Business Law Ch.8

A Revocation

-The calling back of the offer by the offeror. -An offer may be revoked any time before it has been accepted. -An offer may be revoked by the following methods and circumstances: communication, death or insanity of the offeror, automatic revocation, destruction of the subject matter, passage .

Acceptance

-The offeree agrees to be bound by the terms set up by the offeror. -Unilateral contracts do not usually require oral or written communication of an acceptance. When the offeror makes a promise in a unilateral contract, the offeror expects an action, not another promise in return. Performance of the action requested within the time allowed by the offeror and with the offeror's knowledge creates the contract.

Offer should identify:

-The parties involved in the contract. -The goods or services that will be. the subject matter of the contract. -The price the offeror is willing to pay or receive. -The time required for the performance of the contract.

Communication to the Offeree

-The proposed offer must be communicated to the offeree by whatever means are convenient nd desirable. The communication of the offer can be express or implied. Public offers are made through the media but are intended for one party whose identity or address is unknown. Invitations to trade are not offers. -For example, the offer may be communicated orally, by mail, by fax machine, by e-mail, or by any other capable means. It may also be implied. The proposing party's acts and conduct in many cases are successful in communicating an intention to make an offer to another party that witnesses them. When acts and conduct are sufficient to convey an offeror's intentions, an implied offer results.

Fraud and Misrepresentation

-To destroy mutual assent through a claim of fraud, the complaining or innocent party must prove the existence of five elements: 1) The complaining party will have to prove that the other party made a false representation about some material fact involved in the contract. 2) The plaintiff must demonstrate convincingly that the other party made the representation knowing that it was false. 3) The plaintiff must show that the false representations were made with the intent that they be relied upon by the innocent party. 4) The complaining party must establish that there was a reasonable reliance on the false representations. 5) The plaintiff must verify that he or she actually suffered some loss by relying on the false representation after entering the contract.

Bait-and-switch Confidence Game

A deliberately deceptive practice that entices buyers into a place of business when the seller actually has no intention of selling the item at the price stated in the advertisement.

Unilateral Mistake

A mistake made by only one of the contracting parties is a and not offering sufficient grounds for rescission or renegotiation.

Offer

A proposal freely made by one party to another indicating a willingness to enter a contract.

Counteroffer

A response to an offer in which the terms of the original offer are changed.

Auction

A sale that is open to the public, during which potential buyers compete for the right to purchase certain items by placing higher and higher bids until the highest bid is reached and the auctioneer accepts on behalf of the seller.

Offer and Acceptance in Cyberspace

An electronic offeror should insert the following terms in his offer: 1) payment criteria 2) remedies that can be used by the offeree 3) refund policies 4) return procedures 5) dispute settlement instructions 6) the applicability of cyber-signatures 7) liability disclaimers if needed 8) provisions relating to the offeree's manner of acceptance

Bilateral Mistake

Both parties are mistaken, and may permit a rescission by either the offeror or the offeree.

Rescission

Both parties are returned to their original positions, before they entered into the contract.

Silence as Acceptance

Generally does not indicate acceptance of the offer.

Requirements of an Offer

In the case of an open offer, the courts have established three elements that must exist: (1) serious intent; (2) clear and reasonably definite terms; and (3) communication to the offeree.

Physical Duress

Involves either violence or the threat of violence against an individual or against that person's family, household, or property.

Requirements Contract

Is an agreement in which one party agrees to buy all of the goods it needs from the second party. The terms of a requirements contract must be carefully worded. If the agreement allows the buyer to purchase only those goods that the buyer desires or wishes, the agreement is unenforceable, because it is illusory in that the buyer is not really obligated to do anything.

Output Contract

Is an agreement in which one party consents to sell to a second party all of the goods that party makes in a given period of time.

Extortion

Is an illegal means of forcing a person into a contract. It is a lay term for duress.

Current Market Price Contract

Is one in which prices are determined by reference to the market price of the goods as of a specified date.

Implied Acceptance

Mailing of unordered merchandise.

