Term
Formation of Contracts:
Offer and Acceptance |
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Definition
A. Requirements of an Offer
1. Contractual intention
2. Definiteness
3. Communication: offer to offeree
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Term
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Definition
expression of an offeror's willingness to enter into a contractual agreement
a promise that is conditional upon an act, a forbearance, or a return promise |
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Term
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Definition
| a refraining from doing something one has a legal right to do |
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Term
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Definition
To make an offer, the offeror must appear to intend to create a binding obligation.
Whether this intent exists is determined by objective standards.
This intent may be shown by conduct.
Ex. when one party signs a written contract and sends it to the other party, such action is an offer to enter into a contract on the terms of the writing
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Term
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Definition
The first statement made by one of two persons is not necessarily an offer.
There may be a preliminary discussion, or invitation by one party to the other to negotiate or to make an offer.
Ex. an advertisement in a newspaper is ordinarily considered an invitation to negotiate and is not an offer that can be accepted by a reader of the paper |
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Term
AGREEMENT TO MAKE A
CONTRACT
AT A FUTURE DATE |
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Definition
No contract arises when the parties merely agree that at a future date they will consider making a contract or will make a contract on terms to be agreed on at that time.
In such a case, neither party is under any obligation until the future contract is made.
Unless an agreement is reached on all material terms and conditions and nothing is left to future negotiations, a contract to enter a contract in the future is of no effect |
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Term
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Definition
An offer, and the resulting contract, must be definite and certain.
If an offer is indefinite or vague or if an essential provision is lacking, no contract arises from an attempt to accept it.
Ex. an offer to conduct a business "for as long as it is profitable" is too vague to be a valid offer |
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Definition
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Definition
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Term
DEFINITE
BY
INCORPORATION |
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Definition
An offer and the resulting contract that by themselves may appear "too indefinite" may be made definite by reference to another writing.
An agreement may also be made definite by reference to the prior dealings of the parties and to trade practices. |
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Term
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Definition
Although an offer must be definite and certain, not all of its terms need to be expressed.
Some omitted terms may be implied by law.
Likewise, terms may be implied from conduct.
Ex. when borrowed money was given to the borrower by a check on which the word loan was written, the act of the borrower is endorsing the check constituted an agreement to repay the amount of the check. |
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Term
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Definition
It was generally accepted that a duty defined only in terms of "best efforts" was too indefinite to be enforced, but such a view is no longer widely held.
best efforts as commonly understood means at the very least some effort - certainly does not mean zero effort. |
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Term
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Definition
| agreement consisting of two or more parts, each calling for corresponding performances of each part of the parties |
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Term
EXCEPTIONS
TO
DEFINITENESS |
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Definition
-Law has recognized certain situations when the practical necessity of doing business makes it desirable to have a contract, yet it is either impossible or undesirable to adopt definite terms in advance.
-Often tied to the concept of good-faith performance or to some independent factor that will be definitely ascertainable at some time in the future.
-Might be tied to market price, cost to complete, production, or sales requirements. |
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Term
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Definition
contract to buy all requirements of the buyer from the seller
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Term
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Definition
-contract of a producer to sell its entire production or output to a given buyer
-these are binding contracts even though they do not state the exact quantity of goods that are to be bought or sold |
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Term
3. COMMUNICATION
OF
OFFER TO OFFEREE |
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Definition
-An offer must be communicated to the offeree.
-Otherwise, the offeree cannot accept even though knowledge of the offer has been indirectly acquired.
-Internal management communications of an enterprise that are not intended for outsiders or employees do not constitute offers and cannot be accepted by them.
-must be communicated by the offeror or at the offeror's direction. |
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Term
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Definition
1. Contractual Intention
2. Definiteness
3. Communication of offer to offeree |
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Term
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Definition
An offeree cannot accept a terminated offer.
Offers may be terminated by revocation, counteroffer, rejection, lapse of time, death or disability of a party, or subsequent illegality. |
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Term
REVOCATION
OF
OFFER BY OFFEROR |
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Definition
Ordinarily an offeror can revoke the offer before it is accepted. If this is done, the offeree cannot create a contract by accepting the revoked offer. Ex. the bidder at an auction sale may withdraw (revoke) a bid (offer) before it is accepted, and the auctioneer cannot accept that bid later.
An offer may be revoked any time before it's accepted even though the offeror has promised that the offer will be good for a stated period and it has not yet expired. The fact that the offeror promised to keep the offer open has no effect when no consideration was given for that promise. |
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Term
WHAT CONSTITUTES
A REVOCATION? |
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Definition
Any words indicating the offeror's termination of the offer are sufficient.
