Chapter 3: Formation of a Contract: Offer and Acceptance: • *A contract is the meeting of the minds for one purpose. Parties must manifest to each other their mutual assent to the same bargain at the same time. • OFFER : proposal made with the purpose of obtaining an acceptance thereby creating a contract. • Offeror must have intent to enter into contract.
• Preliminary Negotiation: considered a form of solicitation and normally will not constitute an offer. Lacking is the commitment of a promise by the offeror to be bound to an offer. • Test to determine intent: Would a reasonable person in the offeree’s position believe that the offeror intended to be bound to a contract?
• Communication to Offeree: offer must be communicated to offeree to be accepted. Effect of a valid communication is to give the person to whom it was communicated the ability to accept. • Terms of Offer must be Definite: terms of offer must be sufficiently certain and definite so that the offeree knows what to accept. Material essential terms are: • (1) the parties; (2) price; (3) subject matter of the contract; and (4) the time of performance of the contract.
• (1) Parties: Need to identify offeror and offeree to contract. Can discern offeror but need to determine who the offeree is because it is the offeree who has the power of acceptance of offer. Unless offeree is specifically identified then any person or persons to whom the offer is communicated is an offeree. • Example: Carl offers to buy 100 shares of Gamma, Inc. stock for $3 a share from the first stockholder who accepts. Makes this offer to all Gamma shareholders.
• (2) Price: Must be specified in the offer. Both sides must give and receive something of legal value to make the contract valid. If parties refer to an objective standard by which the price can be determined then the offer will stand.
- Fall '07
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