Chapter 7

Offer and Acceptance

HOT DEBATE!!!

Celia had worked after school since she was 14 to save money for a car. When she turned 18, she bought a VW. Two weeks later she was driving a group of friends to school. The car stalled at a stop light and people behind her began honking. Celia became frustrated when the car wouldn’t start and said, “I’ll sell this thing for $300 right now!” Joan gathered $300 cash from her purse and said, “I accept, here’s your money.”

Should Celia be bound because the literal meaning of her words suggests she intended to sell the car?

What’s YOUR Verdict?

Pedro and Seamus were chatting during the break between classes. “Remember ‘Great Moments in Sports’, the video that I showed you last week?” asked Pedro. “You thought it was great and said you wished it was yours. I’ll let you have it for fifteen bucks. Want it?” “Sure!” Seamus answered. “Bring it to school tomorrow, okay?”

Did the two friends create a contract?

I. What is a contract???

A. Contract: An agreement that courts will enforceBetween 2 partiesBasis for ALL economic activity

B. 6 requirements of a contract

1. Offer and acceptance a. Must be serious, definite offerb. The terms of offer must be accepted by party to

whom it was communicated

2. Genuine Assenta. Can not be based on one party deceiving the otherb. Must not use unfair practice/pressure

3. Legalitya. What the parties agree to must be legalb. Cannot agree to commit a crime or tort for money

6 requirements of a contract

4. Considerationa. Both sides must receive something of legal value as

a result of transaction5. Capacity

a. Must be able to contract for themselves rather than a parent or legal rep being obligated

6. Writinga. SOME agreements must be in writing to be

enforceable in court (ex. real estate)

***Indication of INTENT to contract, not the language used, is most important in a contract***

Requirements of an Offer

Anchors Aweigh, a boat retailer, placed an ad in a local newspaper announcing a one-day sale of cabin cruisers for the ‘bargain price’ of $22,500 each. The dealer had 5 cruisers in stock, and they all were sold within one hour. During the rest of the day, seven other would-be buyers came in to purchase a bargain cruiser.

Did the Anchors Aweigh advertisement make offers to the would-be buyers?

Requirements of an Offer

C. Offeror: Party who makes an offer to form a contract

D. Offeree: Party to whom an offer is madeA person who is not the intended offeree

cannot accept the offer

E. Offer: Proposal by an offeror to do something, provided the offeree does something in return

1. Requirements to create a valid offer:

a. The offeror must appear to intend to create a legal obligation

b. The terms must be definite and complete

c. The offer must be communicated to the offeree

F. Expression of Legal Intent to Create a Legal Obligation

1. Test of a Reasonable PersonA legal test that will prevent people from lying about

what they were thinkingSubjective vs. Objective

Law is concerned with appearance NOT what was in the mind; what you were thinking WHY?????

EX) If you are joking, but a reasonable person would interpret your conduct as indicating your intent to contract, you have made an offer

EX) BUT, if you are serious, but a reasonable person interprets your conduct as a joke, then no offer is made

Expression of Legal Intent to Create a Legal Obligation

2. Facts and Circumstances Words spoken in jest, in example, in frenzied terror, or in

anger would not be offers

3. Preliminary Negotiations When you try to determine what someone will charge for

something without indicating intent to contract EX) ‘Would you take $5000 for your car?’ Ex) ‘If I sold my car for $7000, would anybody be interested?’

Social Agreements – Meeting a friend for dinner No contract or legal obligation Break a date no legal obligation

G. Offer Must be Complete and Clear

1. Complete: must include price, subject matter, and quantity

2. Clear specific3. Implied terms: terms might be implied by law or

common business practices- no price specified current market price

Ex) Real estate must include (1) identity of specified lot (2) price (3) full terms of payments (4) date for delivery of possession (5) date for delivery of deed

* If anything is missing, not valid offer

Offer Must be Complete and Clear

4. Advertisements: are treated as invitations to customers to make offers Statutes prohibit fraud or misleading ads

May be an offer when: a. Ad is clearly worded to address problem of limited stock

‘Subject to stock on hand’ ‘Whiles supplies last’ ‘Only to first person who accepts terms of offer’

b. Asks offeree to perform an act as way of accepting ‘Will sell to first person to appear at the mall after

opening’EX) VALID OFFER: “New power lawnmower will be sold

for $20 to the first person to appear at the main door of shopping mall on Saturday morning after 6:00AM”

Which is a valid offer???

