Chapter 7

Offer and Acceptance

Contracts

An agreement that courts will enforce.

Contracts between two parties re the basis for all economic activity.

Contracts are the legal links between individuals & companies producing & consuming goods and services.

6 Requirements of a Contract

1) Offer & Acceptance There must be a

serious, definite offer. The terms of the offer

can be accepted only by the party to whom it was communicated.

2) Genuine Assent The agreement

must not be based on one party’s deceiving another, on an important mistake, or unfair pressure.

6 Requirements of a Contract

3) Legality What the parties

agree to must be legal.

4) Consideration The agreement

must involve both sides receiving something of legal value as a result of the transaction.

6 Requirements of a Contract

5) Capacity The parties must

be able to contract for themselves.

No minors, mentally ill, etc.

6) Writing Some agreement

must be placed in writing to be fully enforceable in court.

Offeror vs. Offerees

Offeror - Makes the offer.

Offeree - Person to whom

the offer is made.

Requirements of an Offer

An offer is a proposal by an offeror to do something provided the offeree does something in return.

To be an offer 1. Offeror must appear to intend to create

legal obligation. 2. Terms must be definite and complete. 3. Offer must be communicated to the

offeree.

Offeror must appear to intend to create legal obligation

Test of reasonable person applies-objective, legal test used by jurors/judges

Preliminary negotiations are not intent to contract

How about social agreements?

Offer must be definite & complete

Generally advertisements are not offers. They are invitations to customers to make offers.

Adv CAN be an offer if:1.Clearly worded in ways that address the problem of numerous people wanting to buy limited product…”subject to stock” OR2.If it asks the offeree to perform an act as a way of accepting…”first 20 at door”

Offer must be Communicated to the Offeree

Read “a question of ethics” on pg 101

A person who is not the intended offeree cannot accept the offer.

Assignment

Think About Legal Concepts 1-9

Think Critically about Evidence 10-13

Page 102

Lesson 7-2

Termination of Offers

Read “What’s Your Verdict” on page 103

Revocation by the Offeror

Revocation - The right to withdraw an offer before it is accepted.

After an offer has been made, the offeror can generally revoke it anytime before it is accepted by the offeree.

Ending Offers

Time stated in the offer.Reasonable length of time.Rejection by the offeree.Counteroffer - Refusing the offer and

making a new proposal.Death or insanity of either the offeror

of offeree.

How can an offer be kept open?

Options = Give the offeror something of value in

return for a promise to keep the offer open.

The offer may not be withdrawn during the option period.

Read “What’s Your Verdict”on page 104

How can an offer be kept open?

Firm Offer - A offer by a merchant for the sale or purchase of goods stating in writing how long the option stays open. Does not end with death or insanity.

Read “In This Case” on page 104

Assignment

Think About Legal Concepts 1-11

Think Critically about Evidence 12-15

Page 105

Lesson 7-3

Acceptance

Acceptances1) Must be made by the person or

persons to whom the offer was made.2) Must match the terms in the offer.

Mirror image rule —if terms in acceptance don’t exactly match offer, it is a counteroffer.

Proposal—new or changed terms in some cases with sale of goods….NOT part of the contract unless agreed to by the original offeror OR unless parties are both merchants (not consumers).

Acceptances …cont

3) Must be communicated to the offeror; cannot be just a mental decision. Can silence be an acceptance?

Only if parties have agreed in advance, such as book clubs

Unilateral Contracts

Acceptance is indicated by performing his/her obligations.

Example: Reward $ for lost dog Once the offeree has begun performance of the act requested (look for lost dog), the offer cannot be revoked until a reasonable amount of time has passed.

Bilateral Acceptance

Most offers are bilateral.The offer is accepted by a promise

to perform an act. Example: I will pay you $50 to scoop

my driveway.

Effective Acceptance

May be communicated orally, in person, or by telephone.

All forms of contractual communications but one take effect when received. (When mail is received not sent).

The exception to this is the acceptance, which is effective when sent.

The offeror may require a certain type of acceptance.

Examples—oral, hand signals, mail, fax.

Assignment

Think About Legal Concepts 1-5 page 108

Think Critically about Evidence 6 & 7 page 109

Your Legal Vocabulary 1-10 page 110