1. Offers and Acceptance

2. Creation of Offer

3. What must be in a Contract?
Courts are far more selective in enforcement of contracts
Contract: Agreements between two or more parties that create obligations.
6 major requirement - legally enforceable contracts
Offer and Acceptance
Genuine Assent
Legality
Consideration
Capacity
Proper Form

4. Offer and Acceptance The person who makes the offer is the offeror.
The person to whom it is made is the offeree.
Terms must be definite and accepted without change by the party to whom it was intended to be offered.

5. Genuine Assent Must not be based on one party’s deceiving another,
on an important mistake or
on the use of unfair pressure exerted to obtain the offer or acceptance.

6. Legality What parties agree to must be legal
An agreement to commit a crime or tort cannot be considered legal

7. Consideration What the promisor demands
Generally must receive in order to make promise legally enforceable is termed consideration

8. Capacity
Parties must have the legal ability to contract for themselves
Example would be age… in Texas, a person must be 18 years of age to form a legally binding contract.

9. Proper Form
Some agreements must be placed in writing to be fully enforceable in court

10. Nature and Classes of Contracts
Contracts are classified in many different ways
Classifications help in the analysis of obligations and performances of the parties to them.

11. Executed and Executory Contracts
Executed Contract - one that has been fully performed.
Both parties have done all they promised to do
Executory Contract - one that has not been fully performed.
Something agreed upon remains to be done by one or both of the parties

12. Express, Implied-in-Fact, and Implied-at-Law Contracts
Express Contract - one in which all the terms are expressly stated either orally or in writing.
Implied in Fact Contract - does not have its terms expressly stated but that can be inferred from the parties’ acts or conduct.
Quasi or Implied at Law Contract - 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.

13. Unilateral and Bilateral (Multilateral) Contract
Unilateral Contract - 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 Contract - one that is formed by a mutual exchange of legally binding promises.
The offeror merely expects a promise in return as acceptance to form a binding contract.
“Bilateral” (rather than “multilateral”) usually is the legal shorthand for two or more parties making promises that form the contract.

14. Requirements of an Offer
An offer is a proposal by an offeror to do something, provided the offeree does or refrains from doing something in return.
An offer is the basis of the the bargain
If it is not valid, there can be no contract for the courts to enforce.
Three tests that an offer must pass to be legally enforceable:
Contractual intent must be present in the offer
The offer must be communicated to the offeree
The essential terms of the offer must be complete and definite

15. Contractual Intent Must Be Present
Words that take the form of offers but which are spoken in jest (as a joke), in extreme terror or anger, or as a preliminary negotiation or social agreement would not be enforced.
Ex. When a teacher in says in a business law class, “I will sell you my new care for $3,000,” this probably isn’t an offer but an example.
Although words themselves may indicate an offer, a reasonable person would disregard them because of the facts and circumstances under which they were spoken.

16. Jests
The law is not concerned with what is actually in the mind of a person making what might be considered an offer.
Rather it is concerned with the appearance of this action.

17. Statements Made in Anger or Terror
It does not have the reasoned basis for enforceable offers.
Yelling after someone who has just stolen your watch, “Stop, thief - I’ll pay anyone who stops her $100,” is not looked upon as being a valid offer by the law.
You would not, legally, owe the person who returned your watch the $100.

18. Preliminary Negotiations
Information often is communicated merely to induce someone to initiate bargaining.
Such statements are not seen by the law as indicating an intent to contract.
Statements of this nature, including putting signs on merchandise with a certain price or ads in newspapers or on tv are the same effect - invitations to negotiate. They are not offers.
Statutes prohibit false or misleading advertising and advertisers found guilty of this may be fined or imprisoned.
Prosecuting an advertiser for false advertising does not allow anyone to enforce the terms of the ad against the false advertiser.

19. Preliminary Negotiations
Advertisements may occasionally be offers.
The ad must be clearly worded in ways that address the problem of numerous people receiving the ad for a limited amount of product.
(may include a statement “subject to stock on hand” or “limited quanity”)
An ad may become an offer if it asks the offeree to perform an act as a way of accepting.

20. Social Agreements
Social contracts typically do not create legal obligations
If two friends agree to go to the movies and one backs out there is no legal obligation and cannot be taken to court.

21. 2. Offer Must be Communicated to the Offeree
A person who is not the intended offeree cannot accept the offer.
A person cannot accept an offer without knowing it has been made.
Any action taken would not have been a response to the offer.

22. 3. Essential Terms Must be Complete and Definite
Terms of an offer must be sufficiently complete and definite to allow a court to determine what the parties intended and to identify the parties’ legal rights and duties.

23. Complete Definite All offers must, at a minimum, identify the: Price
Subject matter
Quantity
Essential Terms for the sale of Real Estate
Proper legal description of real estate
Full terms of payment
Date for delivery of possession
Date for delivery of deed
If any of these terms are missing it is not a valid offer.
Each essential term must be identified clearly
In some contracts, however, a term might be implied by law or common business practice.

24. Termination of Offers

25. How Can Offers Be Ended? Once made, an offer does not last forever
It may be terminated in a variety of ways.

26. Revocation by the Offeror
The offeror can generally revoke it anytime before it is accepted by the offeree.
The right to withdraw an offer because it is accepted is known as the right of revocation.
A revocation is not effective until communicated to the offeree.

