Chapter 10 Contracts: Agreement
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.
§1: Requirements of the Offer • Offeror’s serious intention. • Definiteness of terms. • Communication to Offeree.
Offeror’s Serious Intention • Contract is judged by what a reasonable person in the Offeree’s position would conclude about the offer. • Case 10.1: Lucy v. Zehmer (1954). • Offers made in anger, jest, or undue excitement are usually not offers. • Expressions of opinion are not offers. • Statements of Intention or preliminary negotiations are are not offers. • Advertisements, Catalogues, Price Lists, and Circular are treated as Invitations to negotiate and not as offers.
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. • Case 10.2:Satellite Entertainment Center v. Keaton (1997).
Offer-Communication Offeree’s knowledge of the offer: • Directly by the Offeror. • Use of Agents.
§2: Termination of the Offer • An offer may be terminated prior to acceptance by either: • Action of the Parties; or by • Operation of Law.
Termination by Action of the Parties  • Revocation of the offer by the Offeror: • Offer can be withdrawn anytime before Offeree accepts the offer.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.
Termination by Action of the Parties  • 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. • 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.
Termination by Action of the Parties  • Rejection by Offeree (Cont’d). • A counteroffer by the Offeree is a rejection of the original offer and making of a new offer. • Mirror Image Rule. • Offeree’s acceptance to match the the Offeror’s offer exactly.
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.
Termination by Operation of Law  • Death or Incompetence of the Offeror or Offeree. • Supervening Illegality of the Proposed Contract.
§3: Acceptance • Acceptance is the • Voluntary act (expressed or implied), • by the Offeree that, • shows assent (agreement), • to the terms of an offer. • “Mirror Image” Rule.
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.
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).
Means of Acceptance • Exceptions: • 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. • 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. • Case 10.3:Osprey LLC v. Kelly-Moore Paint Company (1999).
§ 4: Technology and Acceptance • Traditional rules provide framework for digital age. • But traditional rules may not apply to acceptances via Fed Ex, email, or fax. • Generally, ‘mailbox rule’ does not apply to online offers.
Law on the Web • Law Office’s Website. • Findlaw.com Contracts Site. • Legal Research Exercises on the Web.