1. Offer and Acceptance Lessons CHAPTER 7 7-1 Creation of Offers
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CHAPTER 7
Offer and Acceptance
Lessons
7-1 Creation of Offers
7-2 Termination of Offers
7-3 Acceptances

2. Creation of Offers GOALS LESSON 7-1
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LESSON 7-1
Creation of Offers
GOALS
List the elements required to form a contract
Describe the requirements of an offer

3. CHAPTER 7
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Hot Debate – pg. 110
Should Celia be bound because the literal meaning of her words suggests she intended to sell the car?
Argument can be made - should be bound by literal meaning of words
Should Celia not be bound to sell the car because the circumstances (new car stalls and people are honking) suggest that she did not intend to sell?
Argue - literal meaning of sentences often is quite different from what someone intended

4. CHAPTER 7
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WHAT IS A CONTRACT?
A contract is an agreement that courts will enforce.
Contracts between two parties are the basis for all economic activity.
Contracts are the legal links between the individuals and companies producing and consuming goods and services.

5. CONTRACT REQUIREMENTS
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CONTRACT REQUIREMENTS
There are six major requirements that must be satisfied before courts will treat transactions as contracts.
Offer and acceptance
Genuine assent
Legality
Consideration
Capacity
Writing

6. CONTRACT REQUIREMENTS
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CONTRACT REQUIREMENTS
Offer and Acceptance – there must be a serious, definite offer to contract.
And the terms of the offer must be accepted by the party to whom it was communicated

7. CONTRACT REQUIREMENTS
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CONTRACT REQUIREMENTS
Genuine Assent –
cannot be based on:
Deception
Important mistake
Use of unfair pressure to obtain offer/acceptance

8. CONTRACT REQUIREMENTS
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CONTRACT REQUIREMENTS
Legality - make up of agreement must be legal
i.e. Cannot create an agreement to have someone commit a crime for you

9. CONTRACT REQUIREMENTS
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CONTRACT REQUIREMENTS
Consideration – agreement must involve both sides receiving something of legal value as a result of the transaction

10. CONTRACT REQUIREMENTS
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CONTRACT REQUIREMENTS
Capacity – parties must be able to contract for themselves

11. CONTRACT REQUIREMENTS
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CONTRACT REQUIREMENTS
Writing - some agreements must be placed in writing to be fully enforceable in court

12. Chapter 7
Signing the contract

13. Contracts - oral or written
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Contracts - oral or written

14. REQUIREMENTS OF AN OFFER
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REQUIREMENTS OF AN OFFER
Expression of intent to create a legal obligation
Offer must be complete and clear
Offer must be communicated to the offeree

15. Contract: Painter Example
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Contract: Painter Example
Painter promises to paint house within 30 days for $3,000 (Offer)
Homeowner agrees to the time frame and the $3,000 (Acceptance)
Painter  OFFEROR
Homeowner  OFFEREE

16. CONTRACT REQUIREMENTS
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CONTRACT REQUIREMENTS
Offer – proposal by an offeror to do something, provided the offeree does something in return
If the offeree accepts the proposal, a contract arises
Valid Offer:
Offeror must appear to intend to create a legal obligation (serious)
Objective test of the reasonable person
Not based on what someone was thinking – unreasonable to expect courts to figure out what you were thinking

17. CONTRACT REQUIREMENTS
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CONTRACT REQUIREMENTS
2) Appearance counts – 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
On the other hand, if you are serious, but a reasonable person would interpret your conduct as a joke, then no legally enforceable offer is made
2) terms must be definite and complete
3) Offer must be communicated to the offeree

18. Test of Reasonable Person
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Test of Reasonable Person
Examines:
 offeror’s words
conduct in light of all relevant facts and circumstances
Words spoken in jest / frenzied terror / anger = no offer intended

19. Chapter 7

20. Preliminary Negotiations
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Preliminary Negotiations
Tentative terms, inviting others to make offers
i.e. “I think I’m interested in selling my laptop computer for around $1,000. Is anybody interested?”
-- not an offer

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Where do you stand?
Brent and Lisa were students in a class on movie production.
Knowing that the final movie in the Alien Cheerleader trilogy was about to come out, Brent camped out overnight at the theater. He bought two tickets, and then asked Lisa to go with him.

