Chapter 10 Flashcards
Contract
1) One party makes an offer to sell, purchase, or lease a good, or to provide or obtain services from another party
2) the other party much accept the terms of the offer, and if he or she does so, a contract is created.
3) assent may be expressly evidenced by the oral or written words of the parties or implied from the conduct of the parties.
4) without mutual assent, there is no contract.
5) contracts are enforceable in a court of law.
Section 24 of the Restatement (Second) of Contracts
an offer must have three elements in order to be effective:
1) the offeror must objectively intend to be bound by the offer.
2) the terms of the offer must be definite or reasonably certain.
3) the offer must be communicated to the offeree.
Objective Intent
the intent to enter into a contract is determined using the objective theory of contracts (whether a reasonable person viewing the circumstances would conclude that the parties intended to be legally bound.
Express Terms
To be considered definite, an offer ( and contracts) generally must contain the following terms:
1) identification of the parties
2) identification of the subject matter and quantity
3) consideration to be paid
4) time of performance
Implied Terms
Restatement (Second) of Contracts require:
1) terms of the offer to be reasonably certain.
* the court can supply a missing term if a reasonable term can be implied.
* the definition of reasonable depends on the circumstances.
* time of performance can be implied.
* Price can be implied if there is a market or source from which to determine the price of the item or service (e.g., the blue book for na automobile price).
* the parties or subject matter of the contract usually cannot be implied if an item or a service is unique or personal, such as the construction of a house or the performance of a professional sports contracts.
Communication of an Offer
an offer cannot be accepted if it not communicated to the offeree by the offeror or a representative or an agent of the offeror.
Special Offers-Advertisements
advertisements for the sale of goods, even at specific prices, generally are treated as invitations to make an offer.
*one exception to the rule: an advertisement is considered an offer if it is so definite or specific that it is apparent that the advertiser has the present intent to bind himself or herself to the terms of the advertisement.
Special Offers-Rewards
an offer to pay a reward is an offer to form a unilateral contracts. in order to collect the reward, the offeree must
1) have knowledge of the reward offer prior to completing the requested act and
2) perform the requested act.
Special Offers-Auctions
seller offers goods for sale through an auctioneer.
- unless otherwise expressly stated, an auction is considered an auction with reserve–it is invitation to make an offer.
- seller retains the right to refuse the highest bid and withdraw the goods from sale.
- a contract is formed only when the auctioneer strikes the gavel down or indicates acceptance by some other means.
- the bidder may withdraw his or her bid prior to that time.
Termination of an Offer by Act of the Parties
1) revocation of an offer by the offeror
2) rejection of an offer by the offeree
3) counteroffer by the offeree
Revocation of an Offer by the Offeror
- an offeror may revoke (i.e., withdraw) an offer any time prior to its acceptance by the offeree. Generally, an offer can be so revoked even if the offeror promised to keep the offer open for a longer time.
1) may be communicated to the offeree by the offeror or by a third party and made by
A) the offeror’s express statement (e.g., I hereby withdraw my offer) or
B) an act of the offeror that is inconsistent with the offer (e.g., selling the goods to another party).
*Generally, a revocation of an offer is not effective until it is actually received by the offeree.
*Offers made to the public may be revoked by communicating the revocation by the same means used to make the offer.
Rejection of an Offer by the Offeree
- an offer is terminated if the offeree rejects it.
- any subsequent attempt by the offeree to accept the offer is ineffective and is construed as a new offer that the original offeror (now the offeree) is free to accept or reject.
- a rejection can be expressed orally or in writing or implied by conduct.
- a rejection of an offer is not effective until it is actually received by the offeror.
Counteroffer by the Offeree
- simultaneously terminates the offeror’s offer and creates a new offer.
- a counteroffer is not effective until it is actually received by the offeror.
Termination of an Offer by Operation of Law
1) destruction of subject matter
2) death or incompetency of the offeror or offeree
3) supervening illegality
4) lapse of time
Destruction of Subject Matter
*an offer terminates if the subject matter of the offer is destroyed through no fault of either party prior to the offer’s acceptance.
Ex. if a fire destroys an office building that has been listed for sale, the offer automatically terminates.
Death or Incompetency of the Offeror or Offeree
Prior to acceptance of an offer, the death or incompetency of either the offeror or the offeree terminates an offer.
*notice of the other party’s death or incompetence is not a requirement.
Supervening Illegality
If the object of an offer is made illegal prior to the acceptance of the offer, the offer terminates.
Lapse of TIme
an offer expires at the lapse of time of an offer.
- an offer may state that it is effective only until a certain date.
- Unless otherwise stated, the time period begins to run when the offer is actually received by the offeree and terminates when the stated time period expires.
- if no time is stated in an offer, the offer terminates after a “reasonable time” dictated by circumstances.
Acceptance
1) unequivocal acceptance
2) mirror image rule
3) Silent as acceptance
Who can accept the offer?
Only the offeree has the legal power to accept an offer and create a contract.
- third persons usually do not have the power to accept an offer.
- if an offer is made individually to two or more persons, each has the power to accept the offer.
- an offer that is made to two or more persons jointly must be accepted jointly.
Unequivocal Acceptance
an offer’s acceptance must be an unequivocal acceptance.
- the acceptance must be clear and unambiguous, and it must have only one possible meaning.
- also must not contain conditions or exceptions.
Mirror Image Rule
For an acceptance to exist, the offeree must accept the terms as stated in the offer (mirror image).
- the offeree must accept the terms of the offer without modification.
- any attempt to accept the offer on different terms constitutes a counteroffer, which rejects the offeror’s offer.
Silence as Acceptance
*this rule is intended to protect offerees from being legally bound to offers because they failed to respond.
Silence does constitute acceptance if:
1) the offeree has indicated that silence means assent.
2) the offeree has signed an agreement indicating continuing acceptance of delivery until further notification.
Ex. book-of-the-month and DVD-of-the-month club memberships.
3) prior dealings between the parties indicate that silence means acceptance.
Time of Acceptance
Under the common law of contracts, acceptance of a bilateral contract occurs when the offeree dispatches the acceptance by an authorized means of communication.
This rule, is called the acceptance-upon-dispatch rule or, more commonly, the mailbox rule.
