
450 F.3d 445, Web 2006 U.S. App. Lexis (2006)
United States Court of Appeals for the Ninth Circuit
Issue
Is the general release Marder signed an enforceable contract?
10-10
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Offer
Special Offers
Advertisements
Rewards
Auctions
10-11
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14. Termination of an Offer by Act of the Parties
Revocation: Withdrawal of an offer by the offeror that terminates the offer
Rejection: Express words or conduct by the offeree to reject an offer
Counteroffer: A response by an offeree that contains terms and conditions different from or in addition to those of the offer
10-12
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15. Termination of Offer by Operation of Law
Destruction of the subject matter
Death or incompetency of offeror or offeree
Supervening illegality
Lapse of time
10-13
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Acceptance
Acceptance: A manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts
10-14
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Acceptance
Unequivocal acceptance
Clear and unambiguous acceptance
Only one possible meaning
must not contain conditions or exceptions
10-15
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Acceptance
Mirror Image Rule: for an acceptance to exist, the offeree must accept the terms as stated in the offer
Any attempt to accept the offer on different terms constitutes a counteroffer
10-16
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Acceptance
Silence as Acceptance
Offeree indicates that silence means assent
Offeree signed agreement indicating continuing acceptance until further notification
Prior dealings indicate that silence means assent
10-17
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Acceptance
Time of acceptance
Mailbox rule: an acceptance is effective when it is dispatched, even if it is lost in transmission
Does not apply if an offeree first dispatches a rejection and then sends an acceptance
10-18
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Acceptance
Mode of acceptance
Proper dispatch
Authorized means of communication
Implied authorization
Express authorization
10-19
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22. It is the price for which the promise of the other is bought
Consideration
5.1 Meaning
It is the price for which the promise of the other is bought
Exchange of promise: contract
Any party have both gains and losses

23. Love Gratitude Past consideration 5.2 What constitute consideration?
(1) Anything having market value
(2) Exception:
Love
Gratitude
Past consideration

24. 5.3 Adequacy
(1) No requirement: exchange of equal value
(2) $ 1 is adequate consideration

25. Forbearance to sue is adequate consideration.
Case study：
Adams, creditor of Brown, threatened to sue Brown for the debt of $ Cox, friend of Brown, then promised to pay Adams the debt if Adams would refrain from suing, and Adams agreed. If Cox failed to pay Adams as agreed, and Adams sued him for breach of contract, Adams would succeed.
Forbearance to sue is adequate consideration.