2. P A R T P A R T Contracts Introduction to Contracts The Agreement: Offer The Agreement: Acceptance Consideration Reality of Consent 3 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

3. P A R T P A R T Contracts Capacity to Contract Illegality Writing Rights of Third Parties Performance & Remedies 3 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

4. The Agreement: Offer PA E TR HC 10 “There is nothing more likely to start disagreement among people or countries than an agreement.” E.B. White

5. Learning Objectives  Requirements for an offer  Intent  Definiteness of Terms  Special Problems  Termination of an offer 10 - 5

6.  An offer is a promise conditional on an act, return promise, or forbearance (refraining from doing something)  Parties to a contract must have intent to enter binding agreement, terms must be definite, and the offer must be communicated to the offeree Requirements for an Offer 10 - 6

7.  Courts use the objective theory of contracts to determine intent :  Would a reasonable person judge the offeror’s words and acts in the context of the circumstances to signify intent?  Definiteness requires that the offer cannot be vague about major points  Price, quantity, delivery, and time for payment term left open may be filled by inserting presumptions in Code’s rules Details 10 - 7

8.  Advertisements for the sale of goods at specified prices generally are not considered offers, but are invitations to offer or negotiate  Advertisements offering rewards for lost property, information, or capture of criminals are treated as offers for unilateral contracts  Sellers at auctions and advertisements for bids are invitations to offer Invitations to Offer 10 - 8

9. Termination by Revocation  An offer may be terminated by revocation if revoked & communicated to offeree before the offer is accepted, with the exception of:  Option contract in which offeror agrees not to revoke offer for a stated time in exchange for some valuable consideration  Offers for unilateral contracts (e.g., rewards)  Promissory estoppel circumstances  Firm offers for sale of goods 10 - 9

10. Test Your Knowledge  True=A, False = B  Courts apply the subjective theory of contracts when determining whether intent to contract existed  The UCC often creates contractual liability where no contract would result under common law  Sales puffery may be deemed to be a valid offer 10 - 10

11. Test Your Knowledge  Multiple Choice  An offer requires:  (a) intent and communication to offeree  (b) motive  (c) definiteness of terms  (d) all of the above  (e) all of the above except (b)  Which is not an invitation to negotiate:  (a) Advertisement of sale  (b) Offer of Reward  (c) Auction 10 - 11

12. Thought Questions  When you go to a department store and purchase an item, what have you done according to contract law?  Is the law sensible about these contracts? 10 - 12