1. Offer and Acceptance
Chapter 6

2. Creation of Offers
Lesson 6-1

3. What is a contract?
Contract-agreement between two or more parties that create obligations
an agreement that courts will enforce.

4. Six Requirements of a Contract
Offer and acceptance-serious, definite offer. Term must be accepted by the party to whom the offer was communicated.
Genuine assent-no deception, important mistake, or unfair pressure.
Legality
Consideration-both sides receive something of legal value

5. Capacity-must be able to contract for themselves
Capacity-must be able to contract for themselves. For example, 18 or over.
Proper form-some contracts MUST be in writing to be enforceable

6. Offeror-party making the offer
Offeree-person to whom the offer is made

7. Nature and Classes of Contracts
Executed and executory contracts
Executed-fully performed (completed)
Executory-not fully performed
Express, implied-in-fact and implied at-law contracts
Express contracts-all terms are stated in writing or orally
Implied in fact-terms can be inferred from parties’ acts

8. Implied-at-law (quasi) contracts-a fiction created by the law to allow the enforcement of a contractual remedy where justice warrants such a remedy
Unilateral and bilateral contracts
Unilateral-offeror promises something in return for offeree’s performance.
Bilateral-mutual exchange of legally binding promises.

9. Requirements of an Offer
Offer-a proposal by an offeror to do something, provided the offeree does something in return.
To create an offer:
Offeror must appear to intend to create a legal obligation
The offer must be communicated to the offeree
The essential terms must be definite and complete

10. Expression of Intent to Create a Legal Obligation
Test of the Reasonable Person-appearing to be serious, not what the person is thinking or intending. Avoids trying to determine what person is thinking
Facts and circumstances-statements made while joking, in terror or in anger
Preliminary negotiations- Would you take…? Anyone interested…?

11. Addresses the issue of limited stock.
Advertisements-usually considered a invitation to make an offer due to limited number of stock and unlimited possible responses
When is an ad an offer?
Addresses the issue of limited stock.
Sold to the first person to accept terms or “subject to stock on hand”
Asks the offeree to perform an act to accept.
Sold “to the first person to appear at the main floor of the shopping mall on Saturday morning after 6:00 a.m.”
False advertising

12. Social agreements-not breech of contract to break a date, not an intended legal obligation

13. Offer must be Communicated to the Offeree
Person who is not the intended offeree cannot accept offer.
Cannot accept an offer without knowing it was made and acting in response to it (claiming reward if you didn’t know there was one )

14. Offer Must be Complete and Definite
To determine what the parties intended and identify parties’ rights and duties
Complete-must contain all essential info (price, subject matter, quantity directly or indirectly). Amount of info depends on complexity of transaction.

15. Real estate requires:
A legal description
Price
Full terms for payment
Date of possession
Date of delivery of the deed

16. Definite
For example, someone offers to sell “their” car but they own more than one.
For those who regularly buy or sell a product, current market price will be used if not price specified.

17. Lesson 7-2
Termination of Offers

18. How can offers be ended?
Revocation (the right to withdraw a offer before it is accepted)by the offeror-can be revoked even if offer was for a specific time
Time stated in offer- time is up
Reasonable length of time-based on type of transaction

19. Rejection by the offeree
Counteroffer-offeree changes the offeror’s term in important ways
Death or insanity of either the offeror or offeree
Destruction of the specific subject matter

20. How can an offer be kept open?
Offerer does not have to keep offer open even if promised (no consideration)
Options-give the offeror something of value in order to keep offer open
Options remain valid even upon death of offerer.

21. Firm Offers-(applies to merchants who regularly buy or sell) in writing that specifies how long an offer is open
UCC makes these offers binding (no more than 3 months)
Generally, death or insanity does not terminate firm offers or options.

22. Acceptance
Lesson 6-3

23. What is required of an acceptance?
Acceptance-party to whom an offer has been made agrees to the proposal
Be made by party to whom offer was made
Match the terms of the offer
Be communicated to the offeror

24. Who can accept the offer?
Anyone it was directed towards!
One person, particular group, or public

25. Acceptance must match offer
Cannot change terms even if change is advantageous to offeror
Mirror image rule-acceptance must be the exact same of the offer
Goods-any change is a counteroffer except:
If party is a consumer (not merchant) new terms are proposals and not part of contract unless agreed to by offeror

26. If both are merchants, new terms not part of offer if offeror objects or if terms are material
If both are merchants, new terms become part of offer if offeror is silent and terms are not material

27. Acceptance must be communicated to the Offeror
Silence as acceptance- only if continuing relationship and agreed to in advance (record or book club)
Standing order

28. Promises as acceptance
Bilateral acceptances-mutual exchange of legally binding promises.
Example- agreeing to deliver a load of gravel for $120.
Performance as acceptance
Unilateral acceptance-requirement of the offeree to indicate acceptance by performing obligation such as a reward. Must be aware of reward. When performance has started, must give offeree reasonable time to complete performance.

29. Modes of Contractual Communications
Offers, acceptances, rejections, revocations, and counteroffers, may be communicated orally or in writing (letter, , fax, telegram, etc.)
UCC-”any medium reasonable in the circumstances” unless clearly indicated.