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ROGER LeROY MILLER Institute for University Studies Arlington, Texas GAYLORD A. JENTZ Herbert D. Kelleher Emeritus Professor in Business Law University of Texas at Austin Summarized Cases, 8 th Ed., and Excerpted Cases, 2 nd Ed. Learning Objectives Learning Objectives Copyright © 2010 South-Western 2 –OFFER, and –ACCEPTANCE. Agreement Agreement Copyright © 2010 South-Western 3 Requirements of the Offer Requirements of the Offer Copyright © 2010 South-Western 4TRANSCRIPT
Fundamentals of Business Fundamentals of Business LawLaw
Summarized Cases, 8th Ed., and Excerpted Cases, 2nd Ed.
ROGER LeROY MILLERInstitute for University Studies
Arlington, Texas
GAYLORD A. JENTZHerbert D. Kelleher Emeritus Professor in Business Law
University of Texas at Austin
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Learning ObjectivesLearning Objectives• What elements are necessary for an effective
offer? What are some examples of nonoffers?
• In what circumstances will an offer be irrevocable?
• What are the elements necessary for an effective acceptance?
• What is consideration? What is required for consideration to be legally sufficient?
• In what circumstances might a promise be enforced despite a lack of consideration?
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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AgreementAgreement• An essential element of contract
formation is AGREEMENT: – OFFER, and– ACCEPTANCE.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Requirements of the Requirements of the OfferOffer
• Serious Intention,• Reasonably Definite Terms, and• Communication to Offeree.• CASE 8.1 Lucy v. Zehmer (1954).
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Offer: IntentionOffer: Intention• Opinions are not offers.• Good Intentions are not offers.• Preliminary Negotiations are not offers.• Advertisements and Circulars are
considered “invitations to negotiate.”• Auctions are not offers.• Agreements to Agree are not offers.
– CASE 8.1 Basis Technology Corp. v. Amazon.com, Inc. (Mass, 2008).
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Offer: DefinitenessOffer: Definiteness• Offer must have reasonably definite
terms so a court can determine whether breach occurred.– Offer can require acceptance to be
worded in such a way for contract to be formed.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Offer: CommunicationOffer: Communication
• Communication: Offer must be communicated to offeree.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Termination of the OfferTermination of the Offer• By Act of the Parties.• Revocation by Offeror (unless
irrevocable).• Rejection by Offeree (or counteroffer).• Operation of Law:
– Lapse of time.– Destruction of the subject matter. – Death or incompetence of Offeror or Offeree. – Supervening illegality of proposed contract.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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AcceptanceAcceptance• Voluntary act by Offeree that shows assent
to original terms.• Unequivocal Acceptance: “Mirror Image”
Rule.– Offeree must unequivocally accept offer.– Additional terms may be considered a
counteroffer.• Silence as Acceptance.
– Ordinarily silence is not acceptance, unless offeree has duty to speak (benefit of services).
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Acceptance Acceptance • Communication of Acceptance.
– Authorized Means of Communication is either express or implied by form of offer (e.g., U.S. mail, fax, email).
• “Mailbox Rule”: Offeree accepts offer when the acceptance is dispatched.
• Authorized Means of Acceptance: Offeree must accept the offer in the form it was received, unless offer requires a different method (e.g., Fed-Ex, or receipt by Offeror).
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Consideration and Its Consideration and Its RequirementsRequirements
• Consideration is value given in return for a promise.– Something of legally sufficient value,– Given in a bargained-for-exchange between
the parties.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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• Sufficient consideration must be something of value in the eyes of the law.
• Adequate consideration is “fair” although courts do not generally consider this.
• If consideration is inadequate (e.g., fraud) courts may strike down the contract as unconscionable.
Legal Sufficiency Legal Sufficiency andand AdequacyAdequacy
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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• Pre-Existing Duty.– Unforeseen Difficulties.– Rescission and New Contract.
• Past Consideration.– CASE 8.3 Access Organics, Inc. v.
Hernandez (Montana, 2008).• Illusory Promises.
Agreements That Lack Agreements That Lack ConsiderationConsideration
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Settlement of ClaimsSettlement of Claims• Accord and Satisfaction.
– Amount of debt must be in dispute.– If liquidated debt (uncertain) accord and
satisfaction cannot occur.• Release.
– Good faith, signed writing, consideration.
• Covenant Not to Sue.– Does not always bar further recovery.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Promissory EstoppelPromissory Estoppel• Promissory Estoppel (“detrimental reliance”)
doctrine applies when a person relies on the promise of another to her legal detriment.
• Promisor is “estopped” (precluded) from revoking the promise. There must be:– Clear and definite promise with substantial
reliance– Justice is served by enforcement of the promise.