1. CHAPTER 6 OFFER AND ACCEPTANCE

2. 6-1 Creation of Offers What Must Be in a Contract? Contracts – An agreement between two or more parties that create obligations. Requirements of a Legally Enforceable Contract 1.Offer & Acceptance 2.Genuine Assent 3.Legality 4.Consideration 5.Capacity 6.Proper Form

3. 6-1 Creation of Offers What Must Be in a Contract? 1.Offer & Acceptance – There must be an agreement composed of and offer and an acceptance upon which to base the contract. – Offeror – The person who makes the offer – Offeree – The person to whom the offer is made

4. 6-1 Creation of Offers What Must Be in a Contract? 2. Genuine Assent The agreement must not be based on one party deceiving another, on an important mistake, or on the use of unfair pressure exerted to obtain the offer or acceptance.

5. 6-1 Creation of Offers What Must Be in a Contract? 3. Legality What the parties agree to must be legal. An agreement to commit a crime or tort cannot be a legally enforceable contract.

6. 6-1 Creation of Offers What Must Be in a Contract? 4. Consideration What the promisor demands and generally must receive in order to make his or her promise legally enforceable against him.

7. 6-1 Creation of Offers What Must Be in a Contract? 5. Capacity To have a completely enforceable agreement, the parties must have the legal ability to contract for themselves. – Example: Age (in most states, parties must be 18)

8. 6-1 Creation of Offers What Must Be in a Contract? 6. Proper Form Some agreements must be placed in writing to be fully enforceable in court.

9. 6-1 Creation of Offers Nature and Classes of Contracts Executed & Executory Contracts Executed Contracts – one that has been fully preformed Executory Contracts – one that has not been fully preformed ( Something agreed upon remains to be done by one or both of the parties)

10. 6-1 Creation of Offers Nature and Classes of Contracts Express, Implied-In-Fact & Implied-At-Law Contracts Express Contracts– is one in which all the terms are expressly stated either orally or in writing. Implied-In-Fact– Does not have its terms expressly stated but they can be inferred from the parties’ acts or conducts. Implied-At-Law – Not really a contract, but instead a fiction created by the law to allow the enforcement of a contractual remedy where justice alone warrants such a remedy.

11. 6-1 Creation of Offers Nature and Classes of Contracts Unilateral & Bilateral (Multilateral) Contracts Unilateral Contracts– The offeror promises something in return for the offeree’s performance and indicates that this performance is the way acceptance is to be made. Bilateral Contracts – (one that formed by a mutual exchange of legally binding promises) The offeror merely expects a promise in return as acceptance to form a binding contract.

12. 6-1 Creation of Offers Nature and Classes of Contracts Unilateral & Bilateral (Multilateral) Contracts For example, if Cindy agrees to watch neighbor Amber’s children on Monday and Wednesday, and Amber agrees to watch Cindy’s children on Tuesday and Thursday, a bilateral contract has been entered into, where each party offered consideration. The gain or profit of the contract is a couple of quiet afternoons for each mother. If, instead, Cindy offered Amber $10 for each afternoon she watched Cindy’s children, a unilateral contract is created, in which Amber only receives, and Cindy is only obligated to pay the money if Amber watches the children.

13. 6-1 Creation of Offers Nature and Classes of Contracts Unilateral & Bilateral (Multilateral) Contracts When a Unilateral Contract Becomes Bilateral?

14. 6-1 Creation of Offers Nature and Classes of Contracts Unilateral & Bilateral (Multilateral) Contracts Bilateral Contract Example Bob pays Sam $1,000 to install sprinklers in his yard. This seems like a unilateral contract in which Bob is obligated to pay the money only if Sam accepts by installing sprinklers. There exists a question of just what constitutes completion or performance under this type of contract: the act of beginning the installation, or the completion of the job to a standard satisfactory to Bob? In response to these issues, the courts generally hold that, when Sam begins the installation, the contract is converted to a bilateral contract that requires both parties to perform certain actions. Sam must provide the complete service of sprinkler installation, for which Bob must pay $1,000. Modern courts have moved from applying strict unilateral vs. bilateral concepts to contract disputes, focusing instead on the intended result or outcome of each contract.

15. 6-1 Creation of Offers Requirements of an Offer An offer is a proposal by an offeror to do something provided by the offeree does or refrains from doing something in return. 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

16. 6-1 Creation of Offers Requirements of an Offer Contractual Intent Must Be Present Jests – If you think you are joking, but a reasonable person would interpret your conduct as indicating that you intend to contract, you have made an offer. Statements made in anger or terror – These statements do not have the reasoned basis necessary for enforceable offers.

17. 6-1 Creation of Offers Requirements of an Offer Contractual Intent Must Be Present Preliminary Negotiations – Information is communicated merely to induce someone to initiate bargaining, such statements are not seen by the law as indicating an intent to contract. Social Agreements – These do not typically create legal obligations.

