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CHAPTER 6 Offer and Acceptance 6-1 Creation of Offers 6-2 Termination of Offers 6-3 Acceptances.

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Presentation on theme: "CHAPTER 6 Offer and Acceptance 6-1 Creation of Offers 6-2 Termination of Offers 6-3 Acceptances."— Presentation transcript:

1 CHAPTER 6 Offer and Acceptance 6-1 Creation of Offers 6-2 Termination of Offers 6-3 Acceptances

2 6-1 Creation of Offers GOALS List the elements required to form a contract List the elements required to form a contract Describe the requirements of an offer Describe the requirements of an offer

3 Question Juan and Susan were talking one day after school. Juan would turn 16 on the upcoming July 13 and wanted to buy Susan’s car. Susan, 17, had been working and saving her money to buy a new car. Selling her old car for $2,800 would give her enough to do so. She offered it to Juan for that amount, and he accepted. Did the two friend create a legally enforceable contract? Minimum age to be bound by contract is 18 in most states. Therefore if either one wanted out of the contact they would be able too.

4 FOCUS What distinguishes a contract from other agreements? What distinguishes a contract from other agreements? Contracts are enforceable by courts. In contrast social agreements are not enforceable by law. What two actions are necessary to form an agreement which may result in a contract What two actions are necessary to form an agreement which may result in a contract An offer and an acceptance

5 WHAT MUST BE IN A CONTRACT? Offer and acceptance Offer and acceptance Genuine assent Genuine assent Legality Legality Consideration Consideration Capacity Capacity Writing Writing

6 Offer and Acceptance Offeror – one who makes the offer Offeror – one who makes the offer offeree – the one whom it is made to. offeree – the one whom it is made to. Terms must be definite and accepted without change by the party to whom it was intended to be offered. Terms must be definite and accepted without change by the party to whom it was intended to be offered. Without offer and acceptance the courts would not have an agreement that could be enforced. Without offer and acceptance the courts would not have an agreement that could be enforced. To enforce arbitrary terms against the parties would be involuntary servitude and prohibited by the Constitution To enforce arbitrary terms against the parties would be involuntary servitude and prohibited by the Constitution

7 Genuine Assent An agreement based on deception, improper pressure, certain types of mistakes is not an agreement An agreement based on deception, improper pressure, certain types of mistakes is not an agreement

8 Legality What the parties agree to must be legal. What the parties agree to must be legal.

9 Consideration The agreement must involve both sides receiving something of legal value as a result of the transaction. The agreement must involve both sides receiving something of legal value as a result of the transaction. Without this we have merely a promise to make a gift. Without this we have merely a promise to make a gift.

10 Capacity Capacity The court must not have to enforce unfair bargains made due to a lack of ability to contract in the first place. The court must not have to enforce unfair bargains made due to a lack of ability to contract in the first place. Parties must be able to contract for themselves. Parties must be able to contract for themselves.

11 Writing Some contracts are so important that the courts must have a writing to be sure the proper terms are being enforced. Some contracts are so important that the courts must have a writing to be sure the proper terms are being enforced.

12 What elements are required to form a legally enforceable contract? offer and acceptance, genuine assent, legality, consideration, capacity, and a writing

13 REQUIREMENTS OF AN OFFER Offer – is a proposal by an offeror to do something, provided the offeree does something in return. Offer – is a proposal by an offeror to do something, provided the offeree does something in return. Offer must be valid to be a contract. Three tests that a valid offer must pass are: Offer must be valid to be a contract. Three tests that a valid offer must pass are: 1. Contractual intent must be present in the offer. 2. The offer must be communicated to the offeree. 3. The essential terms of the offer must be complete and definite.

14 REQUIREMENTS OF AN OFFER Contractual intent must be present- Contractual intent must be present- Must use the reasonable person test to say whether their was intent to make an offer. Must use the reasonable person test to say whether their was intent to make an offer. Objective Test – how the external behavior of the parties appears to a reasonable person Objective Test – how the external behavior of the parties appears to a reasonable person Subjective Test – What the person could convince the trier of the fact that he or she really felt. Subjective Test – What the person could convince the trier of the fact that he or she really felt.