A notice sent to the offeree that the property that is the subject of the offer has been sold to a third person is a revocation of the offer. |
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Term
COMMUNICATION
OF
REVOCATION |
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Definition
A revocation of an offer is ordinarily effective only when it is made known to the offeree.
Directly or indirectly
If the offeree accepts an offer before it is effectively revoked,
a valid contract is created. |
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Term
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Definition
a binding promise to keep an offer open for a stated period of time or until a specified date
requires that the promisor receive consideration - something, such as a sum of money - as the price for the promise to keep the offer open.
In other words, the option is a contract to refrain from revoking an offer. |
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Term
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Definition
offer that states that it is to be irrevocable, or irrevocable for a stated period of time
Under the UCC this doctrine of firm offer applies to a merchant's signed, written offer to buy or sell goods but with a maximum of three months on its period of irrevocablity. |
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Term
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Definition
The offeree rejects the offer when she ignores the original offer and replies with a different offer. If the offeree purports to accept an offer but in so doing makes any change to the terms of the offer, such action is a counteroffer that rejects the original offer.
An "acceptance" that changes the terms of the offer or adds new terms is a rejection of the original offer and constitutes a counteroffer.
Not limited to offers that directly contradict the original offers. |
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Term
REJECTION OF OFFER
BY OFFEREE |
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Definition
If the offeree rejects the offer and communicates this rejection to the offeror, the offer is terminated.
Communication of a rejection terminates an offer even though the period for which the offeror agreed to keep the offer open has not yet expired.
It may be that the offeror is willing to renew the offer, but unless this is done, there is no longer any offer for the offeree to accept. |
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Term
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Definition
When the offer states that it is open until a particular date, the offer terminates on that date if it has not yet been accepted. This is particularly so when the offeror declares that the offer shall be void after the expiration of the specified time. Such limitations are strictly construed.
If the offer contains a time limitation for acceptance, an attempted acceptance after the expiration of that time has no effect and does not give rise to a contract.
If the offer doesn't specify a time, it will terminate after the lapse of a reasonable time |
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Term
DEATH OR DISABILITY
OF
EITHER PARTY |
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Definition
| If either the offeror or offeree dies or becomes mentally incompetent before the offer is accepted, the offer is automatically terminated |
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Term
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Definition
| If the performance of the contract becomes illegal after the offer is made, the offer is terminated. |
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Term
TERMINATION OF OFFER
recap
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Definition
4. Revocation of offer by offeror
5. Counteroffer by offeree
6. Rejection of offer by offeree
7. Lapse of time
8. Death or disability of either party
9. Subsequent illegality |
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Term
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Definition
An acceptance is the assent of the offeree to the terms of the offer.
Objective standards determine whether there has been an agreement of the parties. |
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Term
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Definition
| unqualified assent to the act or proposal of another; as the acceptance of a draft (bill of exchange), of an offer to make a contract, of goods delivered by the seller, or of a gift or deed |
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Term
WHAT CONSTITUTES
AN ACCEPTANCE? |
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Definition
| No particular form of words or mode of expression is required, but there must be a clear expression that the offeree agrees to be bound by the terms of the offer. If the offeree reserves the right to reject the offer, such action is not an acceptance |
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Term
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Definition
Ordinarily the offeree may refuse to accept an offer. No acceptance, no contract.
The fact that there had been a series of contracts between the parties and that one party's offer ha always been accepted before by the other does not create any legal obligation to continue to accept subsequent offers. |
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Term
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Definition
The acceptance of an offer creates a binding agreement or contract (assuming that all of the other elements of a contract are present)
Neither party can subsequently withdraw from or cancel the contract without the consent of the other party.
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Term
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Definition
An acceptance is the offeree's manifestation of intent to enter into a binding agreement on the terms stated in the offer. Whether there is an acceptance depends on whether the offeree has manifested an intent to accept.
May be an informal "okay," nod, or performance
MUST be absolute and unconditional |
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Term
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Definition
Only the person to whom an offer is directed may accept it.
When a person to whom an offer was not made attempts to accept it, the attempted acceptance has the effect of an offer. If the original offeror is willing to accept this offer, a binding contract arises. |
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Term
MANNER AND TIME
OF ACCEPTANCE |
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Definition
| The offeror may specify the manner and time for accepting the offer. |
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Term
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Definition
| In most cases the offeree's silence and failure to act cannot be regarded as an acceptance. Ordinarily the offeror is not permited to frame an offer in such a way as to make the silence and inaction oft he offeree operate as an acceptance. Nor can a party to an existing contract effect a modification of that agreement without the other party's actual acceptance or approval |
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Term
UNORDERED
GOODS
AND
TICKETS |
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Definition
Sometimes a seller writes a person with whom the seller has had no prior dealings and will state that the recipient is obligated to pay for things. There is no acceptance if the recipient of the letter ignores the offer and does nothing.
