Business Law Ch. 10 - Agreement
Bilateral contracts is accepted only upon the offeree's performance of the required act.
FALSE
During a counteroffer, the previous offeror remains the offeror.
FALSE
Identification of the subject matter and quantity would be an implied term.
FALSE
If an offeree dispatches a rejection before an acceptance, then the rejection will not be applicable.
FALSE
If no time is stated in an offer, then the offer stays valid indefinitely.
FALSE
In an auction with reserve, the bidder can withdraw his bid after an acceptance has been indicated from the offeror.
FALSE
In auction without reserve, the seller is the offeree.
FALSE
The offeree must be objectively intended to be bound by the offer for the offer to be effective.
FALSE
Under the mailbox rule, an acceptance is only effective when it is received.
FALSE
What is the key difference between an agreement and a contract? A) A contract is always enforceable in the court of law, while an acceptance may or may not be. B) A contract can only be between two individuals, while an acceptance can have two or more people involved. C) A contract required mutual assent from all parties, while an acceptance need only be accepted a majority of people involved. D) A contract need not be legally binding, while an agreement must be legally binding.
A) A contract is always enforceable in the court of law, while an acceptance may or may not be.
________ is a manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts. A) Acceptance B) Revocation C) Proposal D) Counteroffer
A) Acceptance
Which of the following is a difference between acceptance and revocation? A) Revocation is valid only if the offeree receives it, while an offeree's acceptance is valid when dispatched. B) Revocation can be done by the offeror or offeree, while an acceptance can only be done by the offeree. C) An acceptance must be received by the offeror to be valid, while a revocation need not be received by the offeree. D) A revocation can be made after acceptance, while an acceptance cannot be made after revocation.
A) Revocation is valid only if the offeree receives it, while an offeree's acceptance is valid when dispatched.
Which of the following is true for an auction with reserve? A) The seller retains the right to refuse the highest bidder. B) Invitations to make an offer are not allowed. C) Goods cannot be withdrawn from sale after the offer has been made. D) A bid once made cannot be withdrawn and is legally binding.
A) The seller retains the right to refuse the highest bidder.
The legal power to accept an offer belongs to the ________. A) offeror B) offeree C) agent D) seller
B) offeree
Ron uses his status message on his Facebook account to invite his friends to buy his desktop computer. Carl, a friend, is interested and calls Ron to express his interest. Ron tells him that he is selling the computer for $400. Carl responds by saying that he is ready to buy it for $350. Ron thinks about it for a while and accepts the offer. They decide to make the exchange after three days. But the next day, Ron puts up another update on his Facebook account saying that he has decided not to sell his computer. Ron's response to sell the computer to Carl is considered as a(n) ________. A) mirror image rule acceptance B) rejection C) counteroffer D) equivocal response
A) mirror image rule acceptance
The ________ theory of contracts states that the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties. A) objective B) relational C) collateral D) bargain
A) objective
Ron uses his status message on his Facebook account to invite his friends to buy his desktop computer. Carl, a friend, is interested and calls Ron to express his interest. Ron tells him that he is selling the computer for $400. Carl responds by saying that he is ready to buy it for $350. Ron thinks about it for a while and accepts the offer. They decide to make the exchange after three days. But the next day, Ron puts up another update on his Facebook account saying that he has decided not to sell his computer. Which of the following describes Ron's action of deciding not to sell his computer? A) revocation B) rejection C) counteroffer D) unequivocal acceptance
A) revocation
Explain implied and express modes of acceptance.
An acceptance must be properly dispatched. The acceptance must be properly addressed, packaged in an appropriate envelope or container, and have prepaid postage or delivery charges. Most offers do not expressly specify the means of communication required for acceptance. The common law recognizes certain implied means of communication. Implied authorization may be inferred from what is customary in similar transactions, usage of trade, or prior dealings between the parties. An offer can stipulate that acceptance must be by a specified means of communication. Such stipulation is called express authorization. If the offeree uses an unauthorized means of communication to transmit the acceptance, the acceptance is not effective, even if it is received by the offeror within the allowed time period, because the means of communication was a condition of acceptance.
Give an account of termination of offer due to lapse of time.
An offer expires at the lapse of time of an offer. An offer may state that it is effective only until a certain date. Unless otherwise stated, the time period begins to run when the offer is actually received by the offeree and terminates when the stated time period expires. If no time is stated in an offer, the offer terminates after a "reasonable time" dictated by the circumstances.
Which of the following statements is true about a counteroffer? A) An offeree that makes the counteroffer is still considered the offeree. B) A counteroffer terminates the existing offer. C) A counteroffer can only be made by the offeror. D) A counteroffer need not be communicated to the offeror.