15 REQUIREMENTS OF AN OFFER The following show non-intent to contract: The following show non-intent to contract: The law is not concerned with what is in the mind of the person making an offer by rather with the appearance of this action. The law is not concerned with what is in the mind of the person making an offer by rather with the appearance of this action. Jests – Statement made as a joke Jests – Statement made as a joke Statements made in anger or terror - Statements made in anger or terror - Social agreements – agreement of social agreement Social agreements – agreement of social agreement

16 REQUIREMENTS OF AN OFFER Preliminary negotiations – information communicated merely to induce someone to initiate bargaining. (Newspaper ads are just an invitation to bargain). The offer typically comes from the party responding to the ad. Preliminary negotiations – information communicated merely to induce someone to initiate bargaining. (Newspaper ads are just an invitation to bargain). The offer typically comes from the party responding to the ad. For an Ad to be offer it must clearly be worded in ways that address the problem of numerous people receiving the ad for a limited amount of product. “Sold to First person or subject to stock on hand” For an Ad to be offer it must clearly be worded in ways that address the problem of numerous people receiving the ad for a limited amount of product. “Sold to First person or subject to stock on hand” Asks the offeree to perform an act as a way to accept the offer. “to the first person to appear at the main door Saturday 6 th and 6:00 am.” Asks the offeree to perform an act as a way to accept the offer. “to the first person to appear at the main door Saturday 6 th and 6:00 am.” Mismarked goods does not make the seller to accept the wrong price. Mismarked goods does not make the seller to accept the wrong price.

17 REQUIREMENTS OF AN OFFER Offer must be communicated to the offeree - Offer must be communicated to the offeree - A person who is not the intended offeree cannot accept the offer. A person who is not the intended offeree cannot accept the offer. Essential terms must be complete and definite – Essential terms must be complete and definite – complete – all offers must at minimum include, price, subject matter and quantity, either directly or indirectly, to be legally effective. (any terms missing not a valid offer) complete – all offers must at minimum include, price, subject matter and quantity, either directly or indirectly, to be legally effective. (any terms missing not a valid offer) Definite – each essential term must be identified clearly. Definite – each essential term must be identified clearly.

18 Question Anchors Aweigh, a boat retailer, placed an ad in a local newspaper announcing a one-day sale of cabin cruisers for the “bargain price” of $35,5000 each. The dealer had five cruisers in stock, and they all were sold within one hour. During the rest of the day, seven other would-be buyers came in to purchase a bargain cruiser. Did the Anchors Aweigh advertisement make offers to the would-be buyers? This is just an invitation to bargain. Preliminary negotiations.

19 Question Nick asks Kim to go to dinner at the Sunset Restaurant at 7:00 PM on Saturday. Andrea mentions to Sabra that she is considering selling her car to Sheila for $750.00 Without Andrea’s permission to do so, Sabra later tells Shelia of Andrea’s statement. Sheila shows up with the money to buy the car. Tim says to Blake, I’ll buy one of your cars.” Social Agreement, No contract No communication by the offeror to the would-be offeree. No contract unless Sheila’s actions would constitute offer if Andrea wanted to accept it. Incomplete information no contract would result

20 Question The owner of a small color television set offers to sell it to a neighbor for $75. As the neighbor stands there thinking about the offer, a bystander says, “That’s a bargain. I’ll take it.” Is there a contract between the bystander and the owner? No Contract because the offer was not made to the bystander.

21 Question In Marsha Brady’s famous “something suddenly came up episode” was there a contract for the original date. No Social engagement not a contact.

22 Question The Nationwide Credit Union agreed to allow Heidi to borrow up to $10,000. Nothing was specified as the length of the agreement, the rate of interest the credit union would charge, or the terms of repaying any loan. The credit union did not make a loan of $8,000 to Heidi when she requested it four months later. Is the credit union liable for breach of contract. No, the credit union is not liable because no contract arose. The agreement was missing essential terms such as the rate of interest.

