Ch. 12- Offer and acceptance of contracts

Acceptance

-assent of the offer to the offer's terms.

firm offer [exception to revocation rule that an offer can be revoked any time before it's accepted]

offer that states it is irrevocable or irrevocable for a period of time.

What constitutes acceptance?

- clear expression of agreement - Whether there's an acceptance depends on whether the offeree has manifested an intent to accept [must be absolute and unconditional]

Definiteness

- the law does not favor the destruction of contracts. - a court may not rewrite the agreement of the parties in order to make it definite. - an offer may be made definite by referring to another writing or to trade practices and prior dealings of the parties. - terms may be implied from conduct

Mailbox rule

A mailed acceptance takes effect when it is placed in control of the US Postal Service or mail carrier (unless otherwise stated).

What constitutes a revocation?

Any form of communication or words indicating termination of the offer. - must be done before acceptance of contract.

Effect of acceptance

Creates a binding agreement or contract, assuming that all of the elements of the contract are present.

Wigod v. Wells Fargo A valid offer?

Issue- does Fargo induce a reasonable belief in Wigod that she can bind Fargo by accepting the offer? an offer= a manifestation of willingness to enter into a bargain as to conclude it. - Decision in favor of Wigod - a unilateral offer to modify Wigod's loan. Compliance = acceptance = action taken - Holding: The test for an offer is whether it induces a reasonable belief in the offeree (recipient) that acceptance binds the offeror.

Types of binding contracts

Requirements contract- contract to buy all requirements from a seller. Output contract- contract of a producer to sell the entire production/output to a given buyer.

Exceptions to definiteness

The law recognizes that it may be impossible to provide definite terms. An indefinite term is tied to an independent factor that is definitely achievable in the near future.

What is the offer's privilege?

The offer may refuse to accept an offer. No acceptance? No contract.

T/F: Niether party can withdraw from or cancel a contract made without consent of the other party.

True

Telephone acceptances are effective where and when dispatched.

True (mailbox rule applies)

An offer terminates on a date set if it has not yet been accepted.

True!

If the offer accepts an offer before it is effectively revoked, a valid contract is created.

True!

If the offeror or offer dies/becomes incompetent before the offer is accepted, the offer is terminated.

True!

communication of a rejection terminates an offer even though the period for which the offeror agreed to keep the offer open did not yet expire.

True! If the offer rejects the offer and communicates the rejection, it's terminated.

When a late acceptance has no legal effect, a contract is not formed.

True! Rule: The offeror is the master of the offer! (WRT time, date, rules...)

If an offer is indefinite, its acceptance will not create a contract because it will be held that the resulting agreement is too vague to enforce.

True! --> you can avoid this by making an indefinite offer definite by incorporating terms or provisions that are definite.

When a seller claims to accept an offer after it has lapsed the expiration of time, the seller's acceptance of the contract is a counteroffer.

True! A contract is not created unless the counteroffer is accepted.

An offeror can revoke an offer after it is presented and before it is accepted.

True! An ordinary offer may be revoked any time before it is accepted.

Acceptance by the offer is the last step in the formation of a bilateral contract.

True.

Once a bid is accepted, an auctioneer cannot cancel the sale.

True.

Only the person to whom the offer is directed may accept it.

True. When one to whom the offer was not made attempts to accept it, the attempted acceptance has the effect of an offer--> can be accepted by the offeror to create a binding contract.

Acceptance of an offer is effective upon dispatch. Offers, revocations, and rejections are generally effective only upon the offer's receipt.

True. In other words, mailbox rule doesn't apply.

When is a contract formed?

Upon the offeror's receipt of the acceptance.

If the performance of the contract becomes illegal after the offer is made, is the offer terminated?

Yes!

option contract

a binding promise to keep an offer open for a stated period of time/until a specific date. - requires the promisor receive consideration (i.e. a sum of money) as a promise to keep the offer open. - the option is a contract to refrain from revoking an offer***

divisible contract

a contract which consists of two or more parts, calls for corresponding performances of each part.

Revocation

a revocation can be learned of indirectly and it can still be valid.

Best efforts clauses

best efforts = at least some effort which obliges one to fulfill one's obligation to a contract.

termination of offer

by revocation, counteroffer, rejection, lapse of time, death, disability, or illegality.

offer

expresses the willingness of the offeror to enter into a contractual agreement regarding a particular subject. - a promise that is conditional upon an act, or a return promise.

Invitation to negotiate

is not necessarily an offer. It is often just a preliminary discussion that is not binding for either party. A willingness to consider an offer may merely be presented. - a contract to enter a contract (agreement to reach an agreement) in the future is of no effect.

Delphi Corp.

issue- are price adjustments warranted under a requirements contract? decision- According to contract, price adjustments were not allowed, so the price could not change. Requirements may fluctuate, but there's no ambiguity of contact. Holding- indefiniteness covers uncertainty in contract, but there is little room for negotiation under a requirements contract (buyer can control the time/quantities of delivery according to the terms specified).

counteroffer

rejects the original offer and makes changes to it - rejection of the original offer constitutes a counteroffer - no offer arises unless the original offeror accepts the counteroffer.