Applies to all kinds of goods, books, magazines, and tickets sent through the mail when they haven't been ordered. |
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Term
| The Postal Reorganization Act |
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Definition
| Provides that the person who receives unordered mailed merchandise from a commercial sender has the right "to retain, use, discard, or dispose of it in any manner the recipient sees fit without any obligation whatsoever to the sender." |
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Term
COMMUNICATION
OF
ACCEPTANCE |
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Definition
Acceptance by the offeree is the last step in the formation of a bilateral contract.
-offeror's receipt of the acceptance should be point in time when the contract is formed and its terms apply |
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Term
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Definition
a properly addressed, postage-paid mailed acceptance takes effect when the acceptance is placed into the control of the U.S. Postal service (or FedEx, UPS)
Offeror may avoid the application of this rule by stating in the offer that acceptance shall take effect upon receipt by the offeror |
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Term
DETERMINING
THE APPLICABLE MEANS
OF
COMMUNICATION |
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Definition
unless otherwise unambiguously indicated in the offer, it shall be construed as inviting acceptance in any manner and by any medium reasonable under the circumstances
-medium of communication normally reasonable if it is one used by the offeror or if it is customary in similar transactions at the time and place offer is received |
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Term
TELEPHONE
AND
ELECTRONIC COMMUNICATIONS
OF ACCEPTANCE |
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Definition
telephone acceptances are effective where and when dispatched
courts have yet to address the applicability of the mailbox rule to e-mail |
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Term
EFFECTS
OF
THE MAILBOX RULE |
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Definition
| If an offer requires that acceptance be communicated by a specific date and the acceptance is properly dispatched by the offeree on the final date, the acceptance is timely and the contract is formed, even though the offeror actually receives the acceptance well after the specified date has passed |
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Term
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Definition
| The statements made by the auctioneer to draw forth bids are merely invitations to negotiate. Each bid is an offer, which is not accepted until the auctioneer indicates that a particular offer or bid is accepted. Usually done by auctioneer's hammer. |
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Term
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Definition
| when placed on a sale, the property must be sold to the person making the highest bid regardless of how low that bid may be |
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Term
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Definition
| the auctioneer takes bids as agent for the seller with the understanding that no contract is formed until the seller accepts the transaction |
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Term
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Definition
| Because a contract arises when an offer is accepted, it is necessary to find that there was an offer and that it was accepted. If either element is missing, there is no contract |
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Term
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Definition
| An offer does not exist unless the offeror has contractual intent. This intent is lacking if the statement of the person 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 merely invitations to negotiate and cannot be accepted. |
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Term
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Definition
| An offer must be definite. If an offer is indefinite, its acceptance will not create a contract because it will be held that the resulting agreement is too vague to enforce. In some cases, an offer that is by itself too indefinite is made definite because some writing or standard is incorporated by reference and made part of the offer. In some cases the offer is made definite by implying terms that were not stated. In other cases, the indefinite part of the offer is ignored when that part can be divided or separated from the balance of the offer. |
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Term
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Definition
| Assuming that there is in fact an offer that is made with contractual intent and that it is sufficiently definite, it still does not have the legal effect of an offer unless it is communicated to the offeree by or at the direction of the offeror. |
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Term
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Definition
In some cases, there was an offer but it was terminated before it was accepted. By definition, an attempted acceptance made after the offer has been terminated has no effect. The offeror may revoke the ordinary offer at any time. All that is required is the showing of the intent to revoke and the communication of that intent to the offeree. The offeror's power to revoke is barred by the existence of an option contract under common law or a firm offer under the UCC.
An offer is also terminated by the express rejection of the offer or by the making of a counteroffer, by the lapse of the time stated in the offer or of a reasonable time when none is stated, by the death or disability of either party, or by a change of law that makes illegal a contract based on the particular offer. |
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Term
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Definition
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.
Ordinarily, the offeree may accept or reject as the offeree chooses. |
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Term
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Definition
| 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. The recipient of unordered goods and tickets may dispose of the goods or use the goods without such action constituting an acceptance. An acceptance does not exist until the words or conduct demonstrating assent to the offer is communicated to the offeror. Acceptance by mail takes effect at the time and place when and where the letter is mailed or the fax is transmitted. |
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Term
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Definition
In an auction sale, the auctioneer asking for bids makes 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 aceptance of that offer and gives rise to a contract.
When the auction sale is without reserve, the auctioneer must accept the highest bid. If the auction is not expressly without reserve, the auctioneer may refuse to accept any of the bids. |
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