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Termination of an Offer

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  1. 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 Chapter 12

  2. Acceptance and the Mailbox Rule Proper acceptance is effective when sent, even if never received. September1, 1997 Seller mails an offer to Buyer September 2, 1997 Buyer receives offer Buyer mails acceptance September 3, 1997 Seller calls to revoke offer Buyer says he has already accepted The acceptance arrives on September 4, 1997. 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? September1, 1997 Seller mails an offer to Buyer September 2, 1997 Buyer receives offer Buyer mails acceptance September 3, 1997 Buyer mails rejection September 4, 1997 Seller receives rejection September 5, 1997 Seller receives acceptance Is there a contract? Why or why not? Chapter 12

  3. Acceptance of Offer Offeror makes an offer Offeree accepts offer unconditionally Offeree changes or adds terms Offeree rejects offer Contract Arises No contract exists Counteroffer Original offeror accepts counteroffer unconditionally Original offeror changes or adds terms Original offeror rejects counteroffer Counteroffer Chapter 12

  4. Offer and Acceptance Acceptance Yes Offer No Offer Counteroffer Yes Acceptance No Offer, No Contractual Intent Acceptance No Offer Not Definite Acceptance No Offer No Acceptance No Invitation to Negotiate Acceptance No Terminated Offer Post-termination Acceptance Chapter 12

  5. Chapter 12 Summary 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. Chapter 12

  6. Chapter 12 Summary (cont.) 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. Chapter 12

  7. Chapter 12 Summary (cont.) 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. Chapter 12

  8. Chapter 12 Summary (cont.) 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. In other cases, the requirement of definiteness is ignored either because the matter that is not definite is unimportant or because there is an exception to the rule requiring definiteness. Chapter 12

  9. Chapter 12 Summary (cont.) 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. Chapter 12

  10. Chapter 12 Summary (cont.) In some cases, no contract arises because there is no offer that satisfies the requirements just stated. In other 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 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. Chapter 12

  11. Chapter 12 Summary (cont.) The offeror’s power to revoke is barred by the existence of an option contract under common law or a firm offer under the Uniform Commercial Code or local non-Code statute and by the application of the doctrine of detrimental reliance by the offeree. Chapter 12

  12. Chapter 12 Summary (cont.) 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. Chapter 12

  13. Chapter 12 Summary (cont.) 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. Limitations on this freedom of action have been imposed by antidiscrimination and consumer protection laws. Chapter 12

  14. Chapter 12 Summary (cont.) 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. Chapter 12

  15. Chapter 12 Summary (cont.) 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. A telephoned acceptance is effective when and where spoken into the phone. Chapter 12

  16. Chapter 12 Summary (cont.) 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 acceptance 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. Chapter 12