23 Question G. Whiz Sports Shop published this advertisement in the local newspaper. “Congratulations to the winners of the Tour de France! Now you too can be a champ! Get an 18-sped Blue Lightning bicycle for only $2,295 – marked down from $2,795, the manufacturer’s suggested retail price. What a bargain. Come and get it!” Baxter visited the discount store the following day and said, “I’ll take on of the Blue Lightning bike.” The clerk replied, “Sorry we had only ten bikes in stock and they’ve all been sold.” Was the advertisement an offer? No, the advertisement was not an offer because it did not address the problem of a limited quantity of the bikes.

24 What are the requirements of an offer? The offer must have contractual intent, be complete and definite, and in some fashion be communicated to the offeree by the offeror.

25 6-2 Termination of Offers GOALS Describe the various ways to end offers Describe the various ways to end offers Explain how an offeree can ensure an offer will remain open Explain how an offeree can ensure an offer will remain open

26 FOCUS Can offers to contracts be terminated at different times depending on the subject matter of the offer? Can offers to contracts be terminated at different times depending on the subject matter of the offer? They can be.

27 Question On May 15 th, Melissa offered to sell her collection of baseball cards for $3,000 at anytime before the first of the next month to her friend and fellow collector, Raoul. While Raoul was trying to raise the money, Melissa had second thoughts. So she called Raoul and said, “I’ve changed my mind, I’m not interested in selling the cards.” Raoul responded, “It’s too late, you said the offer would be open for this whole month. This is just the 20 th, and I’ve got the money so I accept.” Was Melissa’s offer terminated before Raoul’s attempted acceptance? Because Melissa revoked first, there was no offer for Raoul to accept. The promise to keep it open until the end of the month was not legally binding to her.

28 HOW CAN OFFERS BE ENDED? Once made an offer does not last forever. It can be terminated in a variety of ways. Once made an offer does not last forever. It can be terminated in a variety of ways. Revocation by the offeror Revocation by the offeror Revocation – the right to withdraw an offer before it is accepted is know as the right of revocation. Not effective until communicated to the offeree. Revocation – the right to withdraw an offer before it is accepted is know as the right of revocation. Not effective until communicated to the offeree. Can revoke anytime before it is accepted by the offeree. Even if promised to keep open. Can revoke anytime before it is accepted by the offeree. Even if promised to keep open. Time stated in the offer – Time stated in the offer – When making an offer it may be stated how and when the offer must be accepted. If not within that time or way no contract. When making an offer it may be stated how and when the offer must be accepted. If not within that time or way no contract. Reasonable length of time Reasonable length of time When nothing is said in the offer about how long it will remain open, it will end after a reasonable time. It depends on the surrounding circumstances. When nothing is said in the offer about how long it will remain open, it will end after a reasonable time. It depends on the surrounding circumstances.

29 HOW CAN OFFERS BE ENDED? Rejection by the offeree Rejection by the offeree When offeree clearly rejects the offer, the offer is terminated (unless renewed th the original offeror) When offeree clearly rejects the offer, the offer is terminated (unless renewed th the original offeror) Counteroffer Counteroffer When offeree changes the offeror’s terms in important ways and sends it back to the offeror. This becomes the new offer. When offeree changes the offeror’s terms in important ways and sends it back to the offeror. This becomes the new offer. Death or insanity of either the offeror or offeree Death or insanity of either the offeror or offeree Contracts are agreements voluntarily entered into by the parties and subject to their control. These people do not have control. Contracts are agreements voluntarily entered into by the parties and subject to their control. These people do not have control. Destruction of the specific subject matter Destruction of the specific subject matter If whatever was offered is destroyed no contract. If whatever was offered is destroyed no contract.