Misrepresentation

Occurs when a false statement is innocently made.

Fraud in the Inducement

Occurs when one party tricks another party into a contract by lying about the terms of the agreement to get the innocent party to enter the contract under false pretenses.

Fraud in the Inception

Occurs when one party tricks another party into a contract by lying to the innocent party about the actual nature of the contract.

Condition Concurrent

Requires both parties to perform at the same time.

Condition Precedent

Requires the performance of certain acts or promises before the other party is obligated to pay money or provide any other agreed to consideration.

Mistake as to Description

Rescission will be granted.

Serious Intent

The offeror's words must give the offeree assurance that a binding agreement is intended.

Offeree

The person to whom the offer is made.

Offeror

The person who makes the offer.

The Mirror Image Rule

The terms as stated in the acceptance must exactly "mirror" the terms in the offer.

Clarity and Reasonable Definite Terms

The terms of an offer must be sufficiently clear to remove any doubt about the contractual intentions of the offeror. Most courts require reasonable rather than absolute definiteness.

Mistake

When used in the law of contracts, refers to a belief that is not in accord with the facts. State Variations In Georgia, if the consideration to a contract is given as a result of a mutual mistake of fact or law, the contract cannot be enforced.

Unequivocal Acceptance

-The Mirror Image Rule. -Counteroffers Under the UCC.

Public Offer

-One that is made through the public media but is intended for only one person whose identity or address is unknown to the offeror. - A classic example of a public offer is an advertisement in a lost-and-found column in a newspaper. Although it is a public offer, it is legally no different from other types of offers.

Lease Option

-A contract that permits a party to lease real property while at the same time holding an option to purchase that property. -A lease option involves two separate contracts, the lease contract and the option contract, it is often divided into two documents.

Fiduciary Relationship

-A relationship based on trust. -Exist between attorneys and clients, guardians and wards, trustees and beneficiaries, and boards of directors and corporations. -If one party is in a fiduciary relationship with another party, then an obligation arises to reveal what otherwise might be withheld when the two parties enter an agreement.

Duress

-An action by one party that forces another party to do what need not otherwise be done. -Forces a person into a contract through the use of physical, emotional, or economic threats.

Option Contract

-An agreement that binds an offeror to a promise to hold open an offer for a predetermined or reasonable length of time. -Some people mistakenly assume that an option contract necessarily involves a down payment. The term down payment dates from 1926 when buying on credit was at its peak. It is defined as a part of the full price that is paid at the time of purchase or delivery, with the balance promised later. An option contract, which requires consideration, is a binding promise to hold an offer open. The offeree has the choice to create a new contract by exercising the option during a specified time period.

Invitation to Trade

-An announcement published to reach many persons for the purpose of creating interest and attracting responses. -Newspaper and magazine advertisements, radio and television commercials, store window displays, price tags on merchandise, for rent signs, prices in catalogs. -In the case of an invitation to trade, no binding agreement develops until a responding party makes an offer that the advertiser accepts. Nevertheless, in certain relatively rare circumstances, advertisements may be held to be offers. However, such advertisements would have to contain very particular promises, use phrases like "first-come, first-served," or limit the number of items to be sold. Because the number of people who can buy the product is very limited, the advertisement becomes an offer.

Emotional Duress

-Arises from acts or threats that would create emotional distress in the one on whom they are inflicted. -Wrongful exposure to public ridicule, threatened false attacks on one's reputation,nor unjust efforts to prevent employment might constitute emotionalduress. -It might create duress to threaten a person with criminal charges or a civil lawsuit if there are no grounds for using such intimidating tactics. -It isn't duress to promise to exercise a legal right, such as bringing a justified lawsuit, should someone not comply with a reasonable request.

Auction with Reserve

-Auctioneer doesn't have to sell the goods for the highest bid if it's lower than the reserve amount. -Means that the bidders are the offerors and the seller is the offeree.

Auction without Reserve

-Auctioneer must sell the goods to the highest bidder. -The seller, is the offeror and that the bidder is the offeree.

