Comprehensive Volume 18 th Edition Chapter 13 The

Comprehensive Volume, 18 th Edition Chapter 13: The Agreement

Requirements for Contract 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 13

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. Chapter 13 An offer must be definite, with terms that are clear and spelled out. The offer must be communicated to the offeree.

Is A Contract Formed? Offer Yes Acceptance Offer No Counteroffer Acceptance Offer, No Contractual Intent Chapter 13 Yes No Acceptance Offer Not Definite No Acceptance Offer No No Acceptance Invitation to Negotiate No Acceptance Terminated Offer No Post-termination Acceptance

Acceptance of an Offer Chapter 13 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.

Acceptance of Offeror makes an offer Offeree accepts offer unconditionally Offeree changes or adds terms Contract Arises Counteroffer Original offeror accepts counteroffer unconditionally Original offeror changes or adds terms Chapter 13 Counteroffer Offeree rejects offer No contract exists Original offeror rejects counteroffer

Acceptance of an Offer Chapter 13 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.

The Mailbox Rule September 1, 1997 September 2, 1997 September 3, 1997 September 4, 1997 Seller mails an offer to 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? Chapter 13 Yes, in both cases. Proper acceptance is effective when sent, even if never received.

The Mailbox Rule September 1, 1997 September 2, 1997 September 3, 1997 September 4, 1997 September 5, 1997 Seller mails an offer to Buyer receives offer Buyer mails acceptance Buyer mails rejection Seller receives acceptance Is there a contract? Why or why not? Again, Yes, because the acceptance is effective upon dispatch – or as soon as it was mailed. Chapter 13

Termination of Offer 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. Chapter 13

Termination of Offer An offer is also terminated by: the express rejection of the offer or by the making of a counteroffer the lapse of the time stated in the offer or of a reasonable time when none is stated the death or disability of either party a change of law that makes illegal a contract based on the particular offer Chapter 13

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 Chapter 13 *Options and firm offers excepted

Auctions Chapter 13 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.