22. Where do you stand? Lisa agreed.
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Where do you stand?
Lisa agreed.
Lisa would have to call in sick to her evening job as waitress in order to go
Calling out sick would cost her more than $100 in wages & tips
She still made the call
When Brent did not show up to get her, she confronted him

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Where do you stand?
Brent admitted he sold the tickets to someone else for $50 each
Should Lisa be allowed to sue Brent for not taking her to the movie??

24. Where do you stand? Almost every state would NOT allow such a lawsuit
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Where do you stand?
Almost every state would NOT allow such a lawsuit
Social invitations do not produce enforceable contracts

25. Social Arrangements Friends agreeing to go to movies
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Social Arrangements
Friends agreeing to go to movies
Social arrangements = not contracts

26. Offer Must be Complete & Clear
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Offer Must be Complete & Clear
terms must be sufficiently complete and clear to allow a court to determine what the parties intended

27. Complete Terms Offers should contain price / subject matter / quantity
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Complete Terms
Offers should contain price / subject matter / quantity
Amount of detail depends on complexity of transaction
i.e. Real estate sale (identify lot, price, terms of payment, delivery date)
Candy bar sale (price, subject matter, quantity)

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Clear
“In this case” -
Delgado’s agreed to buy a lot from among a subdivision of 200 lots.
Deposit submitted
No specific lot identified
lacking essential information

29. Chapter 7
READ B E F O R E signing

30. Implied Terms Terms can be implied by law or common business practice
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Implied Terms
Terms can be implied by law or common business practice
i.e. Merchants and customers - price is not specified; current market price is the basis for the contract

31. Advertisements NOT offers - invitations to make offers
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Advertisements
NOT offers - invitations to make offers
What’s Your Verdict – pg. 112
Did the Anchors Aweigh advertisement make offers to the would-be buyers?
Customers: made Offers
Sellers must make reasonable supply available – no expectation to meet every demand

32. Advertisements Can be offers:
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Advertisements
Can be offers:
Written clearly and indicating limited quantities -- book example of selling car to first person
Asks offeree to perform an act as a way of accepting -- first person to appear at the main door of a shopping mall on …

33. Offer Must be Communicated to Offeree
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Offer Must be Communicated to Offeree
Non-intended offeree cannot accept the offer
Cannot accept if unaware of offer (reward)

34. What’s your Verdict? Pg. 111 Did the two friends create a contract?
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What’s your Verdict?
Pg. 111
Did the two friends create a contract?
Yes – even though delivery and payment will occur later

35. E-Contracts: Agreeing Online
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E-Contracts: Agreeing Online
When I'm online and I click on a button that says "I ACCEPT," are all of those terms actually enforceable against me, even if I didn't read them?
West's Digital Video Library – video #23

36. CHAPTER 7
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If you don’t satisfy the law’s requirement for creating an offer, then you usually don’t have a contract.
TRUE / FALSE

37. CHAPTER 7
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TRUE

38. CHAPTER 7
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To be valid, an offer must indicate an intent to create a legal obligation.
TRUE / FALSE

39. CHAPTER 7
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TRUE

40. Which of the following are reasons why an offer may not be valid?
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Which of the following are reasons why an offer may not be valid?
A) It is apparent that the speaker is joking
B) It is clear that the speaker is trying to obtain additional information rather than commit to an agreement
C) The subject of the agreement is only social
D) all of the above

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D - all of the above

42. CHAPTER 7
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The requirement that an offeror show an intent to contract is a(n) ______ test rather than a test which focuses on the purported offeror’s actual thoughts.

