Unformatted text preview: Chapter 13
FORMATION OF CONTRACTS: OFFER AND ACCEPTANCE Requirements of an Offer
The offer must have contractual intent. This intent is lacking if the statement is merely an
invitation to negotiate, a statement of intention, or an agreement to agree at a later date. Newspaper ads, price quotations, and catalog prices are ordinarily invitations to negotiate. 2 Requirements of an Offer
An offer must be definite, with terms that are
clear and spelled out. Definite by incorporation. Implied Terms (by law or conduct). Exceptions: good faith performance, requirements
and output contracts. Offer must be communicated to Offeree. 3 Termination of Offer
Revocation. The ordinary offer may be revoked
at any time by the offeror. All that is required is the showing of intent to revoke and the communication of that intent to the offeree. By definition, an attempted acceptance made after the offer has been terminated has no effect. 4 Termination of Offer
An offer is also terminated by: Counteroffer is the express rejection of the offer
with a new offer. Lapse of the time stated in the offer or of a reasonable time when none is stated. Death or disability of either party. Change of law that makes illegal a contract based on the particular offer. 5 Termination of an Offer
Revocation Prior to Acceptance* By Offeror Death or Incapacity Time Limitations Placed in the Offer Rejection By Offeree Counteroffer Death or Incapacity *Options and firm offers excepted
6 Acceptance of Offer
When the offer is accepted, a contract arises. Only the offeree can accept an offer, and the
acceptance must be of the offer exactly as made without any qualification or change. The acceptance is any manifestation of intent to agree to the terms of the offer. Ordinarily, silence or failure to act does not constitute acceptance.
7 Acceptance of an Offer
Offeror makes an offer Offeree accepts offer unconditionally Contract Arises Offeree changes or adds terms Counteroffer Offeree rejects offer No contract exists Original offeror accepts counteroffer unconditionally Original offeror changes or adds terms Counteroffer Original offeror rejects counteroffer 8 Acceptance of an Offer
An acceptance does not exist until the words or
conduct demonstrating assent to the offer is communicated to the offeror. Mailbox Rule: Acceptance by mail takes effect at
the time and place when and where the letter is mailed or the fax is transmitted. RULE: Acceptance upon dispatch, revocation upon receipt. 9 Mailbox Rule: Is There a Contract?
FACTS: September 1, 1997 September 2, 1997 September 3, 1997 September 4, 1997 Seller mails an offer to Buyer Buyer receives offer Buyer mails acceptance Seller calls to revoke offer Buyer says he has already accepted The acceptance arrives Is there a contract?
Assume the same scenario as above, but the buyer's acceptance never arrives. Assuming the buyer has adequate proof of mailing the acceptance, is there a contract? Yes, in both cases. Proper acceptance is effective when sent, even if never received. 10 Acceptance of an Offer
What method of acceptance is reasonable? Telephone and Electronic Acceptance. Telephone: acceptance upon phone call. Email? Upon dispatch of email (send). 11 Auctions
In an auction sale, asking for bids is an
invitation to negotiate. A person making a bid is making an offer, and the acceptance of the highest bid by the auctioneer is an acceptance of that offer and gives rise to a contract. When the auction sale is without reserve, the auctioneer must accept the highest bid.
View Full Document
- Spring '10
- Business Law, Offeree, buyer Buyer