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CHAPTER 10 CONTRACTUAL AGREEMENT: MUTUAL ASSENT

CHAPTER 10 CONTRACTUAL AGREEMENT: MUTUAL ASSENT. DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in the Legal Environment (8 th Ed.). THE FIRST STEP IN CONTRACT FORMATION. Valid offer by the offeror (the person making the offer).

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CHAPTER 10 CONTRACTUAL AGREEMENT: MUTUAL ASSENT

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  1. CHAPTER 10CONTRACTUAL AGREEMENT:MUTUAL ASSENT DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in the Legal Environment (8th Ed.)

  2. THE FIRST STEP IN CONTRACT FORMATION • Valid offer by the offeror (the person making the offer). • Valid acceptance by the offeree (the person to whom the offer is made).

  3. MUTUAL ASSENT • Requires the assent of both parties to the agreement. • Parties must agree exactly to the same terms and conditions. • Without mutual assent no agreement comes into existence.

  4. THE OBJECTIVE THEORY OF CONTRACTS • Offeror has the right to set the terms of the offer. • Offeror controls method of acceptance by the offeree. • Offeror must exhibit clear and present intent to offer.

  5. THE OBJECTIVE THEORY OF CONTRACTS • Objective: observed and verified without being distorted by personal feelings and prejudices. • Subjective: observed and verified through individual feelings and emotions.

  6. OFFER • Clear Intention to Contract and Definiteness of the Offer • Statements of opinions, intentions, and preliminary negotiations lack definiteness. • Offer must be specific in all particulars. • Advertisements and Auctions • Advertisements not valid offers because lack sufficient specificity. • In auctions the law treats the bidder as the offeror.

  7. OFFER • Communication of the Offer to the Offeree. • Offeror must communicated the offer to the offeree to have legal effect. • Duration of the Offer. • Four methods for terminating an offer: • Lapse; • Revocation; • Rejection; • Acceptance.

  8. ACCEPTANCE • Usual mode of terminating an offer. • Offeror and offeree have arrived at an agreement. • Binding contract exists. • Involves the offeree’s assent to all the terms of the offer. • The acceptance is oral, written, or implied.

  9. ACCEPTANCE • Mirror-Image Rule: the acceptance must match, term by term, the provisions in the offer. • Manner and Time of Acceptance: offeree must accept in exactly the mode specified or stipulated, by the offeror in the offer. Acceptance becomes legally effective at the time of dispatch. • “Mailbox Rule”.

  10. ACCEPTANCE • Silence: overt act accompanies acceptance, which requires a clear intent to accept, prior dealings of parties may permit acceptance based on silence. • Bilateral vs. Unilateral Contracts. • Bilateral Contracts the offeree accepts by either a direct communication to offeror or a counter-promise inferred from the offeree’s conduct. • Unilateral Contracts the offeree accepts by merely completing the act called for in the offer.

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