2 What Must Be in a Contract Contract – agreement between two or more parties that creates obligationsSix requirements to a contractOffer and AcceptanceOfferor – person making offerOfferee – person offer made tooTerms must be definite and accepted without change by the party to whom it is intended to be offered
3 Six Requirements for a Contract Genuine Assent – Agreement 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 acceptanceLegality – What the parties agree to must be legal
4 Six Requirements for a Contract Consideration – Agreement must involve both sides receiving what the law considers value in some form as a result of the transactionCapacity – Person must have legal ability to contract for themselvesWriting – Some agreements must be placed in writing to be fully enforceable in court
5 Requirements for an Offer Offer – Proposal by an offeror to do something, providing the offeree does or refrains from doing something in return.RequirementsContractual Intent must be presentThe offer must be communicated to the offereeThe essential terms of the offer must be complete and definite
6 Contractual IntentJest – Words that take the form of offers but which are spoken as a jokeLaw is not concerned with what is actually in the mind of a person making what might be considered an offerIf your joke is considered an offer by a reasonable person, then you have made an offerIf you are serious about your offer, but a reasonable person interprets it as a joke, then we have no legally enforceable offer
7 Offer Must Be Communicated Person who is not the intended offeree cannot accept the offerPerson cannot accept an offer without knowing it has been made
8 Essential Terms Must Be Complete and Definite Sale of Real EstateProper legal description of the real estatePriceFull term for paymentDate for deliveryDate for delivery of the deedEssential terms must be definite
9 6-1 AssessmentTurn to page 113 and complete the assessment
11 6-1 AssessmentNo contract because the offer was not communicated to the bystander. Bystanders statement is an offer.No, social engagement not a contractNo, the credit union is not liable because of no contract. The agreement was missing essential detail.The ad was not an offer because it did not address the problem of a limited quantity.
12 How can offers be ended? Revocation by the offeror The right to withdraw an offer before it is acceptedAt any time before it is accepted by the offeree, the offer can be revokedRevocation is not effective until it is communicated to the offeree
13 How can offers be ended? Time stated in the offer The offeror may state how and when the offer must be acceptedExample: On October 10, the Mercantile Bank sent a letter to Jimmy, who had applied for a loan. In the letter, Mercantile offered to lend $50,000 on specified terms and stated that the acceptance had to be in writing and received no later than October 18. Jimmy mailed his acceptance on October 17 which was not received until October There is no contract
14 How can offers be ended? Reasonable length of time If no time is stated, the offer will end after a reasonable length of time, which depends on the circumstancesExample: different length of time for produce and a bulldozer
15 How can offers be ended? Rejection by the Offeree Offeree clearly reject the offer, the offer is terminated
16 How can offers be ended? Counteroffer Offeree changes the offeror’s terms in important ways and sends it back to the offeror.The counteroffer becomes the new offer.Death or Insanity of either offeree or offerorDestruction of the specific subject matter
17 How can an offer be kept open Option – offeree give something of value in return for a promise to keep the offer openFirm Offer – Same as option that applies to merchants (individuals who regularly deal in the goods being bought or sold)The UCC (Uniform Commercial Code) makes firm offers binding for the time stated, but not for more than three months
18 6-2 AssessmentTurn to page 117 and complete the assessment
19 6-2 Assessment True D (terminated) Counteroffer B (purchase of an option by the offeree)FalseOptionBNoFirmYes
20 6-2 AssessmentYes, Wood can still withdraw her offer even when she promised to leave it open. A firm offer or option is required to bind an offeror to the promise to leave an offer open.No. The price in the ad was merely an invitation to negotiate. Tom is legally free to reject any and all offers.This is a firm offer and therefore binding.Opie has not been sold because Phil did not accept the offer without alterations.
21 What is Required of an Acceptance Acceptance – When a party to whom an offer has been made agrees to the proposal.Acceptance must:Come from the person or persons to whom the offer was madeMatch the terms in the offerBe communicated to the offeror
22 Acceptance Communicated Unilateral Acceptance – Offeror promises something in return for the offereee’s performanceExample: The offeror publicly promises to pay a $100 reward.Bilateral Acceptance – Both parties promise to do something
23 When Acceptances are Effective The offeror may require the offeree to use a certain communication method to accept.If a different method is used, then this is treated as a modification of the offer.Most courts say that acceptance is effective when sent by the same means used for the offer or by faster means
24 When Acceptances are Effective Under UCC, the acceptance of an offer for the sale or purchase of goods is by a reasonable means, it is effective when sent.Oral acceptance are effective at the moment the words are spoken directly to the offeror.Acceptance sent by mail takes effect when properly posted.
25 When Acceptances are Effective A telegram takes effect when handed to the clerkA fax transmission is instantaneous when the transmission lines are open and equipment is working properlyThe offeror may specify that an acceptance will not be binding until it is actually received.
26 6-3 AssessmentTurn to page 121 and complete the assessment
28 6-3 Assessment No. The $2,000 was merely an invitation to negotiate. No, there was not an acceptance because the mirror image rule is applied in the are of real estate contacts. Smith varies the terms contained in the original offer.This is a contract for the sale of goods between merchants. No objection was made, so the contract is valid and enforceable with the new terms