Mod 3 exam review.docx - Lesson 1 MOD 3 pg 12 ELO Identify...

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Lesson 1 MOD 3 pg. 12: ELO: Identify the essential elements of a contract Lesson 1 – Contract Formation Principles” reading, e.g., Mutual Assent, Considerations 1. MOD 3pg 10-11: Mutual assent (Offer and Acceptance) A contract is formed by acceptance of an offer . An offer is a proposal by a person (the “offeror”) to enter into a contract. The person receiving the offer is called the “offeree”. When the offeree intends to accept the offer and communicates this acceptance to the offeror, a contract is formed. As simple as these basic building blocks of contract formation may appear, the question of whether a contract has been formed can be complex. Indeed, the more complex the proposed agreement, the greater the chance that a contract has not been effectively formed or, if there is an agreement, that the agreement may in some way be flawe d or imperfect. Many issues may arise. Most offers can be accepted only by or on behalf of the designated offeree . The offeror generally has the absolute right to choose the person with whom he or she wants to enter a contract. Subject to the ordinary rules concerning the legal relationship of principal-agent, someone other than the offeree can accept the offer for the benefit of the offeree, provided that the offeror has not stipulated to the contrary. The acceptance by the offeree must be unequivocal. The reason is that the offeror must know what the state of the offer is, and must not be put in a position of uncertainty by a communication from the offeree that is ambiguous. Therefore, a conditional acceptance (where the offeree accepts subject to the offeror doing something more than promised in the offer) or a communication that hedges, procrastinates, or leaves the offeror in doubt, does not constitute a binding acceptance. Contract formation requires mutual assent by at least two persons . These parties must “manifest” (declare, demonstrate) this assent in an objective manner. It is sometimes said that contract formation requires a "meeting of the minds". The parties’ minds need not "meet" in a subjective sense; the parties need not be clairvoyant. Mutual assent will be objectively assessed: How would a reasonable person interpret the words and or conduct that were exchanged by the parties? If the contract is in writing, the issue becomes how should the language of the contract be read? If the contract language is clear and yields only one reasonable interpretation, one party’s subjective misunderstanding of the language is not relevant. A party’s subjective understanding only becomes relevant if the offer is ambiguous. Consideration Contracts are based on bargain and exchange. Each party receives something of value and gives something of value. " Consideration" is the name given to that "value" given by each party. Actually, many things may constitute consideration: an act, a promise, a forbearance, or the creation, modification or destruction of a legal relation. (Restatement of Contracts, Section 75.) In a bilateral

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