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Chapter 10 Contracts: Agreement . Introduction. Agreement = offer and acceptance. Parties must show mutual assent to terms of contract. Once an agreement is reached, if the other elements of a contract are present, a valid contract is formed. §1: Requirements of the Offer.

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Chapter 10 Contracts: Agreement

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Chapter 10

Contracts: Agreement


Introduction

  • Agreement = offer and acceptance.

  • Parties must show mutual assent to terms of contract.

  • Once an agreement is reached, if the other elements of a contract are present, a valid contract is formed.


§1: Requirements of the Offer

  • Offeror’s serious intention.

  • Definiteness of terms.

  • Communication to Offeree.


Offeror’s Serious Intention

  • Contract is judged by what a reasonable person in the Offeree’s position would conclude about the offer.

    • Case 10.1: Lucy v. Zehmer (1954).

  • Offers made in anger, jest, or undue excitement are usually not offers.

  • Expressions of opinion are not offers.

  • Statements of Intention or preliminary negotiations are are not offers.

  • Advertisements, Catalogues, Price Lists, and Circular are treated as Invitations to negotiate and not as offers.


Offer-Definiteness of Terms

  • Terms (Expressed or Implied).

    • Identification of the parties.

    • Object or subject matter of the contract.

    • Consideration to be paid.

    • Time of payment, Delivery, or Performance.

  • Case 10.2:Satellite Entertainment Center v. Keaton (1997).


Offer-Communication

Offeree’s knowledge of the offer:

  • Directly by the Offeror.

  • Use of Agents.


§2: Termination of the Offer

  • An offer may be terminated prior to acceptance by either:

    • Action of the Parties; or by

    • Operation of Law.


Termination by Action of the Parties [1]

  • Revocation of the offer by the Offeror:

    • Offer can be withdrawn anytime before Offeree accepts the offer.

    • Effective when the Offeree or Offeree’s agent receive it.

    • Exceptions:

      • Irrevocable Offers.

      • Option Contract: Promise to hold an offer open for a specified period of time in return of consideration.


Termination by Action of the Parties [2]

  • Exceptions (Cont’d):

    • Detrimental Reliance or Promissory Estoppel where Offeree relies on offer to his or her detriment, thus Offeror is barred from revoking the offer.

  • Rejection of the offer by the Offeree:

    • Rejection by the Offeree (expressed or implied) terminates the offer.

    • Effective only when it is received by the Offeror or Offeror’s agent.


  • Termination by Action of the Parties [3]

    • Rejection by Offeree (Cont’d).

      • A counteroffer by the Offeree is a rejection of the original offer and making of a new offer.

    • Mirror Image Rule.

      • Offeree’s acceptance to match the the Offeror’s offer exactly.


    Termination by Operation of Law

    • Lapse of Time.

      • Offer terminates by law when the period of time specified in the offer has passed.

      • If no time period for acceptance is specified, the offer terminates at the end of a reasonable period of time.

    • Destruction of the Subject Matter.


    Termination by Operation of Law [2]

    • Death or Incompetence of the Offeror or Offeree.

    • Supervening Illegality of the Proposed Contract.


    §3: Acceptance

    • Acceptance is the

      • Voluntary act (expressed or implied),

      • by the Offeree that,

      • shows assent (agreement),

      • to the terms of an offer.

    • “Mirror Image” Rule.


    Silence as Acceptance

    • Acceptance of Services by Silence.

      • Sometimes Offeree has a duty to speak.

    • Prior Dealings and Acceptance.

      • Silence can be acceptance if there are prior dealings.

    • Solicited Offers.

      • Offeree has a duty to reject.


    Mode and Timeliness of Acceptance

    • Mail Box Rule - Acceptance becomes effective on dispatch, providing that authorized means of communication is used. Offeree accepts by using the stipulated means of acceptance.

      • Offeror specifies (expressly or impliedly) how acceptance should be made.

      • Effective when dispatched (mailed, shipped).


    Means of Acceptance

    • Exceptions:

      • If acceptance is not properly dispatched by the Offeree.

      • If Offeror specifies that acceptance will not be effective until it is received.

      • If acceptance is sent after rejection, whichever is received first is given effect.

    • Unauthorized Means of Acceptance.

      • Not effective until it is received by the Offeror. If timely sent and dispatched it is considered to have been effective on its dispatch.

    • Case 10.3:Osprey LLC v. Kelly-Moore Paint Company (1999).


    § 4: Technology and Acceptance

    • Traditional rules provide framework for digital age.

    • But traditional rules may not apply to acceptances via Fed Ex, email, or fax.

    • Generally, ‘mailbox rule’ does not apply to online offers.


    Law on the Web

    • Law Office’s Website.

    • Findlaw.com Contracts Site.

    • Legal Research Exercises on the Web.


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