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Chapter 11
Contracts: Agreement

Miller  Cross

BUSINESS LAW
Alternate Edition 12thEd.

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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.

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§1: Requirements of the Offer

  • Offeror’s serious intention.
  • Definiteness of terms.
  • Communication to Offeree.

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  • Contract is judged by what a reasonable person in the Offeree’s position would conclude about the offer.
  • Offers made in anger, jest, or undue excitement are usually not offers.
  • Expressions of opinion are not offers. P. 204

Offer-Serious Intention

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Offer-Serious Intention

  • Statements of intention, preliminary negotiations, and agreements to agree, are not offers.
  • Advertisements, catalogues, price lists, and circulars are treated as invitations to negotiate, and not as offers.
  • Auctions.

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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.

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Offer-Communication

Offeree’s knowledge of the offer:

  • Directly by the Offeror, or
  • Use of Agents.

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§2: Termination of the Offer

  • An offer may be terminated prior to acceptance by either:
  • Action of the Parties; or by
  • Operation of Law.

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Termination by
Action of the Parties

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  • Offer can be withdrawn anytime before Offeree accepts the offer.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

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  • 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.

Detrimental Reliance and Partial Performance where offeree partially performs in response to an offer to form a unilateral contract.

Termination by
Action of the Parties

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  • 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.
  • A counteroffer by the Offeree is a rejection of the original offer and making of a new offer (“mirror image” rule).

Termination by
Action of the Parties

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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.
  • Death or Incompetence of the Offeror or Offeree.
  • Supervening Illegality of the Proposed Contract.

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§3: Acceptance

  • Acceptance is the:
  • Voluntary act (expressed or implied),
  • by the Offeree that,
  • shows assent (agreement),
  • to the terms of an offer.
  • Unequivocal: The “Mirror Image” Rule.

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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.

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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).

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Authorized Means of Acceptance

  • Exceptions to Mailbox Rule:
  • 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.

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Authorized Means of Acceptance

  • 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.

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