27. Time Stated in the Offer
The offeror may state how and when the offer must be accepted.
If the offeror does not receive the acceptance given by the offeree by a specific date, the contract expires and never is validated.

28. Reasonable Length of Time
What is considered a reasonable length of time depends on all the surrounding circumstances.
May be determined if the product is perishable
If the parties have bargained about the sale over a period of months, a week or longer might be appropriate.
To avoid misunderstandings, the time available for acceptance should be specified at the outset.

29. Rejection by the Offeree
When an offeree clearly rejects the offer, the offer is terminated.
Unless renewed by the original offeror, the offeree can no longer accept the original offer.
An offer is terminated by an offeree’s rejection even if a time limit set by the offeror had not expired.
If the offeree has purchased an option, the offer will remain open until the option expires even if the offeree and buyer of the option rejects it beforehand or makes a counteroffer.

30. Counteroffer
An offeree accepting an offer must accept it exactly as made
If the offeree changes the offeror’s terms in important ways and sends it back to the offeror, a counteroffer has been made.
The counteroffer terminates the original offer and the counteroffer becomes the new offer.

31. Death or Insanity of Either the Offeror or Offeree
Contracts are agreements voluntarily entered into by the parties and subject to their control.
Death or insanity eliminates such control.
The law acts for these parties when they can no longer act and terminates their offer.

32. Destruction of the Specific Subject Matter
If the offer refers to unique subject matter, such as Melissa’s card collection, and it subsequently destroyed, the offer is automatically terminated.

33. How Can an Offer Be Kept Open?
An offeror is not legally obligated to keep an offer open for a specified time even if the offeror has promised to do so.
This may cause the offeree not to pursue the offer or to act without proper consideration to close the deal.
Such uncertainty may be eliminated in the following ways:
Options
Firm Offers

34. Option
Of the offeree gives the offeror something of value in return for a promise to keep the offer open, this agreement itself is a binding contract.
This is a called an Option.

35. Firm Offers
A special rule that works the same result as an option applies to merchants (individuals who regularly deal in goods being bought and sold) who make offers in writing.
A firm offer is such a written offer and contains a term stating how long it is to stay open.
The Uniform Commercial Code (UCC) makes firm offers binding for the time stated, not more than three months.
This is true even when nothing is paid by the offeree.

36. Acceptance

37. What is Required of an Acceptance?
Acceptance occurs when a party to whom an offer has been made agrees to the proposal.
The acceptance must:
Come from the person or persons to whom the offer was made
Match the terms in the offer
Be communicated to the offeror

38. Only Offerees May Accept
An offer made to one person cannot be accepted by another.
Can be made to a group or to the public
Ex. reward for a lost article

39. The Acceptance Must Match the Offer
Mirror Image Rule - requires that the acceptance must exactly match the terms contained in the offer.
Including when and how the acceptance must be made
Any differences result in a counteroffer.
Courts apply this rule only when the term altered in the attempted acceptance is material (important) and related to the providing of services or the sale of real property.

40. Under the UCC
If there is a contract where the offer and acceptance agree, the new or modified terms are treated as follows:
If a party receiving the acceptance (the original offeror) is a consumer, not a merchant, then the new or changed terms are mere proposals and not a part of the contract unless agreed to by the original offeror.
If both parties are merchants, the new or changed terms are not part of the contract if the original offeror objects, or in the absence of an objection, if the terms are material.
If the parties are merchants, the new or changed terms are part of the contract if the original offeror is silent and the terms are minor (not material).

41. Acceptance Must Be Communicated to the Offeror
Acceptance can not be just a mental decision.
It must be communicated.

42. Silence as Acceptance
One is not obligated to reply to offers made by others.
An offeror’s attempt to word the offer so that silence would appear to be an acceptance will not work.

43. Promises as Acceptance
Most offers can be accepted by giving a promise instead of performing the contracted-for act.
Bi-lateral contracts are formed by the mutual exchange of legally binding promises between the offeror and offeree.
Ex. seller promises to deliver a load of topsoil in exchange for the homeowner’s promise to pay $65.

44. Performance as Acceptance
The offeror requires that the offeree indicate acceptance by performing an action specified in the offer.
Unilateral Contracts - offeror promises something in return for the offeree’s performance and indicates that this performance is the way acceptance is to be made.
Ex. offeror may publicly promise to pay a $100 reward to anyone who returns a lost camera.
NOTE: If the person performing the act does not know of the reward, that person is not legally entitled to it.

45. Modes of Contractual Communication
Contractual communication such as offers, acceptance, rejection, revocation, and counteroffers may generally be communicated in person or by other effective means such as:
Telephone
Text message
Mail
Delivery service
Texting
Facsimile (fax)

46. When Acceptances are Effective
All forms of contractual communications but one take effect only when received.
The exception is acceptance which is effective when it is sent.
The offeror may require the offeree to use a certain communication method to accept.
If a different method is used, then it is treated as a modification to the offer.

47. Examples: Oral Acceptance - once words are spoken
Acceptance sent by mail - once post-marked by post office
Telegram- handed to the clerk at the telegraph office
Fax Transmission - instantaneous when the fax has been sent and received