43. CHAPTER 7
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Objective

44. Which of the following is evidence showing an intent to contract
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Which of the following is evidence showing an intent to contract
A) spoken or written words
B) conduct other than speaking or writing
C) other facts and circumstances
D) all of the above

45. CHAPTER 7
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D – all of the above

46. Advertisements can be offers when A) they are complete
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Advertisements can be offers when
A) they are complete
B) they are clear
C) they address the problem of numerous recipients and a limited supply of the advertised product
D) all of the above

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D - all of the above

48. If an offer is made, it can be accepted by anyone who learns of it.
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If an offer is made, it can be accepted by anyone who learns of it.
TRUE / FALSE

49. CHAPTER 7
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FALSE

50. CHAPTER 7
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The test of the reasonable person is used by a jury or judge to evaluate all the relevant evidence to determine whether there has been a manifestation of an intent to contract.
TRUE / FALSE

51. CHAPTER 7
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TRUE

52. B) an important mistake C) using unfair pressure D) all of the above
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To meet the contract requirement of genuine assent, the agreement must not be based on
A) deception
B) an important mistake
C) using unfair pressure
D) all of the above

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D - all of the above

54. Termination of Offers GOALS LESSON 7-2
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LESSON 7-2
Termination of Offers
GOALS
Describe how an offeror can end an offer
Tell how an offeree can end an offer
Explain how the parties can create offers that cannot be ended by the offeror

55. Offers may terminate --
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Offers may terminate --
Rejection

56. CHAPTER 7
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HOW CAN OFFERS BE ENDED?
Revocation by the offeror – can be revoked anytime before it is accepted by the offeree
REVOCATION - right to withdraw an offer before it is accepted
Not effective until communicated to the offeree

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HOW CAN OFFERS BE ENDED?
Time stated in the offer – offeror may state how and when the offer must be completed
i.e. Bank agrees to give loan but specifies acceptance must be received by Oct. 18
Boggs mails acceptance on Oct arrives Oct. 20 at bank
 offer NOT received by time specified
 Offer E-X-P-I-R-E-D

58. CHAPTER 7
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HOW CAN OFFERS BE ENDED?
Reasonable length of time – amount of time depends on surrounding circumstances
Rejection by the offeree – offer is terminated by the offeree’s rejection

59. Negotiation Terms JOE BOB Offer Accept or Reject or
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Negotiation Terms
JOE BOB
Offer Accept or Reject or
Accept or Counteroffer
Reject or
Counteroffer

60. SUMMARY Offeror  Revoke (revocation) Offeree  Reject (rejection)
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SUMMARY
Offeror  Revoke (revocation)
Offeree  Reject (rejection)

61. CHAPTER 7
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HOW CAN OFFERS BE ENDED?
Counteroffer – offeree must accept offer exactly as it was made (no changes) – otherwise, it becomes a counteroffer
In this Case – pg. 116
Haviland submitted written offer to sell to Ping a luxury apt. bldg in San Fran.
Property Price  $15.5 million cash
Ping replied (certified mail) offering to pay $14.4 million cash
Haviland rejected price.
Ping writes “I am shocked by your price but feel it is urgent to invest in San Fran. Therefore, I accept your offer and will pay $15.5 million cash
Was a contract formed?
No, Ping’s $14.4 m price was a counteroffer  eliminated Haviland’s offer at $15.5

62. Chapter 7
Counteroffer

63. CHAPTER 7
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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
Death or insanity eliminates such control  terminating their offers

64. Chapter 7
Death

65. CHAPTER 7
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What’s Your Verdict?
Melissa offered her collection of baseball cards to Paul for $3,0000.
Paul requested time to think it over – Melissa agreed
Melissa changed her mind, called Paul and said “I’ve changed my mind, I’m not interested in selling the cards.”
Paul – “It’s too late, you promised to sell them to me, and I’ve got the money so I accept.”

66. CHAPTER 7
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What’s your Verdict?
Pg. 115
Was Melissa’s offer terminated before Paul tried to accept?
Because Melissa revoked first, there was no offer alive when Paul tried to accept

67. Chapter 7
The Mailbox Rule

68. HOW CAN AN OFFER BE KEPT OPEN?
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HOW CAN AN OFFER BE KEPT OPEN?
Generally, offeror is NOT obliged to keep offers open even if offeror agreed to do so IF OFFEREE HAS GIVEN NOTHING IN EXCHANGE FOR THE PROMISE

69. HOW CAN AN OFFER BE KEPT OPEN?
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HOW CAN AN OFFER BE KEPT OPEN?
Options – offeree gives the offeror something of value in return for a promise to keep the offer open
Firm offers – special rule that applies to merchants for sale of goods/services stating in a signed writing how long it is to stay open
Not open more than three months
True even when nothing is paid by offeree
Death/Insanity do not terminate option contracts or firm offers