30 Explain two ways in which offers can be terminated.

31 HOW CAN AN OFFER BE KEPT OPEN? Options – Options – If the offeree gives the offeror something of value in return for a promise to keep the offer open, this agreement is itself a binding contract called an option. Offer cannot be withdrawn during the period of the option. If the offeree gives the offeror something of value in return for a promise to keep the offer open, this agreement is itself a binding contract called an option. Offer cannot be withdrawn during the period of the option. Firm offers Firm offers A written offer stating how long it is to stay open called a firm offer. The UCC makes firm offers binding for the time stated but not longer than 3 months. Applies to Merchants. A written offer stating how long it is to stay open called a firm offer. The UCC makes firm offers binding for the time stated but not longer than 3 months. Applies to Merchants.

32 Question The Downings had placed their idle factory building on the market for $950,000. Robinson, a developer, was interested in buying it, but she needed time to persuade a group of investors to join her in a syndicate to purchase the building. Robinson offered $10,000 to the Downings to keep the offer open to her alone for 60 days. The Downings accepted the money. Are they now legally bound to keep the offer open to the Robinson. This was an option and the Downings could not legally withdraw the offer or sell to another party during the 60 days.

33 Question While her car was in Prescott’s garage for repairs, Wood noticed a large, seemingly unused, metal tool chest in the corner, complete with about 400 standard and metric tools. Wood offered to buy it for $3,000 and said, “You can take a week to think about it before you decide whether to accept.” Four days later, before Prescott had responded, Wood told Prescott that she was withdrawing her offer as she had found a better set for less money. Can Prescott still accept Wood’s original offer? If wood had put the offer in writing, could she have withdrawn it before the week was over? Yes, Wood can withdraw an offer even when he promised to leave it open. A firm offer or option is required to bind on offer to the promise to leave an offer open.

34 Question Frank saw a wheelchair advertised in the paper for sale for $900. When he called the seller, who had bought it to use while he was recovering from a skiing accident, the seller said it had not yet been sold. Frank drove out to see it but found it needed work. So Frank offered $700. The seller seemed insulted, and said he wasn’t interested at that price. Frank left. About an hour later, he went back and found the wheelchair had not been sold. He then offered the $900 specified in the ad. However, the seller refused to sell it to him. Frank became upset and sued to get the court to force the owner to sell it to him for $900. Will the seller have to do so? Why or why not? No, the seller’s offer at $900 was rejected by Frank so he cannot later accept it.

35 Question Gus walked into his local hardware store to buy exterior paint for his house. It was on sale for $35.00 a gallon. Gus wanted to check around but didn’t want to lose the change to buy at the sale price. In response to Gus’s request, the manager of the paint department wrote Gus a not stating, “Gus Almondson may buy up to 15 gallons of Old Dutch Exterior Grade paint for $35 per gallon anytime within the next two weeks.” The manager signed and dated the note. Is this offer binding? Yes, this is a firm offer and therefore a binding offer.

36 Question Phil was talking with Sharon about Opie, his Springer Spaniel dog. Phil explained that Opie has a strong personality, loves to snuggle up to people, likes to eat “people food,” and is a good watchdog. Sharon liked Opie a lot and needed a dog. She asked Phil how much he paid for Opie. Phil said, “I paid $75, but I wouldn’t sell Opie for ten times that amount. Sara said, “Well okay, it’s a deal then. I’ll give you $800, more than ten times the $75.” Has Opie been sold? Opie has not been sold because Phil did not make an offer.

37 How could an offeree ensure that an offer will stay open for a set period of time? Options or Firm offers

38 6-3 Acceptances GOALS Discuss the requirements of an effective acceptance Discuss the requirements of an effective acceptance Determine at what point in time an acceptance is effective Determine at what point in time an acceptance is effective

39 FOCUS Scenario John makes an offer to Paul. Paul is not interested, but Paul’s friend, who was standing nearby, hears the offer and says she accepts. John makes an offer to Paul. Paul is not interested, but Paul’s friend, who was standing nearby, hears the offer and says she accepts.Question Has a contract been formed? Has a contract been formed? No, it can only be accepted by the person(s) whom it has been made.

