Clarkson, Business Law, 11th Ed 2009
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Transcript Clarkson, Business Law, 11th Ed 2009
BUSINESS LAW: Text & Cases —
Legal, Ethical, International, and
E-Commerce Environment 11th Ed.
Chapter 11
Contracts: Agreement
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
Introduction
Agreement = offer and acceptance.
Parties must show mutual assent to terms
of contract.
Once an agreement is reached, if the
other elements of a contract are present, a
valid contract is formed.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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§1: Requirements of the Offer
Offeror’s serious intention.
Definiteness of terms.
Communication to Offeree.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Offer-Serious Intention
Contract is judged by what a reasonable
person in the Offeree’s position would
conclude about the offer.
– CASE 11.1 Lucy v. Zehmer (1954).
Offers made in anger, jest, or undue
excitement are usually not offers.
Expressions of opinion are not offers.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Offer-Serious Intention
Statements of intention, preliminary
negotiations, and agreements to agree,
are not offers.
Advertisements, catalogues, price lists,
and circulars are treated as invitations to
negotiate, and not as offers.
– CASE 11.2 Trell v. American Association
of Advancement of Science (2007).
Auctions.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Offer-Definiteness of Terms
Terms (Expressed or Implied).
– Identification of the parties.
– Object or subject matter of the contract.
– Consideration to be paid.
– Time of payment, Delivery, or Performance.
CASE 11.3 Baer v. Chase (2004).
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Offer-Communication
Offeree’s knowledge of the offer:
– Directly by the Offeror, or
– Use of Agents.
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a part of South-Western Cengage Learning.
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§2: Termination of the Offer
An offer may be terminated prior to
acceptance by either:
– Action of the Parties; or by
– Operation of Law.
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a part of South-Western Cengage Learning.
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Termination by
Action of the Parties
Revocation of the Offer by the Offeror:
– Offer can be withdrawn anytime before Offeree
accepts the offer.
– Effective when the Offeree or Offeree’s agent
receive it.
– Exceptions: Irrevocable Offers.
• Option Contract: Promise to hold an offer open for a
specified period of time in return of consideration.
•
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Termination by
Action of the Parties
– Exceptions (Cont’d):
• Detrimental Reliance or Promissory Estoppel
where Offeree relies on offer to his or her
detriment, thus Offeror is barred from revoking
the offer.
• Detrimental Reliance and Partial Performance
where offeree partially performs in response to
an offer to form a unilateral contract.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Termination by
Action of the Parties
Rejection of the offer by the Offeree:
– Rejection by the Offeree (expressed or
implied) terminates the offer.
– Effective only when it is received by the
Offeror or Offeror’s agent.
A counteroffer by the Offeree is a
rejection of the original offer and making
of a new offer (“mirror image” rule).
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Termination by Operation of Law
Lapse of Time.
– Offer terminates by law when the period of
time specified in the offer has passed.
– If no time period for acceptance is specified,
the offer terminates at the end of a reasonable
period of time.
Destruction of the Subject Matter.
Death or Incompetence of the Offeror or
Offeree.
Supervening Illegality of the Proposed
Contract.
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a part of South-Western Cengage Learning.
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§3: Acceptance
Acceptance is the:
– Voluntary act (expressed or implied),
– by the Offeree that,
– shows assent (agreement),
– to the terms of an offer.
Unequivocal: The “Mirror Image” Rule.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Silence as Acceptance
Acceptance of Services by Silence.
– Sometimes Offeree has a duty to speak.
Prior Dealings and Acceptance.
– Silence can be acceptance if there are prior
dealings.
Solicited Offers.
– Offeree has a duty to reject.
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a part of South-Western Cengage Learning.
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Mode and
Timeliness of Acceptance
Mail Box Rule - Acceptance becomes
effective on dispatch, providing that
authorized means of communication is
used. Offeree accepts by using the
stipulated means of acceptance.
– Offeror specifies (expressly or impliedly) how
acceptance should be made.
– Effective when dispatched (mailed, shipped).
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a part of South-Western Cengage Learning.
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Authorized Means of
Acceptance
Exceptions to Mailbox Rule:
– If acceptance is not properly dispatched by
the Offeree.
– If Offeror specifies that acceptance will not
be effective until it is received.
– If acceptance is sent after rejection,
whichever is received first is given effect.
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a part of South-Western Cengage Learning.
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Authorized Means of
Acceptance
Unauthorized Means of Acceptance.
– Not effective until it is received by the Offeror.
If timely sent and dispatched it is considered
to have been effective on its dispatch.
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a part of South-Western Cengage Learning.
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§ 4: Technology and
Acceptance Rules
Traditional rules provide framework for
digital age.
But traditional rules may not apply to
acceptances via Fed Ex, email, or fax.
Generally, ‘mailbox rule’ does not apply to
online offers.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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