Transcript Business Law Ch 6 Notes - Sheffield

Business Law: Ch 6
Offer and Acceptance
What Must Be in a Contract
• Contract – agreement between two or more
parties that creates obligations
• Six requirements to a contract
1. Offer and Acceptance
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
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Offeror – person making offer
Offeree – person offer made too
Terms must be definite and accepted without
change by the party to whom it is intended to be
offered
Six Requirements for a Contract
2. Genuine Assent – Agreement must not be
based on one party’s deceiving another, on an
important mistake, or on the use of unfair
pressure exerted to obtain the offer or
acceptance
3. Legality – What the parties agree to must be
legal
Six Requirements for a Contract
4. Consideration – Agreement must involve
both sides receiving what the law considers
value in some form as a result of the transaction
5. Capacity – Person must have legal ability to
contract for themselves
6. Writing – Some agreements must be placed in
writing to be fully enforceable in court
Requirements for an Offer
• Offer – Proposal by an offeror to do something,
providing the offeree does or refrains from doing
something in return.
• Requirements
1. Contractual Intent must be present
2. The offer must be communicated to the offeree
3. The essential terms of the offer must be
complete and definite
Contractual Intent
• Jest – Words that take the form of offers but
which are spoken as a joke
▫ Law is not concerned with what is actually in the
mind of a person making what might be
considered an offer
▫ If your joke is considered an offer by a reasonable
person, then you have made an offer
▫ If you are serious about your offer, but a
reasonable person interprets it as a joke, then we
have no legally enforceable offer
Offer Must Be Communicated
• Person who is not the intended offeree cannot
accept the offer
• Person cannot accept an offer without knowing
it has been made
Essential Terms Must Be Complete and
Definite
• Sale of Real Estate
▫
▫
▫
▫
▫
Proper legal description of the real estate
Price
Full term for payment
Date for delivery
Date for delivery of the deed
• Essential terms must be definite
6-1 Assessment
• Turn to page 113 and complete the assessment
6-1 Assessment
1.
2.
3.
4.
5.
True
B (Genuine dissent)
True
False
False
6-1 Assessment
6. No contract because the offer was not
communicated to the bystander. Bystanders
statement is an offer.
7. No, social engagement not a contract
8. No, the credit union is not liable because of no
contract. The agreement was missing essential
detail.
9. The ad was not an offer because it did not
address the problem of a limited quantity.
How can offers be ended?
• Revocation by the offeror
▫ The right to withdraw an offer before it is accepted
▫ At any time before it is accepted by the offeree, the
offer can be revoked
▫ Revocation is not effective until it is
communicated to the offeree
How can offers be ended?
• Time stated in the offer
▫ The offeror may state how and when the offer
must be accepted
▫ Example: On October 10, the Mercantile Bank
sent a letter to Jimmy, who had applied for a loan.
In the letter, Mercantile offered to lend $50,000
on specified terms and stated that the acceptance
had to be in writing and received no later than
October 18. Jimmy mailed his acceptance on
October 17 which was not received until October
20. There is no contract
How can offers be ended?
• Reasonable length of time
▫ If no time is stated, the offer will end after a
reasonable length of time, which depends on the
circumstances
▫ Example: different length of time for produce and
a bulldozer
How can offers be ended?
• Rejection by the Offeree
▫ Offeree clearly reject the offer, the offer is
terminated
How can offers be ended?
• Counteroffer
▫ Offeree changes the offeror’s terms in important
ways and sends it back to the offeror.
▫ The counteroffer becomes the new offer.
• Death or Insanity of either offeree or offeror
• Destruction of the specific subject matter
How can an offer be kept open
• Option – offeree give something of value in
return for a promise to keep the offer open
• Firm Offer – Same as option that applies to
merchants (individuals who regularly deal in the
goods being bought or sold)
▫ The UCC (Uniform Commercial Code) makes firm
offers binding for the time stated, but not for more
than three months
6-2 Assessment
• Turn to page 117 and complete the assessment
6-2 Assessment
1. True
2. D (terminated)
3. Counteroffer
4. B (purchase of an option by the offeree)
5. False
6. Option
7. B
8. No
9. Firm
10. Yes
6-2 Assessment
11. Yes, Wood can still withdraw her offer even
when she promised to leave it open. A firm
offer or option is required to bind an offeror to
the promise to leave an offer open.
12. No. The price in the ad was merely an
invitation to negotiate. Tom is legally free to
reject any and all offers.
13. This is a firm offer and therefore binding.
14. Opie has not been sold because Phil did not
accept the offer without alterations.
What is Required of an Acceptance
• Acceptance – When a party to whom an offer has
been made agrees to the proposal.
• Acceptance must:
1. Come from the person or persons to whom the
offer was made
2. Match the terms in the offer
3. Be communicated to the offeror
Acceptance Communicated
• Unilateral Acceptance – Offeror promises
something in return for the offereee’s
performance
▫ Example: The offeror publicly promises to pay a
$100 reward.
• Bilateral Acceptance – Both parties promise to
do something
When Acceptances are Effective
• The offeror may require the offeree to use a
certain communication method to accept.
• If a different method is used, then this is treated
as a modification of the offer.
• Most courts say that acceptance is effective when
sent by the same means used for the offer or by
faster means
When Acceptances are Effective
• Under UCC, the acceptance of an offer for the
sale or purchase of goods is by a reasonable
means, it is effective when sent.
• Oral acceptance are effective at the moment the
words are spoken directly to the offeror.
• Acceptance sent by mail takes effect when
properly posted.
When Acceptances are Effective
• A telegram takes effect when handed to the clerk
• A fax transmission is instantaneous when the
transmission lines are open and equipment is
working properly
• The offeror may specify that an acceptance will
not be binding until it is actually received.
6-3 Assessment
• Turn to page 121 and complete the assessment
6-3 Assessment
1.
2.
3.
4.
5.
Acceptance
True
False
B (bilateral)
True
6-3 Assessment
6. No. The $2,000 was merely an invitation to
negotiate.
7. No, there was not an acceptance because the
mirror image rule is applied in the are of real
estate contacts. Smith varies the terms
contained in the original offer.
8. This is a contract for the sale of goods between
merchants. No objection was made, so the
contract is valid and enforceable with the new
terms