70. UNIFORM COMMERCIAL CODE  UCC
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UNIFORM COMMERCIAL CODE  UCC

71. Offers expire at the time stated in the offer.
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Offers expire at the time stated in the offer.
TRUE / FALSE

72. CHAPTER 7
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T R U E

73. If an offeree clearly rejects the offer, the offer is said to be:
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If an offeree clearly rejects the offer, the offer is said to be:
Counteroffered
Revoked
Expired
Terminated

74. CHAPTER 7
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d) Terminated

75. CHAPTER 7
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When an offeree changes the offeror’s terms in important ways, the offeror makes a(n) ________________

76. CHAPTER 7
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Counteroffer

77. Revocation by the offeror
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Which of the following does not describe a method used to terminate offers?
Revocation by the offeror
Offeror is admitted to the hospital for tests
Counteroffer
Death of the offeree

78. B) Offeror is admitted to the hospital for tests
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B) Offeror is admitted to the hospital for tests

79. CHAPTER 7
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An offeree who rejects an offer can later accept it if the acceptance occurs within a reasonable time after the rejection.
TRUE / FALSE

80. CHAPTER 7
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F A L S E

81. Which of the following will cause an offer to end?
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Which of the following will cause an offer to end?
Occurrence of an event, such as the passage of time, which the offer said would cause it to end
Passage of a reasonable time if nothing is said in the offer about the length of its life
Revocation by the offeror
Counteroffer by the offeree
All of the above

82. CHAPTER 7
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All of the above

83. CHAPTER 7
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If an offeree gives the offeror something of value to keep an offer open, this is called a(n) ________________

84. CHAPTER 7
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Counteroffer

85. CHAPTER 7
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A barber, speaking to a longtime customer said, “I promise not to raise my prices for you this year.”
Is this offer binding?
YES / NO ?

86. CHAPTER 7
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87. CHAPTER 7
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A barber said, “I promise not to raise my prices for you this year if you pay me $10 today.” If this offer binding if you pay the ten dollars?
Y E S / N O

88. CHAPTER 7
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Y E S

89. CHAPTER 7
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If a hardware store salesman said, “This price on the lawnmowers is good for 30 days,” would this be a firm offer?
Y E S / N O

90. CHAPTER 7
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N O

91. CHAPTER 7
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If a beauty salon hair designer said, “This price on the cut and dry is good for 30 days,” then wrote it down on a piece of paper and signed it, would this be a firm offer?
Y E S / N O

92. CHAPTER 7
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Y E S

93. Acceptances GOALS LESSON 7-3
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LESSON 7-3
Acceptances
GOALS
Discuss the requirements of an effective acceptance
Determine at what point in time an acceptance is effective

94. HOW ARE ACCEPTANCES CREATED?
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HOW ARE ACCEPTANCES CREATED?
ACCEPTANCE occurs when a party to whom an offer has been made agrees to the proposal
To create an enforceable contract the acceptance must:
Be made by the person or persons to whom the offer was made
Match the terms in the offer
Be communicated to the offeror

95. HOW ARE ACCEPTANCES CREATED?
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HOW ARE ACCEPTANCES CREATED?
Who can accept an offer? – can only be accepted by person to whom offer was made
What’s Your Verdict?  Darrow offered to trade his digital camera to Monette in exchange for her camcorder. Schorling, who had a camcorder of the same make and model, overheard the offer and said she would make the swap
Did a contract result from Schorling’s statement?
Only Monette, not Schorling, could accept Darrow’s offer

96. HOW ARE ACCEPTANCES CREATED?
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HOW ARE ACCEPTANCES CREATED?
Acceptance must match the offer – offeror may specify the terms of acceptance
Acceptance must be communicated to the offeror – must be more than a mental decision

97. CHAPTER 7
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In This Case
RING LOST at Zuma Beach in front of beach house. Lady’s yellow-gold band with 12 small diamonds. Inside inscribed “Like diamonds. Forever Yours, J.R.J.” $1,00 reward. Call
Dowell saw this newspaper advertisement and rushed to the beach with a homemade sand sifter. About ten other people were also searching, using various devices. After four hours, Dowell shouted. “Eureka! I’ve found it!” She promptly returned the ring to its owner. She alone was legally entitled to the reward.

