1. Offer and Acceptance Chapter 6

2. Because of its limited resources the court system is very selective in what it will enforce. Criminal laws and laws allowing recover for certain private injuries (torts) are highest on the priority list. The courts are more selective when it comes to contracts.

3. Contracts A contract is an agreement between two parties that creates an obligation. For contracts to be enforceable six conditions need to be met before the courts will treat a transaction as a legally enforceable contract.

4. Conditions of contracts Offer and acceptance Genuine Assent Legality Consideration Capacity Writing

5. Offer and Acceptance There must be an apparently serious offer to contract. – Offeror – this is the person who is making the offer. – Offeree – the person The terms of the offer must be definite and accepted without change by the party to whom it was intended to be offered.

6. Genuine Assent The agreement (offer and acceptance) must not be bases on one party’s: – Deceiving another. – An important mistake. – The use of unfair pressure exerted to obtain the offer or acceptance.

7. Legality What both parties agree to must be legal.

8. Consideration The agreement must involve both sides receiving something of legal value as a result o the transaction.

9. Capacity The parties must be able to contract for themselves rather than being forced to use parents or legal representatives.

10. Writing Some agreements must be placed in writing to be enforceable.

11. Contractual Intent Must be Present Often although the words themselves may indicate an offer, a reasonable person would disregard them because of the facts or circumstances under which they were spoken.

12. Jests The law is concerned with the appearance of an action. If a contract offer would appears to a reasonable person to be made as a joke then it is not enforceable.

13. Statement Made in Anger or Terror If an offer is made in a moment of terror or anger it is not enforceable.

14. Preliminary Negotiations Most offers start with merely an invitation to initiate bargaining. Examples of invitation to initiate barging include: – Price tags on sale merchandise in stores. – Advertisements may be on offer however they are an invitation to negotiate if: The advertisement clearly indicates that stock is limited. An advertisement may become an offer if it asks the offeree to perform an act as a way of acceptance. – For example: if it states for the first customer.

15. Social Agreements Social agreements are not binding contracts for no contract is intended.

16. The Offer Must be Communicated to the Offeree A person who is not the intended offeree cannot accept the offer. A person who has not been notified about an offer cannot accept the offer.

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

18. Complete Nearly all offers must at a minimum: – Identify the price (compensation) – Subject manner – Quantity Some offers require even more information to be legally effective. – Example: The sale of real estate.

19. Definite Each essential term must be identified clearly. In cases where price is not specified, current market price is used for a basis for the contract.

20. Revocation by the Offeror After an offer has been made, the offeror can generally revoke it anytime before it is accepted by the offeree. Revocation - the right to withdraw an offer before it is accepted. This is true even if the offeror promised that the offer would remain open for a particular period of time.

21. Time Stated in the Offer In making an offer the offeror must state how and when the offer must be accepted. To avoid misunderstanding the time available for acceptance should be specified at the outset.

22. Rejection by the Offeree When an offeree clearly rejects the offer, the offer is terminated, unless renewed by the original offeror. An offer is terminated by an offeree’s rejection even if a time limit is set by the offer has not expired.

23. Counteroffer Generally an offeree accepting an offer must accept the offer exactly as it was made. Counteroffer – When an offeree changes the offeror’s terms in important ways and sends it back to the offeror. The counteroffer becomes a new offer.

24. Death or Insanity of Either the Offeror of Offeree. Contracts are agreements voluntarily entered into by the parties and subject to their control. Death or insanity eliminates such control.

25. Destruction of Specific Subject Matter. If the offer refers to unique subject matter, and the subject matter is subsequently destroyed then the offer is terminated.

26. Ways an Offer Can be Kept Open Since 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. There are ways to insure that the offer is kept open.

27. Option Option – a separate contract arising when the offeree gives the offeror something of value in return for a promise to leave an offer open.

28. Firm Offers Firm offer – when written offer contains a term stating how long it is to remain open. The Uniform Commercial Code (UCC) makes firm offers binding for the time stated but not more than three months. – This is true even when nothing is paid to the offeror.

29. The Acceptance Must Match the Offer. The Mirror Image Rule – requires that acceptance must exactly match the terms contained in the offer. – If the attempted acceptance is not identical to the offer it is a counteroffer. Under the UCC, absent such a requirement for identity in the offer, an attempted acceptance of an offer for a contract for a sale of goods can be valid even if it does include new or conflicting terms.

30. Contracts on the Terms Where the Offer and Acceptance Agree. In a counteroffer the new or modified terms are treated as follows: – If a party is a consumer not a merchant, then the new or changes terms are mere proposals and not part of the contract unless agreed to by the original offeror. – If both parties are merchants, the new or changes terms are not a 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).

31. Acceptance Must be Communicated to the Offeror For a contact to be in effect the acceptance by the offeree must be communicated to the offeror.

32. Silence as Acceptance Silence is not considered a form of acceptance. An offeror’s attempt to work a contract so that silence is viewed as acceptance will not work.

33. Bilaterial Acceptance Most offers are bilaterial meaning that the offer implies that it can be accepted by giving a promise instead of performing the contracted for act. The promise can be implied by the offeree’s actions as well as words.

34. Unilaterial Contracts Unilaterial contract – when acceptance of the contract requires the offeree to indicate acceptance by performing his or her obligations under the contract. The offeror in a unilaterial contract promises something in return for the offeree’s performance and indicates this performance is the way acceptance is to be made.

35. Time of Acceptance When communication takes time to reach the offeror, for example when sent through the mail, can become very important. All forms of contractual communication but one, that one being acceptance, take place only when they are received. However, acceptance is effective from the time it is sent.

36. Way of Sending Acceptance Often the offeror may require the offeree to send the acceptance a certain way. If the offeree uses a different method then it is a treaded as a modification to the offer.