CHAPTER 7 REVIEW

Offer and Acceptance

6 PARTS OF A CONTRACT Offer and Acceptance- Both sides

agree on mutual terms Genuine Assent- Entering under your

own free will (Not being forced) Consideration- both sides gain

something Capacity- Understanding your actions Legality- legal agreement Writing- some contracts must be

written to be considered valid

OFFER AND ACCEPTANCE Agreed on “mutual” terms Only person offer was made to

(Offeree) may accept If a group, offeree is the person

WHO accepts Terms of the offer must be clear,

detailed and complete

ELEMENTS OF OFFER AND ACCEPTANCE

OFFER ACCEPTANCE

Agreement is “serious” and legal

The terms of the agreements are clear, definite and complete

Communicated to offeree

Only the offeree can accept

Terms agreed to by offeree match the offer’s terms (Mirror image rule)

Communicated back to offeror (Acceptance)

CONTRACTS Agreements “Courts” will enforce Social Agreements are not legally

enforceable contracts (Taking someone on a date)

Contracts create legal links between individuals, businesses and anyone involved in a legal agreement

All serious agreements are “not” considered contracts “unless” all 6 parts of contract are satisfied

TEST OF A REASONABLE PERSON Since you can never really

know what is in the mind of a person, you need a test to determine if you can agree what someone “thought” another person was thinking

This is a legal test to determine what someone meant when they entered a contract

FACTS AND CIRCUMSTANCES These are the things going on when an

offer was made to determine if the person who made the offer was in fact “serious”

If a person looks mad and the circumstances of their offer was made when they were mad, the offer will not be determined as serious.

For example, if a person grabs a $2000 watch and throws it on the ground, then tells a friend “This thing never works, I’d give it to you for free” they are not serious.

PRELIMINARY NEGOTIATIONS These are the things 2 people

say to each other to determine if the other person is serious about selling an item and if they can get it for the price they want.

Ex) “I see you want to sell your home. Would you take $200,000 for it?” The person responds “No, that is well below what I am asking”. Response “What would you take then?”

ESSENTIAL INFORMATION All important items needed to

make the contract terms complete

Names, dates, times, money, description of items

If any key item is missing, the contract is considered too vague or incomplete to be a valid agreement

ADVERTISEMENTS “Usually” NOT considered

offers, as they would need to make sure they are clear about the number of items for sale and make the customer do something to accept

Ads are considered “invitations” to an offer, as the consumer would need to come in to accept and can still negotiate the price.

ACCEPTANCE OF OFFER “Only” allowed to be done by the

person who the offer is made it (Offeree)

Cannot have a friend or relative say “She will accept, I’ll do it for her”

No person other than the one the offer was made to may accept unless its made to a group

ACCEPTANCE RULES MUST accept the final offers

terms exactly as they were offered (Mirror Image rule)

Must be made within the time frame allowed (If time is agreed)

Only offeree can accept Acceptance must be

communicated back in some way

HOW CAN OFFERS END? Revocation- the offeror takes back

offer Time stated- If time ends, so does

offer Reasonable time ends- If what

would be a reasonable time elapses, offer ends

Rejection by Offeree- once the Offeree rejects the offer, they cannot change their mind at a later date and accept

Counteroffer- Any “Change in terms” ends the original offer

Death or Insanity- Either party

KEEPING OFFERS OPEN

Common law Oversees non-

business contracts

Options (Collateral) must be given to keep offer open

UCC Law Oversees

business contracts (Retailers)

Firm Offers (Signed written agreements)

Good for 3 months

OPTIONS “Only” used with common law agreements (Non-Business related)

Based on collateral (Money or property used to keep offer open to buy time to decide)

Part of agreement

FIRM OFFER “Only” used with UCC Law based agreements (Retailers or business)

NO collateral is needed Usually in form of rain check or small written contract

Protected for 3 months or more

MIRROR IMAGE RULE Means the

acceptance must match the offer “exactly” as its offered

Any change in the offer’s terms is a counteroffer and therefore ends the original offer

UNILATERAL ACCEPTANCE If the offeree must

perform in some way to accept an offer

Ex) If I tell an employee “If you decide to work overtime this weekend, I’ll pay you double-time even though I only need to pay you time and a half”

BILATERAL ACCEPTANCE Most offers are bilateral A promise for a promise Ex) Going to the store and

paying for goods at the cash register. I get the goods and the store gets the money

WHEN THESE TAKE EFFECT

OFFERS Take effect

when received Can be made in

person, mail, email, etc..

ACCEPTANCES

Take effect when Sent

If mailed, acceptance is based on mail stamp or email through time and date

ACCEPTANCES Offeror may require

way acceptance must be made (For example, in writing through the mail)

Offeror may tell offeree acceptance does not take effect until it is received

SILENCE An offeror may NOT word a

contract offer to trick a person into agreeing by saying nothing

Illegal Silent acceptance only work

when you have a relationship with person or business

Ex) Stocking Pepsi on store shelves

IMPLIED TERMS Things that are understood

without being spoken or agreed to Its understood that you will pay for

goods before leaving a store Clear offers means the terms are

explained in a way both parties understand

I am selling a 2009 GE refrigerator

QUESTIONS???