40 WHAT IS REQUIRED OF AN ACCEPTANCE? Only offerees may accept Only offerees may accept The acceptance must match the offer The acceptance must match the offer Acceptance must be communicated to the offeror Acceptance must be communicated to the offeror

41 WHAT IS REQUIRED OF AN ACCEPTANCE? Only offerees may accept – Only offerees may accept – If made to general public then anyone can accept. If made to general public then anyone can accept. The acceptance must match the offer The acceptance must match the offer Mirror image rule – requires that the acceptance must exactly match the terms contained in the offer. Mirror image rule – requires that the acceptance must exactly match the terms contained in the offer. Under the UCC an attempted acceptance of an offer for a contract for a sale of goods can be valid where the offer and acceptance agree. Anytime a consumer is involved the consumer is singled out for protection against unagreed to terms being included in the contract without the consumer’s consent. Under the UCC an attempted acceptance of an offer for a contract for a sale of goods can be valid where the offer and acceptance agree. Anytime a consumer is involved the consumer is singled out for protection against unagreed to terms being included in the contract without the consumer’s consent.

42 WHAT IS REQUIRED OF AN ACCEPTANCE? Acceptance must be communicated to the offeror Acceptance must be communicated to the offeror Silence cannot be an acceptance of an offer. Silence cannot be an acceptance of an offer. bilateral acceptance – bilateral acceptance – Most offers are these (bilateral contracts) Contains two promises Most offers are these (bilateral contracts) Contains two promises Can be accepted by giving a promise Can be accepted by giving a promise unilateral acceptance – unilateral acceptance – Indicate acceptance by offeree by performing a certain act. Indicate acceptance by offeree by performing a certain act. Unilateral Contracts Unilateral Contracts Example promise to pay reward to anyone who returns a lost camera. When camera returned is acceptance of offer. Example promise to pay reward to anyone who returns a lost camera. When camera returned is acceptance of offer. Modes of contractual communication Modes of contractual communication When acceptances are effective – When acceptances are effective – Court say acceptance is effective when sent by the same means used for the offer or by faster means. Court say acceptance is effective when sent by the same means used for the offer or by faster means. Acceptances sent by mail generally take effect when properly posted. Acceptances sent by mail generally take effect when properly posted. The offeror may specify what is necessary means of acceptance. The offeror may specify what is necessary means of acceptance.

43 What are the requirements of an effective acceptance? Must come from the intended offeree, match the terms of the offer, and be communicated to the offeror in a proper and timely fashion.

44 Question When Blithely found Jack on Blithely’s used car lot looking at an SUV, she introduced herself and then showed him the features of the vehicle. After a period of time they discussed the price, and then she opened the driver’s door for him. As he slid behind the wheel, she said, “Tell you what. I believe that once a customer gets behind the wheel of one of these beauties, he’s sold. So, if you don’t say no within the next ten seconds, we’ve got a deal at $15,750.” Jack said nothing within the ten seconds. Did Jack legally agree to Blithely’s offer. No Contract would result by the silence.

45 Question To help pay for housing renovations, Jeanne placed an ad on the bulletin board at the public golf course showing a picture of her prized set of golf clubs, her phone number, and the figure $2,000. Eve, after seeing the ad called Jeanne and then drove to her house with $2,000 in hand. When se presented the $2,000 to Jeanne, the latter refused it, stating that she had received several calls raising it to $2,500. Can Eve sue and force Jeanne to accept her $2,000 for the clubs. Why or why not? No. The $2,000 was merely an invitation to negotiate. Therefore, Eve’s presenting the $2,000 was not an acceptance but an offer. Jeanne has as much right to raise that price as others do to try and get her to lower it.

46 Question Office Suppliers, Inc. ordered 2,000 of 20lb. paper from Dimension Paper for $1.75 per ream to be delivered at the Office Suppliers warehouse on April 24. Dimension responded that 2,000 reams would be delivered on April 25 at the price of $1.75 per ream. Office Suppliers made no further response. Has a valid contract been formed? If so, what are the terms? If not, why not? A Valid contract has been formed based on Office Suppliers offer. UCC code minor changes


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