98. ACCEPTANCE MUST MATCH THE OFFER
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ACCEPTANCE MUST MATCH THE OFFER
Mirror image rule – terms in the acceptance must exactly match the terms contained in the offer
If it varies any term, it is a counteroffer
Courts in some states apply this rule only when the term in the offer is material (important)
By statute (UCC) the rule has been changed in contracts for sale of goods such as books, computers, clothing, and food

99. ACCEPTANCE MUST MATCH THE OFFER
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ACCEPTANCE MUST MATCH THE OFFER
Goods – if offeror requires acceptance must exactly match terms set forth in the offer, than any variation is a counteroffer
Absent this requirement in the offer, an unequivocal acceptance of an offer for a contract for a sale of goods can be valid even if it includes new or conflicting terms

100. CHAPTER 7
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G O O D S
In This Case - On Thursday, the manager of Volume Value Vacuum, Inc. (VVV), offered by mail to sell model 234A vacuum cleaners to Susan’s Shops, a retailer, at the bargain price of $129 each, with payment to be made on delivery. Susan accepted in writing but stated, “payment due 30 days after delivery.”
VVV said nothing in reply. A contract resulted on the area of agreement (model 234A at $129). Because both parties are merchants and VVV did not object to the modification, it will become a part of the contract if it is not material. Because an extension of credit is probably material, it does not become a part of the contract

101. ACCEPTANCE MUST BE COMMUNICATED TO THE OFFEROR
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ACCEPTANCE MUST BE COMMUNICATED TO THE OFFEROR
Silence as acceptance – one is not obliged to reply to offers made by others
In This Case – Kulich, an art dealer, wrote Chiang, “I understand you are interested in selling your four-panel Chinese lacquer screen. I sold it to you in 1997 for $500 and said it would go up in value. Now I offer to buy it back for $3,000. Unless I hear from you to the contrary. I’ll treat your silence as acceptance and send my truck to pick it up next Monday morning. The driver will bring my certified check for the full amount.”
Chiang did not reply
Chiang would not be bound to sell the screen

102. CHAPTER 7
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Silence as acceptance
You receive by mail a calculator. The sender states that if you wish to keep it, you must send in a check for $40, otherwise send it back.
What does the law require you to do?
Nothing

103. ACCEPTANCE MUST BE COMMUNICATED TO THE OFFEROR
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ACCEPTANCE MUST BE COMMUNICATED TO THE OFFEROR
Unilateral acceptance – offeror requires that the offeree indicate acceptance by performing his or her obligations under the contract

104. Chapter 7
Bilateral acceptance – require that the offeree accept by communicating the requested promise to the offeror
Offer for an Offer

105. Chapter 7
When acceptance is effective – may be communicated orally, in person, or by telephone

106. Will Your Contract Be Enforced Under the Law?
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Will Your Contract Be Enforced Under the Law?
The unconscionability defense is concerned with the fairness of both the process of contract formation and the substantive terms of the contract. When the terms of a contract are oppressive or when the bargaining process or resulting terms shock the conscience of the court, the court may strike down the contract as unconscionable. 

107. Chapter 7
The unconscionability defense applies to a wide variety of types of conduct, so a court will look at a number of factors in determining if a contract is unconscionable:
  If there is a gross inequality of bargaining power, so the weaker party to the contract has no meaningful choice as to the terms, and the resulting contract is unreasonably favorable to the stronger party, there may be a valid claim of unconscionability. 

108. Chapter 7
A court will also look at whether one party is uneducated or illiterate, whether that party had the opportunity to ask questions or consult an attorney, and whether the price of the goods or services under the contract is excessive. 

109. Chapter 7
How much consideration, or payment, must there be for a contract to be valid?
There is no minimum amount. A price is only how people agree to value something, so there's no absolute standard of whether a price is fair or reasonable. The courts presume that people will only make deals that they consider worthwhile. So if you want to sell your car to your friend for $1 instead of $1,000, you can do it
An exception may be found if the consideration given is so out of line with what is being received that it would "shock the conscience of the court."