Chapter 6: Offer and Acceptance

Two essential elements of a contract are:

(1) an offer, either expressed or implied; and (2) an acceptance, either expressed or implied.

inquiries Not Constituting Rejection

-The offeree may make an inquiry about terms that differ from the offer's terms without rejecting the offer -If the offeror says no, the original offer may still be accepted if it has not been revoked in the meantime

acceptance

1. Assent of buyer to become owner of goods; 2. Assent to an offer resulting in a contract; 3. Drawee's signed agreement to pay draft

A valid offer includes three requirements:

1. It must be definite. 2. It must appear to be seriously intended. 3. It must be communicated to the offeree.

the offer must be definite

A contract will not be enforced unless the court can determine what the parties agreed to. The offeror's intentions are ascertained from the offer, and these intentions cannot be ascertained unless the offer is definite

What happens when an offer doesn't specify how it may be accepted?

An offer that does not specify a particular manner of acceptance may be accepted in any manner reasonable under the circumstances -However, the offeror may stipulate that the acceptance must be written and received by the offeror in order to be effective -If there is no requirement of delivery, a properly mailed acceptance is effective when it is posted

option

Binding promise to hold an offer open

firm option

A merchant's signed, written offer to sell or purchase goods, saying it will be held open

offeror

A person who makes an offer

mailbox rule

Acceptance is generally effective upon dispatch. Terminations are effective when received.

what is the offer and who is the offeree?

The proposal to make a contract is the offer. The offeror is the person who makes the offer; the offeree is the person to whom the offer is made

Objectives

Three requirements of a valid offer. Constitutes an invitation to make an offer. Option is a promise to keep an offer open. Duration of an offer and what terminates an offer

The Offer Must Be Communicated to the Offeree

Until the offeror makes the offer known to the offeree, it is not certain that it is intended that the offeree may accept and thereby impose a binding contract. Accordingly, the offeree cannot accept an offer until the offeror has communicated the offer to the offeree.

When is a binding contract formed?

When an offer has been properly communicated to the party for whom it is intended, and that party or an authorized agent accepts, a binding contract is formed. The offer then can no longer be revoked

Offer

a proposal to make a contract

Ratification

confirming an act which was executed without authority or an act which was voidable

examples of when a contract cannot be excepted due to communication?

if one writes out an offer, and it falls into the hands of the offeree without the knowledge or consent of the offeror, it cannot be accepted -Furthermore, an offer directed to a specific individual or firm cannot be accepted by anyone else. This is because people have a right to choose the parties with whom they deal

In states in which the seal has its common law effect, an offer cannot be revoked when:

it is contained in a sealed writing that states that it will not be revoked

The Uniform Commercial Code modifies this strict rule somewhat as to contracts for the sale of goods

it is not always practical for a businessperson to make an offer for the sale of merchandise that is definite as to price. The offeror may state that the price will be determined by the market price at a future date or by a third party. If the contract does not specify the price, the buyer must ordinarily pay the reasonable value of the goods.

Necessaries

items, required or proper and useful, for sustaining a human being at an appropriate living standard (i.e. food, clothing and shelter)

circulars

mailed advertisements (equivalent of modern day junk mail)

When may an advertisement be an offer?

may be an offer when it clearly shows it is intended as an offer. This is primarily true with advertisements that offer rewards

if the offer stipulates a particular mode of acceptance, the offeree must:

meet those standards in order for a contract to be formed

The general rule is that circulars are:

not offers but invitations to the recipients to make an offer

Terms usually required to be stated would include

the identity of the offeree; the subject matter of the offer; and the price, quantity, and time of performance.

Offeror

the party who initiates, or makes an offer

Offeree

the person to whom an offer is made

Disaffirmance

the repudiation of, or election to avoid, a voidable contract

What are most "offers"?

they are treated as invitations to the public to make offers at certain terms and prices.

When does an agreement exist?

when one party makes an offer, and the other party accepts the offer The parties may expressly state, either orally or in writing, what they agree to do, or they may indicate their intentions by their actions

The most common types of general invitations are:

advertisements, window displays, catalogs, price lists, and circulars -there is no binding requirement to sell at this price in these cases

A valid contract is created by the:

agreement of the parties. This agreement, vital to the formation of a contract, is frequently called "a meeting of the minds" of the parties

What can an acceptance be made by?

an acceptance can be made by telephone, by fax, or in some jurisdictions by e-mail. The contract is made on the date and at the place the fax acceptance is sent.

Acceptance

an agreement to an offer resulting in a contract

Counter offer

an intended acceptance which changes or qualifies an original offer and in effect, rejects that offer and becomes a new offer

How must an offer be accepted?

an offer must be accepted without any deviation in its terms. If the intended acceptance varies or qualifies the offer, this counteroffer rejects the original offer

Uniform Commercial Code, Sec. 2-206(1)(a), relating to sales of goods

"Unless otherwise unambiguously indicated by the language or circumstances, an offer to make a [sales] contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances."

Several rules affect the duration of an offer:

1. The offeror may revoke an offer at any time before its acceptance. If it has been revoked, the offeree can no longer accept it and create a contract. Normally, the offer can be revoked even if the offeror has promised to keep it open 2. An option cannot be revoked at will. If the offeror receives something of value in return for a promise to hold the offer open, it is said to be an option, and this type of offer cannot be revoked 3. A revocation of an offer must be communicated to the offeree prior to the acceptance. Mere intention to revoke is not sufficient. This is true even though the intent is clearly shown to people other than the offeree, as when the offeror dictates a letter of revocation 4. An offer is terminated by the lapse of the time specified in the offer. If no time is specified in the offer, it is terminated by a lapse of a reasonable time after being communicated to the offeree. A reasonable length of time varies with each case, depending on the circumstances. It may be ten minutes in one case, and sixty days in another. Important circumstances are whether the price of the goods or services involved is fluctuating rapidly, whether perishable goods are involved, and whether there is keen competition with respect to the subject matter of the contract. 5. Death or insanity of the offeror automatically terminates the offer. This applies even though the offeree is not aware of the death or the insanity of the offeror and communicates an acceptance of the offer. Both parties must be alive and competent to contract at the moment the acceptance is properly communicated to the offeror. 6. Rejection of the offer by the offeree and communication of the rejection to the offeror terminates the offer 7.If, after an offer has been made, the performance of the contract becomes illegal, the offer is terminated.

Only in rare cases does silence constitute an acceptance. Those instances include:

1. When the offeree accepts the benefit of offered services with reasonable opportunity to reject them, knowing compensation is expected 2. When the offeree has given the offeror reason to know that assent might be shown by silence, and in remaining silent the offeree intends to accept the offer 3. When, because of previous dealings, it is reasonable for the offeree to notify the offeror of non-acceptance

counter offer

Offeree's response that rejects offer by varying its terms -This rejection terminates the offer.

The Offer Must Appear to Be Seriously Intended

One may make an offer in jest, banter, fear, or extreme anger, and if this fact is known or should be known by the offeree because of the surrounding circumstances, no contract is formed. A business transaction is ordinarily not entered into in jest or because of extreme fear or anger, and the offeree has no right to think that the offer is seriously intended when it is made under these circumstances