Contracts and Their Formation Its a deal Ill

Contracts and Their Formation “It’s a deal, I’ll take it” Offer and Acceptance OBE-118, Section 3 Fall 2004

What is a Contract? • An exchange of promises between several different parties (or sometimes a act for a promise) that the.

Basic Elements of a Contract Usually looked at as six elements Agreement (or “Mutual Assent”) Consideration Capacity Legality Genuineness of assent Writing and Form

Classifying Contracts • • • Bilateral versus Unilateral Express versus Formal versus Oral versus Written V____, V_____, and Unenforceable Goods versus Services

Understanding a Unilateral Contract Offer Bilateral: Promise Unilateral: Promise Acceptance Promise Act

Formation • Mutual Agreement or Mutual Assent • Requires acceptance of an offer • The “objective theory of contracts” resolves issues as to what was an offer,

Offer Basic Elements of an offer – Serious objective intent by offeror – Terms reasonable definite and certain – Offer communicated to offeree No:

Acceptance • Voluntary act that expresses assent or agreement to terms of offer • Unequivocal or absolute • Communicated to the offeror No:

Did the Offer Survive to be Accepted? Offer Acceptance

Revocation of Offers • Direct repudiation • Behavior conforming to repudiation • Generally, revocation must be received by offeror or offeror’s agent. • Irrevocable offers

Termination by Rejection • Words or acts that convey “no” Termination by Counteroffer • A rejection with a new offer • Watch out for inquiries: “Would you accept $50? • Mirror-image rule (common law)

Termination by Operation of Law • Lapse of time • Destruction of Subject matter • Death or incompetence of offeror • Illegality of proposed contract

Complications I Revocation versus Acceptance rule: acceptance by authorized manner effective when dispatched (also called the mailbox rule) Authorized manner: (General rule) same means that offeror used or one that is commercially reasonable and quicker. Revocation rule: Revocation is effective when received

Complications II Accepting a Unilateral Contract Rule: A unilateral contract is accepted by performing and once performance has commenced the offeree has a reasonable period of time to complete performance