B) A counteroffer terminates the existing offer.
Which of the following statements is true about a revocation? A) It can be made by the offeree. B) It needs to reach the offeree to be effective. C) It can be done even after acceptance of the offer. D) It can be applied to an option contract.
B) It needs to reach the offeree to be effective.
Luke offered to sell his farm to Kent at $75,000, an offer which Kent declined. A week later, Luke offered to sell the farm for $65,000, stating that it was the final offer, it was valid for one month, and that he would not alter it. Two days later, Kent replied by saying that he was willing to pay $60,000 for the farm. A week after Luke received Kent's offer, Luke declined it. Ten days after that, Kent agreed to buy the farm for $65,000, but Luke refused to sell the farm. Kent decided to sue Luke for a breach of contract. The judge ruled in favor of Luke. Which one of the following is the reason for the ruling in Luke's favor? A) Luke's original offer of $75,000 is still valid, even though rejected. B) Kent's counteroffer of $60,000 had rendered the offer for $65,000 invalid. C) Kent's acceptance was past the set time period in the offer. D) Kent acted in an incompetent manner with regards to the offer.
B) Kent's counteroffer of $60,000 had rendered the offer for $65,000 invalid.
Which of the following is true for legally claiming a reward? A) A promise of completing the requested act is sufficient for a claimant to claim the reward. B) Knowledge of the reward before completing the requested act is necessary to claim the reward. C) The claimant can claim the reward even if he or she came to know of the reward subsequent to completing the act. D) The offeror cannot withdraw the reward once the offer has been placed in the public domain.
B) Knowledge of the reward before completing the requested act is necessary to claim the reward.
Which of the following statements is true of an offer that was not communicated? A) The offer stays valid for 30 days from the date of creation. B) The offer cannot be accepted by the offeree if not communicated. C) The offeree can claim an offer that was not communicated. D) It is considered to be an implied term.
B) The offer cannot be accepted by the offeree if not communicated.
Which one of the following would constitute a reward? A) a person buying a car after seeing an ad about it B) a person returning a lost item after seeing an ad about it C) a seller accepting a bid for an item D) a seller making an invitation for offers
B) a person returning a lost item after seeing an ad about it
A response by an offeree that contains terms and conditions different from or in addition to those of the offer is called a(n) ________. A) rejection B) counteroffer C) revocation D) acceptance
B) counteroffer
The term ________ refers to a mode of acceptance that is indicated from what is customary in similar transactions, usage of trade, or prior dealings between the parties. A) express authorization B) implied authorization C) option contract D) unequivocal acceptance
B) implied authorization
Section 24 of the Restatement (Second) of Contracts defines a(n) ________ as the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. A) order B) offer C) advertisement D) revocation
B) offer
Quentin is a member of the Album of the Month Club and receives a new music CD every month without fail. The Club usually gives its members a time period within which they can reject the selection and stop shipment of the CD, failing which the CD will be shipped. Last month, Quentin received a CD from Album of the Month Club, a copy of which a friend had already gifted him. He had not found time to reject the offer as he was away. Quentin could not reject the CD and had to buy it. What kind of an offer-acceptance model does Album of the Month Club have? A) mirror image rule acceptance B) silence as acceptance C) acceptance-upon-dispatch D) unequivocal acceptance
B) silence as acceptance
George made an offer to Jacob to sell his house for $1 million. The offer was received by Jacob on the 1st of May, and stipulated that he had 13 days to accept. But Jacob could not arrange the money, and on 16th May made a counteroffer to George to buy the house for $850,000. Which of the following is true about the original offer made by George to Jacob? A) It is terminated by the counteroffer. B) It is still valid as the house has not been sold. C) It is invalid due to lapse of the stated time. D) It is invalid due to incompetency of the offeree.
C) It is invalid due to lapse of the stated time.
Which of the following is true for an auction without reserve? A) The bidder is considered the offeror. B) The seller need not accept the highest bid. C) The goods on sale cannot be withdrawn. D) The auctioneer is not allowed to set a minimum bid.
C) The goods on sale cannot be withdrawn.
An agreement is created when the offeree receives the offer.
FALSE
An offer cannot stipulate that acceptance must be by a specified means of communication
FALSE
An offeror can revoke his or her offer even after an agreement or acceptance has been reached.
