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Business Law
Principles
and Practices 8e
Arnold J. Goldman William D. Sigismond
Chapter 7: Agreement: Offer and Acceptance
How Agreement is Reached
The first and most important requirement of a legally enforceable contract is that the parties must agree on the subject of the contract.
Offer and acceptance: process by which parties to a contract agree to its terms.
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How Agreement is Reached
These terms may be made orally, in writing, or by conduct of the parties that recognizes the existence of a contract.
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Offer
Offer: promise made by one person to do something if another person either performs an act or promises to do or not do something.
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Acceptance
Acceptance: agreement by offeree to do what offeror requests in offer; agreement by seller of real property to buyer’s purchase offer.
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Offeror and Offeree
Offeror: one who makes an offer.
Offeree: one to whom an offer is made.
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The Offer
Offer must be seriously intended.
Objective theory of contracts (a party’s intentions are determined by objective facts).
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The Offer (cont’d)
Offer must be definite.
Preliminary negotiations: discussions between parties that usually lead one party to make an offer.
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The Offer (cont’d)
The offer must be communicated.
The offeree must know that an offer has been made and must know the terms of the offer.
Invitations to make offers (i.e., a bid at auction).
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The Offer (cont’d)
How an offer ends:
Lapse of time.
Rejection.
Counteroffer.
Revocation.
Death or insanity.
Illegality.
Impossibility.
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Acceptance
A legally binding agreement is reached when the offeree accepts the offer made by the offeror.
Acceptance is the usual manner in which an offer is terminated.
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Acceptance (cont’d)
The acceptance must be accepted only by the offeree, agree with the offer, and be communicated to the offeror by the offeree.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Acceptance (cont’d)
In a unilateral contract (a promise for an act), acceptance is the doing of the act requested.
In a bilateral contract (a promise for a promise), the offeree’s promise is the acceptance.
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Acceptance (cont’d)
Acceptance must be communicated to the offeror.
The offeror has to power to determine the manner and medium of acceptance.
Reasonable and authorized means.
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Mailbox Rule
Mailbox rule: a common law rule used in contracts stating that an acceptance made in response to an offer is binding when placed in the mailbox, properly addressed.
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Communication of Offer and Acceptance
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Facsimile Transaction
The transmittal of a document by fax is simultaneous. Consequently, the offer is accepted as soon as it is sent.
If it is to serve as the original, have it notarized before sending it.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Silence as Acceptance
As a general rule, the offeree’s silence or in action is not regarded as acceptance, even if the offeror states that it is.
In some cases, acceptance may be implied by an act of the offeree.
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Forming Contracts Online
Courts continue to apply common law principles and existing statutory law to the formation of contracts online.
New laws have been drafted to address contract issues peculiar to the online world.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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