18. 6-1 Creation of Offers Requirements of an Offer Offer Must Be Communicated to the Offeree A person cannot accept an offer without knowing it has been made. A person who is not the intended offeree cannot accept the offer.

19. 6-1 Creation of Offers Requirements of an Offer Essential Terms Must Be Complete & Definite Complete Identify the price, subject matter, and quantity Real estate 1.A proper legal description of the real estate 2.Price 3.Full terms for payment 4.Date for delivery of possession 5.Date for delivery of the deed

20. 6-1 Creation of Offers Requirements of an Offer Essential Terms Must Be Complete & Definite Definite Essential terms must be identified clearly When the price is not specified, current market price is used as the basis for the contract

21. 6-2 Termination of Offers How Can Offers Be Ended Revocation by the Offeror Revocation – The right to withdraw an offer before it is accepted After an offer has been made, the offeror can generally revoke it anytime before it is accepted by the offeree.

22. 6-2 Termination of Offers How Can Offers Be Ended Time Stated in the Offer In making an offer, the offeror may state how and when the offer must be accepted.

23. 6-2 Termination of Offers How Can Offers Be Ended Reasonable Length of Time When no specific time is stated a reasonable length of time is accepted depending on the surrounding circumstances. EXAMPLE: An offer to purchase bananas would not remain open for day. Bananas are a perishable item.

24. 6-1 Termination of Offers How Can Offers Be Ended Rejection by the Offeree An offer is terminated by an offeree’s rejection even if a time limit set by the offeror has not expired.

25. 6-2 Termination of Offers How Can Offers Be Ended Counteroffer An offeree accepting an offer must accept it exactly as made. A counteroffer terminates the original offer and proposes a new offer.

26. 6-2 Termination of Offers How Can Offers Be Ended Death or Insanity of Either the Offeror or Offeree Contracts are agreements voluntarily entered into by the parties and subject to their control The law will act for the parties when they can no longer act and terminates their offers

27. 6-2 Termination of Offers How Can Offers Be Ended Destruction of the Specific Subject Matter If the offer refers to unique subject matter, for example a car and a tree falls on that car in the middle of the night, the offer is automatically terminated.

28. 6-2 Termination of Offers How Can an Offer be Kept Open Options If the offeree fives the offeror something of value in return for a promise to keep the offer open, this agreement is itself a binding offer.

29. 6-2 Termination of Offers How Can an Offer be Kept Open Firm Offers Applies to merchants (individuals who regularly deal in the goods being bought or sold) who make offers in writing Firm Offer – a written offer contains a term stating how long it is to stay open. – No more than three months (according to the UCC)

30. 6-3 Acceptances What is required of an Acceptance? Acceptance – when a party to whom an offer has been made agrees to the proposal To create an enforceable contract, the acceptance must: 1.Come from the person or persons to whom the offer was made 2.Match the terms in the offer 3.Be communicated to the offeror

31. 6-3 Acceptances What is required of an Acceptance? Only Offerees May Accept An offer made to one person cannot be accepted by another Sometimes an offer can be made to the general public

32. 6-3 Acceptances What is required of an Acceptance? The Acceptance Must Match the Offer Mirror Image Rule – requires that the acceptance must exactly match the terms contained in the offer.

33. 6-3 Acceptances What is required of an Acceptance? Acceptance Must Be Communicated to the Offeror Silence as Acceptance Promises as Acceptance Performance as Acceptance Modes of Contractual Communication When Acceptances Are Effective

34. 6-3 Acceptances What is required of an Acceptance? Acceptance Must Be Communicated to the Offeror Silence as Acceptance – one is not obligated to reply to offers made by others.

35. 6-3 Acceptances What is required of an Acceptance? Acceptance Must Be Communicated to the Offeror Promises as Acceptance – most offers can be accepted by giving a promise instead of performing the contracted-for act. – If a seller promises to deliver a load of topsoil in exchange for a homeowner’s promise to pay $65 – Bilateral contract: mutual exchange of legally binding promises

36. 6-3 Acceptances What is required of an Acceptance? Acceptance Must Be Communicated to the Offeror Performance as Acceptance – Unilateral Contracts: the offeror promises something in return for the offeree’s performance and indicates that this performances is the way acceptance is to be made. EXAMPLE: Find a lost puppy receive $500

37. 6-3 Acceptances What is required of an Acceptance? Acceptance Must Be Communicated to the Offeror Modes of Contractual Communication - In person, telephone, text messaging, mail, delivery service, email, fax, and others. Example: On some stock and commodity exchanges, hand signals are used to communicate offers and acceptance,

38. 6-3 Acceptances What is required of an Acceptance? Acceptance Must Be Communicated to the Offeror When Acceptances Are Effective - All communication is takes effect when received, except acceptances. They take effect when sent.