FALSE
Peter has two houses that he plans to sell, numbered Lot 1 and Lot 2. Each priced at $800,000. David has shown interest in buying Lot 2, but could not make up his mind on the final offer, so he asks Peter to give him a week to decide and Peter accepts. But David takes two weeks to get back to Peter with a counteroffer. Before he could give David a reply to his counteroffer, Peter is killed in a fire that burned down Lot 1. Which of the following would be true of this case? A) The offer is terminated due to lapse of time. B) The offer is terminated due to destruction of the subject matter. C) The offer is terminated due to death of the offeror. D) David can still buy the house for Peter's original offer.
C) The offer is terminated due to death of the offeror.
An offer is terminated on the grounds of "supervening illegality" when ________. A) the set period in the offer has expired B) the subject matter in the offer has been destroyed C) a statute or court decision deems an object of the offer unlawful D) the offeror or offeree passes away prior to the offer being accepted
C) a statute or court decision deems an object of the offer unlawful
An invitation to make an offer or an actual offer is referred to as a(n) ________. A) proposal B) reward C) advertisement D) bid
C) advertisement
A(n) ________ is a voluntary exchange of promises between two or more legally competent persons to do, or refrain from doing, an act. A) offer B) advertisement C) agreement D) proposal
C) agreement
Which of the following contradicts the mirror image rule? A) silence as acceptance B) option contract C) counteroffer D) acceptance-upon-dispatch
C) counteroffer
If a fire destroys an office building that has been listed for sale, the offer is automatically terminated due to ________. A) supervening illegality B) death or incompetency of the offeror C) destruction of the subject matter D) lapse of time
C) destruction of the subject matter
Mandy has decided to sell her iPad, and makes an offer to her friend Shelly for $250. Shelly tells Mandy she is willing to buy the iPad, but would be glad if Shelly could lower her asking price. Mandy lowered the price to $210 and Shelly bought it. Which of the following would describe Shelly's response to Mandy for her first offer? A) counteroffer B) rejection C) equivocal acceptance D) grumbling acceptance
C) equivocal acceptance
The ________ states that an acceptance is effective when it is dispatched, even if it is lost in transmission. A) rule of silence as acceptance B) mirror image rule C) mailbox rule D) mutual assent rule
C) mailbox rule
An agreement that an offeror will not sell his property for a specified period subsequent to the offeree paying consideration to the offeror is referred to as a(n) ________. A) unequivocal acceptance B) contract of adhesion C) option contract D) firm offer
C) option contract
A(n) ________ is a withdrawal of an offer by the offeror that terminates the offer. A) rejection B) advertisement C) revocation D) counteroffer
C) revocation
Which of the following would be considered an offer to form a unilateral contract? A) advertisement B) auction without reserve C) reward offer D) auction with reserve
C) reward offer
An option contract is terminated upon the death of the offeror.
FALSE
Jennifer had put up a reward offer, in the local newspaper, for her lost watch for two weeks now. But after buying a new watch, Jennifer decided to not pursue her old watch, and so decided not to put up the reward offer in the third week. Betty, who found the watch, and saw the reward offer, returned the watch to Jennifer during the third week. Which of the following would be true about Betty receiving or not receiving the reward? A) Betty will not receive the reward as Jennifer had already revoked it. B) Betty will not receive the reward as Jennifer had stopped publishing the reward offer. C) Betty cannot claim the reward because she had not performed all the requested acts. D) Betty can claim the reward because Jennifer had not published a notice of revocation.
D) Betty can claim the reward because Jennifer had not published a notice of revocation.
________ is a stipulation in an offer that says the acceptance must be by a specified means of communication. A) Option contract B) Mirror image rule C) Implied authorization D) Express authorization
D) Express authorization
Techstate, a hardware manufacturer in the United States, has an existing contract with a client based in the Republic of Karthasia, which is going through a domestic political crisis. The resulting upheaval in that country has led to some of the shipments to the client being destroyed by warring factions. As a sanction against the country, the United States government places an embargo on all exports to that country by U.S. firms. What will be the state of the contract between Techstate and the client in Karthasia after the embargo? A) It will be terminated due to destruction of subject matter. B) It will be terminated due to incompetency of the offeror. C) It will be terminated due to lapse of time. D) It will be terminated due to supervening illegality.
D) It will be terminated due to supervening illegality.
Which of the following is true about an option contract? A) If the offeree chooses not to buy the property then money paid in consideration must be returned. B) If money is paid as consideration, then that is not applied to the sale price. C) Death or incompetency of either party terminates an option contract. D) The offer cannot be revoke during the option period.
D) The offer cannot be revoke during the option period.