Mutual Assent

-Both parties know what the terms are, and both have willingly agreed to be bound by those terms. -"Meeting of the minds." -The twin keys to mutual assent then are an "open offer" and "authentically accepted."

Economic duress

-Consists of threats of a business nature that force another party without real consent to enter a commercial agreement. -Also known as business compulsion. -To establish economic duress, the complaining party must demonstrate the existence of three elements: 1. The plaintiff must prove that the other party wrongfully placed the plaintiff in a precarious economic situation. 2. The plaintiff must show that he or she had no alternative other than to submit to the contractual demands of the wrongful party. 3. The plaintiff must demonstrate that he or she acted reasonably in entering the contract.

Cyber-contracts, Electronic contracts or e-contracts

-Contracts that are made with computers or that involve computer-related products. -The new rules are found in the federal Electronic Signatures in Global and National Commerce Act (E-Sign Act), the Uniform Electronic Transactions Act, and the Uniform Computer Information Transactions Act.

Firm Offer

-Created when a merchant agrees in writing to hold an offer open. -Under this condition, no consideration is needed to hold that offer open. -May be made for a specified period of time. If no time limit is specified, then the offer may remain open for a reasonable amount of time (upper limit 3 months). -Involves only sale-of-goods.

Mutual Assent in Cyberspace

-Cyber-contracts, Electronic contracts or e-contracts. -Contracts that are made with computers or that involve computer-related products. -The new rules are found in the federal Electronic Signatures in Global and National Commerce Act (E-Sign Act), the Uniform Electronic Transactions Act, and the Uniform Computer Information Transactions Act.

Cost-plus Contract

-Does not include a final price; rather, the contract price is determined by the cost of labor and materials, plus an agreed-to percentage or dollar markup.

Passive Fraud

-Occurs when one party does not say something about certain facts that he or she is under an obligation to reveal. -Also called concealment or nondisclosure.

Active Fraud

-Occurs when one party to a contract makes a false statement intended to deceive the other party in a contract. -Actions designed to deceive, such as turning back a car's odometer or painting over rust spots, are considered statements about the condition of the subject matter of the contract. Getting Students Involved Have students make lists of examples of sales puffery that they see daily in media advertising. Then have them explain why it is merely sales puffery and not a fraudulent statement.

Undue Influence

-Occurs when the dominant party in a special relationship uses excessive pressure to convince the weaker party to enter a contract that greatly benefits the dominant party. -A plaintiff who wants to demonstrate that he or she was enticed into a contract by undue influence must prove the existence of two elements: 1) Must show that a special relationship existed between the parties. A special relationship can generally be characterized as one that is fiduciary in nature or one that involves domination. 2) Must show that the other party used excessive pressure to take advantage of him or her to enter a contract that greatly benefits the party applying the pressure. In most cases involving undue influence, one party in the special relationship has enough strength and leadership to dominate the other party, who is obviously weaker and dependent.

Click-on Acceptance or a Click-on Agreement

-One that is created by having a party click on a box on the computer screen that states he or she agrees to be bound by the terms of the contract..

Authorized Means of Communication

Acceptance is complete and effective when given by that same medium (e.g. mailed offer is accepted when acceptance is dropped in the mail).

Acceptance Improperly Dispatched

Acceptance is complete and effective when it actually reaches offeror.

Face-to-face Communication

Acceptance is complete and effective when offeror hears the words of acceptance.

Telephone Communication

Acceptance is complete and effective when offeror hears the words of acceptance.

Text Messages

Acceptance is complete when text message is sent, if offeror has asked for a text response. If not, the acceptance is complete when sent, only if a text message is faster than the requested method.

A Rejection

Comes about when an offeree expresses or implies a refusal to accept an offer.

Condition Subsequent

Parties agree that the contract will be terminated when a prescribed event occurs or does not occur.

Mistake as to Existence

Proof that subject matter was destroyed before the agreement was made gives grounds for rescission.