Nick asks Kim to do to dinner at the Sunset Restaurant at 7pm on Sat.

Tim says to Blake, ‘I will buy one of your cars.”

Jane says ‘I will give you $2000 for your fishing boat.’

Bob says ‘Would you think about selling your fishing boat for $2000’???

H. Offer Must be Communicated to the Offeree

Person who is not the intended offeree CANNOT accept the offer

Person cannot accept offer without knowing it has been made

READ, A Question of Ethics, pg 101Is Major legally entitled to the reward?Is Sarah ethically obliged to give him the

reward?

Your assignment…Due NOW!!!

RE-READ Chapter 7-1 - NOTHING BUT READING FOR THE NEXT 6 MINUTES.

Crossword Puzzle 7-1

ON BACK of Puzzle: pg 102 (1-13)

Chapter 7-2: Termination of Offers

What’s your verdict, pg 103

II. How can offers be ended??

A. Right of Revocation: Offer is revoked by offeror before it is acceptedREVOCATION: the right to withdraw an offer BEFORE it is

acceptedB. Time stated in offer – how long you have to decide and

when the decision is needed byC. Reasonable length of time- depends on circumstances

(should specify w/ offer)D. Rejection by offereeE. Counteroffer – if the offeree changes the offeror’s terms

in important (material) ways – the ORIGINAL offer is terminated

F. Death or insanity of either the offeror or the offeree

Reasonable timeWhich offer should be terminated first?

Offer to deliver bricksOffer to deliver fresh cream

Read In this case, page 104Was a contract formed????

III. How can an offer be kept open???A. Option: separate contract arising when

the offeree gives the offeror something of value in return for a promise to leave an offer open

ex) Down payment on a carB. Firm offers: binding offer stated in writing

how long it is to be held open UCC makes some firm offers binding for a

stated time (no more than 3 months) READ In this case..., pg 104

Assignment: Chapter 7-2 Review, p. 105

Complete 1-152-sided worksheet

Practice ActivityPuzzle

Chapter 7-3: Acceptances

What’s your verdict? Pg 106

IV. How are Acceptances Created?

A. Acceptance: occurs when a party to whom an offer has been made agrees to the proposal

If mailing, faxing, etc. it is USUALLY effective when SENT (NOT received)

In this case, pg 106

B. Acceptance MUST...1. Be made by the person or persons to whom the offer was

made2. Match the terms of the offer

Mirror Image Rule: requires that terms of acceptance must exactly match the terms contained in the offerVariation = counterofferApplies to services and realty

Goods: sometimes an ‘unequivocal acceptance’ emerges, terms don’t match exactly but contract is valid If party is a consumer, then new terms are PROPOSALS, not

part of the contract If party is a merchant, new/changed terms are NOT a part of

the contract if the offeror objects If party is a merchant, new/changed terms ARE part of the

contract if offeror is silent and terms are minor In this case, 107

Acceptance MUST...

3. Be communicated to the offeror: Silence as acceptance??? - Only in a continuing relationship, the

parties can agree to silence = acceptanceIe: Grocery store ordering fresh produce daily until silence is brokenIe: Order coffee/medication/makeup comes monthly until silence is

broken

a. Unilateral contract: promises something in return for the offeree’s performance (1 party)Ex) promise of pymt for finding a lost dog Performance = acceptance

b. Bilateral contract: (most contracts) – offer is accepted by communicating a promise (2 specific parties)Ex) promise of pymt in exchange for promise to paint fence

both need to perform obligations In this case, pg 107

When is acceptance effective???

Orally, by phone, in person, writing, email, fax “The Mailbox Rule”

ALMOST all forms of contractual communication take effect when received, EXCEPT ONE ACCEPTANCE

Most take effect when SENT unless otherwise specified

UCC provides acceptance of an offer to buy goods may be made ‘in any manner and by any medium reasonable in the circumstances’ unless otherwise clearly ‘indicated by the language or circumstances’

ASSIGNMENT:

Type the following into your notes: ‘When you enter into a contract’ - pg 109

Questions 1-10, pg 108-1092-sided Review worksheet

Chapter 7 Review:

Legal vocab, pg 110, 1-10Think Critically, 17Analyze Real Cases, 20, 22Case for Legal Thinking, pg 113Chapter 7 Review worksheetTest – MONDAY!!!