In which of the following types of offers does the seller offer the goods for sale? A) revocation B) reward C) auction with reserve D) auction without reserve
D) auction without reserve
Ron uses his status message on his Facebook account to invite his friends to buy his desktop computer. Carl, a friend, is interested and calls Ron to express his interest. Ron tells him that he is selling the computer for $400. Carl responds by saying that he is ready to buy it for $350. Ron thinks about it for a while and accepts the offer. They decide to make the exchange after three days. But the next day, Ron puts up another update on his Facebook account saying that he has decided not to sell his computer. Carl's response to Ron's offer is considered as a(n) ________. A) mirror image rule acceptance B) rejection C) unequivocal acceptance D) counteroffer
D) counteroffer
A term in a contract that can reasonably be supplied by the courts is referred to as a(n) ________. A) intent term B) unconditional term C) objective term D) implied term
D) implied term
An offer is terminated on the grounds of "lapse of time" if ________. A) the offeror dies before the offeree has accepted the offer B) the offer is not communicated to the offeree C) the offeror has communicated to the offeree a set time which is not mentioned in the offer D) the offer is not accepted within a stated time period
D) the offer is not accepted within a stated time period
The mirror image rule states that ________. A) the offeree's counteroffer should match the value of the offeror's offer B) the offeree is allowed to modify the terms of the offer C) the offeror can modify the terms of the offer even after the offeree has accepted it D) the offeree must accept the terms as stated in the offer
D) the offeree must accept the terms as stated in the offer
A contract is created upon an equivocal response to an offer from the offeree.
FALSE
A reward is a form of bilateral contract.
FALSE
A contract requires an offer and an acceptance.
TRUE
A counteroffer is a rejection of the original offer.
TRUE
A rejection of an offer is not effective until it is actually received by the offeror.
TRUE
Advertisements are considered to be invitations to make an offer.
TRUE
An offer is not effective until it is actually received by the offeree.
TRUE
An offer is terminated if the subject matter of the offer is destroyed.
TRUE
An offer terminates upon the expiration of a stated time in the offer.
TRUE
An offer that is made to two or more persons jointly must be accepted jointly.
TRUE
An unequivocal acceptance must not contain conditions or exceptions.
TRUE
Identification of the parties of a contract would be an express term.
TRUE
If the object of an offer is made illegal prior to the acceptance of the offer, then the offer terminates.
TRUE
Implied terms in a contract can be supplied by the courts.
TRUE
In an auction with reserve, the bidder is the offeror.
TRUE
In an auction with reserve, the seller retains the right to refuse the highest bidder.
TRUE
In an auction without reserve, the seller is obliged sell the goods to the highest bidder.
TRUE
Only the offeree has the legal power to accept an offer and create a contract.
TRUE
The offer must be communicated to the offeree for the offer to be effective.
TRUE
To meet the mirror image rule, the offeree must accept the terms of the offer without modification.
TRUE
Unless otherwise expressly stated, an auction is considered an auction with reserve.
TRUE
Give an account of the express terms that are parts of an offer.
The terms of an offer must be clear enough for the offeree to be able to decide whether to accept or reject the terms of the offer. To be considered definite, an offer generally must contain the following terms: (1) identification of the parties, (2) identification of the subject matter and quantity, (3) consideration to be paid, and (4) time of performance. Complex contracts usually state additional terms. Most offers and contracts set forth express terms that identify the parties, the subject matter of the contract, the consideration to be paid by the parties, and the time of performance, as well as other terms of the offer and contract. If the terms are indefinite, the courts usually cannot enforce the contract or determine an appropriate remedy for its breach.
Explain the importance of "time of acceptance" of contracts.
Under the common law of contracts, acceptance of a bilateral contract occurs when the offeree dispatches the acceptance by an authorized means of communication. This rule is called the acceptance-upon-dispatch rule or, more commonly, the mailbox rule. Under this rule, the acceptance is effective when it is dispatched, even if it is lost in transmission. If an offeree first dispatches a rejection and then sends an acceptance, the mailbox rule does not apply to the acceptance. The problem of lost acceptances can be minimized by expressly altering the mailbox rule. The offeror can do this by stating in the offer that acceptance is effective only upon actual receipt of the acceptance.
How can an offeror revoke an offer?
Under the common law, an offeror may revoke (i.e., withdraw) an offer any time prior to its acceptance by the offeree. Generally, an offer can be so revoked even if the offeror promised to keep the offer open for a longer time. The revocation may be communicated to the offeree by the offeror or by a third party and made by (1) the offeror's express statement or (2) an act of the offeror that is inconsistent with the offer. Generally, a revocation of an offer is not effective until it is actually received by the offeree.