Ch. 6 Offer and Acceptance

Ch. 7 Genuineness of Assent

Ch. 8 Consideration

Ch. 9 Legal Capacity to Contract

Ch. 10 Legal Purposes and Proper

Form

Ch. 11 Contractual Obligations and

Their Enforcement

Chapter 6

Offer and

Acceptance

Section 1

Creation of Offers

Juan and Susan were talking one day

after school. Juan would turn 16 on the

upcoming July 13 and wanted to buy

Susan’s car. Susan, 17,had been

working and saving her money to buy a

new car. Selling her old car for $2,800

would giver her enough to do so. She

offered it to Juan for that amount, and

he accepted.

Did the two friends create a legally

enforceable contract?

What is a Contract?

An agreement between 2 or more

parties that creates an

obligation.

6 Requirements in a Legally

Enforceable Contract

1. Offer and Acceptance

2. Genuine Assent (True and Complete Agreement)

3. Legality

4. Consideration

5. Capacity

6. Writing

1. Offer and Acceptance

• Offeror: person who makes the offer.

• Offeree: person to whom the offer is

made to

• The terms of the offer must be:

– Definite (clear)

– Accepted without change by the party

to whom it was intended to be offered.

2. Genuine Assent

(True and Complete Agreement)• The agreement (offer and

acceptance) CANNOT be based on:

–a lie

–mistake

–the use of unfair pressure to obtain offer or acceptance (duress)

3. Legality

• What the parties agree to must

be legal.

• Ex: an agreement to pay

someone to commit a crime or

tort cannot be a contract.

4. Consideration

• The agreement must involve

both sides receiving something

of legal value (money,

materials object) as a result of

the transaction.

5. Capacity

• Parties must be able to contract

for themselves rather than being

forced to use parents or legal

representatives.

Minimum Age to Contract = 18

6. Writing

Some agreements must be

placed in writing to be

fully enforceable in court.

Elements of an Offer

• Definition: Proposal by an

offeror to do something.

• Offer is the basis of the bargain.

• If offer is NOT valid, there is

NO contract.

3 tests a valid offer MUST pass

1. Intent

2. Communication from offer to

offeree.

3. Complete and defined terms

1. Intent

• Words that take the form of offer, but

would not be enforced are spoken as:

– a joke

– in anger

– preliminary negotiations

– a social agreement

Jokes

• The law considers an offer valid not by the

intent of the person making the offer, but by

how other reasonable people would

perceive the offer.

• If you think you are joking but a reasonable

person would interpret your conduct as

indicating that you intend to contract, you

have made an offer.

Anchors Aweigh, a boat retailer, placed an

ad in a local newspaper announcing a one-

day sale of cabin cruisers for the “bargain

price” of $35, 500 each. The dealer had

five cruisers in stock, and they were all sold

out within one hour. During the rest of the

day, seven other would-be buyers came in

to purchase a bargain cruiser.

Did the Anchors Aweigh advertisement

make offers to the would-be buyers?

Preliminary Negotiations

It’s all about the wording!

Would you pay $1,000 for my car?

vs.

I’ll sell you my car for $1,000.

Social Agreements

Social arrangements do not

create legal obligations!

2. Communication

If you do not know someone is

making an offer you cannot

accept it

3. Complete and Definite Termscomplete?

• identity of specific lot

• price

• full terms of payment

• date of delivery/possession

• date for delivery of deed

definite?

• essential terms are identified clearly

Section 2

Termination of

Offers

On May 15th, Melissa offered to sell her collection of

baseball cards for $3,000 at anytime before the first of

the next month to her friend and fellow collector,

Raoul. While Raoul was trying to raise the money,

Melissa had second thoughts. So she called Raoul and

said, “I’ve changed my mind, I’m not interested in

selling the cards.” Raoul responded, “It’s too late, you

said the offer would be open for this whole month.

This is just the 20th , and I’ve got the money so I

accept.”

Was Melissa’s offer terminated before Raoul’s

attempted acceptance?

Termination of Offers

A. Revocation by the Offeror

•anytime before acceptance by offeree

B. Time Stated in Offer

•how and when offer must be accepted

C. Reasonable Length of Time

•when no time stated for offer

•depends on circumstances

D. Rejection by the offeree

•offeree clearly rejects

E. Counteroffer

•terms changed in important ways by offeree

•offeree must accept as made

•original offer terminated

•becomes new offer

F. Death or Insanity

•of offeror or offeree

•law acts in their place

•terminates offer

G. Destruction of Specific Subject Matter

•automatic termination *destroyed possessions

Keeping Offers Open

Options - Offeree gives offeror something of value to keep offer open. *down payment

Firm Offer – Special rule (same as option) for merchants. Written statement of how long to keep offer open. *UCC 3 month max. rule

Section 3Acceptances

Acceptance

occurs when a party to whom the

offer has been made agrees to

proposal

1.Only offeree may accept

2. Must match offer

“mirror image rule”

3. Must be communicated to offeror

• Silence - NOT acceptance

• Bilateral Acceptance – promising instead of performing contracted act

• Unilateral Acceptance - performance of obligations under contract

Modes of Communication

faxdelivery service

e-mail

mail

When is Acceptance Effective???

“when received”

exception: when sent through same means as offer