Chapter 7 Offer and Acceptance. Contracts zAn agreement that courts will enforce. zContracts between...
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Transcript of Chapter 7 Offer and Acceptance. Contracts zAn agreement that courts will enforce. zContracts between...
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.
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.
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
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.