1. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. and the Legal Environment, 10 th edition by Richard A. Mann & Barry S. Roberts Essentials of Business Law and the Legal Environment, 10 th edition by Richard A. Mann & Barry S. Roberts

2. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Topics Covered Chapter 10: Mutual Assent I. Offer A. Essentials of an Offer B. Duration of Offers II. Acceptance of Offer A. Communication of Acceptance B. Variant Acceptances

3. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Essentials of an Offer n Communication – offeree must have knowledge of the offer and the offer must be made by the offeror to the offeree. n Intent – determined by an objective standard of what a reasonable offeree would have believed. n Definiteness – offer's terms must be clear enough to provide a court with a basis for giving an appropriate remedy.

4. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Issues with Intent n Preliminary Negotiations – initial communications between parties, through which the parties either request or supply the terms of a possible offer. n Advertisements – invitation to customers or the public to make an offer to buy the advertised goods. n Auction sales -- An auctioneer does not make offers to sell the property being auctioned but invites offers to buy.

5. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Issues with Definiteness n Open Terms – the Code and the Restatement both provide a method for determining omitted terms when the parties n Output and Requirements Contracts An output contract is an agreement of a buyer to purchase a seller’s entire output for a stated period; a requirements contract is an agreement of a seller to supply a buyer with all his requirements for certain goods. These are enforceable within reason.

6. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Duration of Offers n Lapse of Time – offer remains open for the time period specified or, if no time is stated, for a reasonable period of time. n Revocation – generally, an offer may be terminated at any time before it is accepted, subject to the following exceptions. n Rejection – refusal to accept an offer terminates the power of acceptance. n Counteroffer – counterproposal to an offer that generally terminates the original offer.

7. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Duration of Offers Offer Effective Communicated Intent Definite and certain No Offer OFFER OPEN Offer Terminated Lapse of time Death Revocation Incompetency Rejection Destruction of subject matter Counteroffer Subsequent illegality No Offer

8. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Revocation n Option Contract – contract that binds offeror to keep an offer open for a specified time. n Firm Offer – a merchant's irrevocable offer to sell or buy goods in a signed writing ensures that the offer will not be terminated for up to three months. n Statutory Irrevocability – offer made irrevocable by statute.

9. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Revocation n Irrevocable Offer of Unilateral Contract – a unilateral offer may not be revoked for a reasonable time after performance is begun. n Promissory Estoppel – noncontractual promise that binds the promisor because she should reasonably expect that the promise will induce the promisee (offeree) to take action in reliance on it.

10. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Rejection and Counteroffer n Rejection – a manifestation by the offeree of his unwillingness to accept. n Counteroffer – counter-proposal from the offeree to the offeror that indicates a willingness to contract, but on different terms from the original offer. –Conditional acceptance is a type of counteroffer which purports to accept the offer, but with additional or different terms

11. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Termination of Offers n Death or Incompetency – of either the offeror or offeree usually terminates the offer; exception is offer contained in an option. n Destruction of Subject Matter – terminates the offer. n Subsequent Illegality – terminates the offer.

12. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Acceptance of Offer n Definition – positive and unequivocal expression of a willingness to enter into a contract on the terms of the offer.

13. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Communication of Acceptance n General Rule – acceptance effective upon dispatch unless the offer specifically provides otherwise or the offeree uses an unauthorized means of communication. n Silence as Acceptance – usually inaction does not indicate acceptance, unless in usual customs or previous dealings, offers have been accepted by silence; example: members of mail order clubs indicate acceptance by NOT returning a mailed notice of shipment.

14. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. n Effective Moment –Stipulated Provisions in the Offer – the communication of acceptance must conform to the specification in the offer. –Authorized Means – the Restatement and the Code provide that unless the offer provides otherwise, acceptance is authorized to be in any reasonable manner. –Unauthorized Means – acceptance effective when received, provided that it is received within the time within which the authorized means would have arrived. –Acceptance Following a Prior Rejection – first communication received by the offeror is effective. Communication of Acceptance

15. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. n Defective Acceptance – late or defective acceptance does not create a contract but serves as a new offer. To create a contract, the original offeror must accept the new offer. Communication of Acceptance

16. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Offer and Acceptance

17. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. n Common Law – Under the common law, an acceptance must be positive, unequivocal and must not change the provisions of the offer. n Mirror Image Rule – except as modified by the Code, an acceptance cannot deviate from the terms of the offer. n Code – Under the Code, an attempt is made to examine the intent of the parties, regardless of the terms, especially in written contracts between merchants using standard sales forms. Variant Acceptance

18. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Mutual Assent Has a definite and certain offer been communicated? No offer Offer terminated Has lapse of time, death, incompetency, destruction of subject matter, or subsequent illegality occurred? Yes No Has the offer been revoked by the offeror? Has the offeror received a rejection or counteroffer? Is acceptance effective? No No contract No Yes Contract formed