Essentials Of Business Law Chapter 7 Offer, Acceptance, And Mutual Agreement McGraw-Hill/Irwin...

Essentials Of Business Law

Chapter 7

Offer, Acceptance, And Mutual Agreement

McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Essentials of Business Law Chapter 7-2

Characteristics Of A Valid Offer

Offer must be definite and certain Specify all terms and conditions Should include: who, what, where, and when

Offer must be communicated Orally, written, or implied

Offer must be made with serious intent Can not be made in anger, in jest, or under

emotional strain


Bids, Advertising, And Public Offers

Bids and estimates Request for proposal

• Not an offer, rather it is a request for an offer• Can be accepted or rejected

Advertising Invitation to trade

• Generally not a valid offer


Bids, Advertising, And Public Offers

Public offers General offer to public

• Example: reward for information that leads to the arrest of a criminal

• Example: reward for the return of a lost pet

Performance of act is considered acceptance Results in an enforceable contract


Characteristics Of A Valid Acceptance

Must be communicated to offeror

Must be unconditional


Must Be Communicated To Offeror

General rule: acceptance becomes effective when the parties so intend

Method of communication Telephone, letter, e-mail or other form

Sometimes specific form is requested Example: “reply by registered mail”



May be explicitly stated as either: Effective when it is sent by the offeree Effective when it is received by the offeror

When offer is silent about effective time Mailbox rule is in effect If sent via the postal system or by courier

acceptance is effective when sent



Acceptance is effective when received when communicated by: Telephone, fax, or telex

Acceptance sent via e-mail Courts are divided as to whether it is effective

when sent or when received


Acceptance Must Be Unconditional

General rule: acceptance of an offer must be the same as the offer No material differences can exist

UCC provides exception between merchants Additional terms are to be considered proposals in

addition to the contract Additional terms then become part of the contract Acceptance cannot be conditional on assent to the

additional or different terms


Termination Of An Offer

Lapse of time Failure to accept an offer within the time specified After a reasonable time period, if time is not specified

in an offer

Rejection Refusal to accept offer Terminates offer Offer cannot be revived or made into a counteroffer


Termination Of An Offer

Revocation Offer is withdrawn by offeror Must be prior to offeree’s acceptance Can be communicated verbally or in writing Written offers by merchants must be held

open for time specified• Cannot be revoked during this time period• If no time period is specified, until a reasonable

time has elapsed


Defective Agreements

Voidable contract results if agreement of either party is obtained by:

Fraud Misrepresentation Mistake Undue influence

Duress If contract is one of

adhesion If contract is

unconscionable


Fraud

Must prove that the statement or act: Was a misstatement or non-disclosure of a material

fact Was made with knowledge of its falsity or with

reckless disregard of its truth Was made with the intention of causing the other

party to enter into the agreement Was relied on by the injured party Resulted in loss to the injured party

Injured party can cancel the contract and bring suit for damages


Puffing

Expression of opinion usually made by salespeople Not considered to be fraud Typically directed at the five senses

Examples: the dress looks great, the stereo sounds terrific, the fabric feels soft


Misrepresentation

Unintentional misstatement or non-disclosure of a material fact Results in inducing another to enter into an

agreement to his or her injury Not made knowingly or recklessly Contract can be canceled Injured party cannot sue for additional

damages


Mistake

Belief that is not in accord with the facts May be concerned with the nature of the

subject matter May be concerned with the quality of the

subject matter Must concern an existing fact Not a belief about a possible future event Mistake must be mutual

• Made by both parties


Undue Influence

Improper use of pressure by dominant member of confidential relationship Power to control the actions of another Contract is voidable at the option of the party

wrongfully influenced Examples include:

• Employer and employee• Physician and patient• Teacher and student• Attorney and client


Duress

Applying unlawful or improper pressure to gain agreement to a contract Threat of bodily harm Threat of serious loss or damage to his or her

property Contract may be dissolved by the injured

party


Contract Of Adhesion

Parties have unequal bargaining power Take-it-or-leave-it contractUnenforceable if it results in a significant hardship for one of the partiesPrepared by one party and simply presented to the other without negotiation Insurance policies Disclaimers printed on ticket stubs Dry cleaning receipts Routine contracts


Unconscionable Contract

Shockingly unjust or unfair

UCC clause originally intended to apply only to sale of goods

Recently clause has been applied to consumers in various kinds of contracts Making home improvements Opening a checking account Leasing an apartment An agreement written in a way that takes unfair

advantage of someone who does not know English

Essentials Of Business Law Chapter 7 Offer, Acceptance, And Mutual Agreement McGraw-Hill/Irwin...

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