Download Chapter 010

PowerPoint Slides to Accompany
BUSINESS LAW
E-Commerce and Digital Law
International Law and Ethics
5th Edition
by Henry R. Cheeseman
Chapter 10
Agreement
Slides developed by
Les Wiletzky
Wiletzky and Associates, Puyallup, WA
Copyright © 2004 by Prentice-Hall. All rights reserved.
Introduction

Contracts are voluntary agreements between
the parties.

One party makes an offer that is accepted by
the other party.

Without mutual assent, there is no contract.
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 2
Agreement
Agreement

The manifestation by
two or more persons
of the substance of a
contract
Parties


Offeror
 Person who makes
an offer
Offeree
 Person to whom an
offer has been made
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 3
Offer

“The manifestation of willingness to enter into
a bargain, so made as to justify another
person in understanding that his assent to
that bargain is invited and will conclude it.”
[Section 24 of the Restatement (Second) of Contracts]
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 4
Requirements of an Offer
For an offer to be effective:
 The offeror must objectively intend to be
bound by the offer.
 The terms of the offer must be definite or
reasonably certain.
 The offer must be communicated to the
offeree.
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 5
Objective Theory of Contracts

A theory that says the intent to contract is
judged by the reasonable person standard
and not by the subjective intent of the
parties.
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 6
Objective Theory of Contracts
(continued)

No valid contract results from:
Preliminary negotiations
 Offers that are made in jest, anger, or undue
excitement
 Offers that are an expression of opinion

Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 7
Definiteness of Terms
The terms of an offer must be clear enough
to the offeree to be able to decide whether to
accept or reject the terms of the offer.
 If the terms are indefinite, the courts cannot
enforce the contract or determine an
appropriate remedy for its breach.

Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 8
Definiteness of Terms (continued)

An offer (and contract) must contain the
following terms:
Identification of the parties
 Identification of the subject matter and
quantity
 Consideration to be paid
 Time of performance

Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 9
Definiteness of Terms (continued)
Implied Terms
 The court can supply a missing term if a
reasonable term can be implied.
 Terms that are supplied in this way are called
implied terms.
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 10
Communication
An offer cannot be
accepted if it is not
communicated to the
offeree by the offeror
or a representative or
agent of the offeror.
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 11
Special Offer Situations
Advertisements
Rewards
Auctions
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 12
Advertisements
A
general advertisement is an invitation
to make an offer.
A
specific advertisement is an offer.
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 13
Rewards


An offer to pay a reward is an offer to form
a unilateral contract.
To collect a reward, the offeree must:
1. Have knowledge of the reward offer prior to
completing the requested act
2. Perform the requested act
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 14
Auctions
Auction with reserve
 Unless expressly
stated otherwise, an
auction is an auction
with reserve, i.e., the
seller retains the right
to refuse the highest
bid and withdraw the
goods from auction
Auction without reserve
 An auction in which the
seller expressly gives
up his or her right to
withdraw the goods
from sale and must
accept the highest bid
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 15
Termination of an Offer by Action of the
Parties

Revocation
Withdrawal of an offer by the offeror
terminates the offer.
 An offeror can revoke an offer at any time
prior to its acceptance by the offeree.


Rejection
Express words or conduct by the offeree that
rejects an offer.
 Rejection terminates the offer.

Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 16
Termination of an Offer by Action of the
Parties (continued)

Counteroffer
A response by an offeree that contains terms
and conditions different from or in addition to
those of the offer.
 A counteroffer terminates an offer.

Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 17
Termination of the Offer by Operation
of Law

Destruction of the subject matter


The offer terminates if the subject matter of
the offer is destroyed through no fault of
either party prior to its acceptance.
Death or incompetency of the offeror or
offeree

The death or incompetency of either party
terminates the offer.
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 18
Termination of the Offer by Operation
of Law (continued)

Supervening illegality
The enactment of a statute, regulation, or
court decision that makes the object of an
offer illegal.
 This action terminates the offer.


Lapse of time

An offer terminates when a stated time period
expires.
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 19
Acceptance

Acceptance
A manifestation of assent by the offeree to
the terms of the offer in a manner invited or
required by the offer as measured by the
objective theory of contracts.
[Section 50 of the Restatement (Second) of Contracts]
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 20
Acceptance (continued)
Only the offeree can legally accept an offer
and create a contract.
 The offeree’s acceptance must be
unequivocal.



Mirror image rule requires the offeree to
accept the offeror’s terms.
Silence is not considered acceptance even if
the offeror states that it is.
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 21
Time and Mode of Acceptance

Contract law establishes the following rules
concerning the time and mode of acceptance:
Mailbox Rule
 Proper Dispatch Rule
 Mode of Acceptance
 Express Authorization
 Implied Authorization

Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 22
Time and Mode of Acceptance (continued)

Mailbox Rule
A rule that states that an acceptance is
effective when it is dispatched, even if it is lost
in transmission.
 Also called the acceptance-upon-dispatch
rule.
 If an offeree first dispatches a rejection and
then sends an acceptance, the mailbox rule
does not apply to the acceptance.

Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 23
Time and Mode of Acceptance (continued)

Proper Dispatch Rule
The acceptance must be properly dispatched.
 The acceptance must be properly addressed,
packaged, and posted to fall within the
mailbox rule.
 Under common law, if an acceptance is not
properly dispatched, it is not effective until it is
actually received by the offeror.

Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 24
Mode of Acceptance
Express Authorization
 A stipulation in the offer
that says the
acceptance must be by
a specified means of
communication.
 Use of an unauthorized
means of
communication makes
acceptance not
effective.
Implied Authorization
 Mode of acceptance
that is implied from
what is customary in
similar transactions,
usage of trade, or prior
dealings between the
parties.
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 25
Offer and Acceptance: Summary (1 of 2)
Communication by Offeror Effective When
Offer
Received by offeree
Revocation of offer
Received by offeree
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 26
Offer and Acceptance: Summary (2 of 2)
Communication by Offeree Effective When
Rejection of offer
Received by offeror
Counteroffer
Received by offeror
Acceptance of offer
Sent by offeree
Acceptance after previous
rejection of offer
Received by offeror
Copyright © 2004 by Prentice-Hall. All rights reserved.
10 - 27