Offer and Acceptance Chapter 6

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Offer and AcceptanceChapter 6
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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.

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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.

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Conditions of contracts

• Offer and acceptance
• Genuine Assent
• Legality
• Consideration
• Capacity
• Writing

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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.

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Genuine Assent

• The agreement (offer and acceptance) must not be
  bases on one partys
• Deceiving another.
• An important mistake.
• The use of unfair pressure exerted to obtain the
  offer or acceptance.

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Legality

• What both parties agree to must be legal.

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Consideration

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

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Capacity

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

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Writing

• Some agreements must be placed in writing to be
  enforceable.

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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.

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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.

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Statement Made in Anger or Terror

• If an offer is made in a moment of terror or
  anger it is not enforceable.

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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.

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Social Agreements

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

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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.

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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.

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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.

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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.

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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.

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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.

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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 offerees rejection
  even if a time limit is set by the offer has not
  expired.

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Counteroffer

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

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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.

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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.

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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.

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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.

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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.

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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.

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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).

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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.

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Silence as Acceptance

• Silence is not considered a form of acceptance.
• An offerors attempt to work a contract so that
  silence is viewed as acceptance will not work.

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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 offerees
  actions as well as words.

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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 offerees performance
  and indicates this performance is the way
  acceptance is to be made.

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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.

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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.