© 2007 west legal studies in business, a division of thomson learning chapter 8 contracts:...

© 2007 West Legal Studies in Business,

A Division of Thomson Learning

Chapter 8Chapter 8Contracts: Contracts: AgreementAgreement

and Consideration and Consideration

2© 2007 West Legal Studies in Business, A Division of Thomson

Learning

• What elements are necessary for an effective offer? What are some examples of nonoffers?

• In what circumstances will an offer be irrevocable?

• What are the elements that are necessary for an effective acceptance?

• What is consideration? What is required for consideration to be legally sufficient?

• In what circumstances might a promise be enforced despite a lack of consideration?

Learning Objectives


Learning

Agreement

• An essential element of contract formation is AGREEMENT: – OFFER, and– ACCEPTANCE.


Learning

Offer--Requirements• Elements:

– Serious Intention,– Reasonably Definite Terms, and– Communication to Offeree.– CASE 8.1 Lucy v. Zehmer (1954).


Learning

Offer--Requirements

• Serious Intention:– Opinions are not offers.– Good Intentions are not offers.– Preliminary Negotiations are not

offers.– Agreements to Agree are not

offers.– Auctions are not offers.


Learning

Offer--Requirements

• Definiteness: Offer must have reasonably definite terms so a court can determine whether breach occurred.– CASE 8.2 Satellite Entertainment

Center, Inc. v. Keaton (2002).• Communication: Offer must be

communicated to offeree.


Learning

Offer—Termination• By Act of the Parties.• Revocation by Offeror (unless

irrevocable).• Rejection by Offeree (or

counteroffer).• Operation of Law: lapse of time,

destruction, death or incompetence, supervening illegality.


Learning

Acceptance• Voluntary act by Offeree that shows

assent to terms of original offer.• Mirror Image Rule.

– Offeree must unequivocally accept offer.– Additional terms may be considered a

counteroffer.• Acceptance by Silence.

– Ordinarily silence is not acceptance, unless offeree has duty to speak (benefit of services).


Learning

Acceptance• Communication of Acceptance.

– Authorized Means of Communication is either express or implied by form of offer (e.g., U.S. mail, fax, email).

– “Mailbox Rule”: Offeree accepts offer when the acceptance is dispatched to Offeror in the form it was received, unless offer requires a different method (e.g., Fed-Ex, or receipt by Offeror).


Learning

Consideration and Its Requirements

• Consideration is value given in return for a promise.– Something of legally sufficient value,– Given in a bargained-for-exchange

between the parties.


Learning

Legal Sufficiency and Adequacy• Sufficient consideration must be

something of value in the eyes of the law.• Adequate consideration is “fair” although

courts do not generally consider this.• If consideration is inadequate (e.g., fraud)

courts may strike down the contract as unconscionable.

• CASE 8.3 Seaview Orthopaedics v. National Healthcare Resources, Inc. (2004).


Learning

Contracts That Lack Consideration• Pre-Existing Duty.• Unforeseen Difficulties.• Past Consideration.• Illusory Promises.


Learning

Settlement of Claims

•Accord and Satisfaction.•Release.•Covenant Not to Sue.


Learning

Promissory Estoppel• Promissory Estoppel (“detrimental

reliance”) doctrine applies when a person relies on the promise of another to her legal detriment.

• Promisor is “estopped” (precluded) from revoking the promise. There must be:– Clear and definite promise with substantial

reliance– Justice is served by enforcement of the promise.

© 2007 west legal studies in business, a division of thomson learning chapter 8 contracts:...

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