Understanding Business and Personal Law Offer and Acceptance Section 5.2 How Contracts Arise What...

Understanding Business and Personal Law

Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2

How Contracts Arise

What You’ll Learn

How to recognize the requirements of an How to recognize the requirements of an offer (p. 114)offer (p. 114)How to distinguish between an offer and an How to distinguish between an offer and an invitation to negotiate (p. 114)invitation to negotiate (p. 114)

How to recognize the requirements of an How to recognize the requirements of an acceptance (p. 116)acceptance (p. 116)How to distinguish between an acceptance How to distinguish between an acceptance and a counteroffer (p. 117)and a counteroffer (p. 117)



How Contracts Arise

What You’ll Learn

How to recognize when an offer has How to recognize when an offer has terminated (p. 119)terminated (p. 119)

Why It’s Important

You need to know when an offer has been You need to know when an offer has been made and when an acceptance goes into made and when an acceptance goes into effect to make sound contracts.effect to make sound contracts.



How Contracts Arise

Requirements of an Offer Serious IntentDefiniteness and CertaintyCommunication to the Offeree

Section OutlineSection Outline

Requirements of an Acceptance Unconditional AcceptanceMethods of Acceptance



How Contracts Arise

Termination of an Offer RevocationRejectionCounterofferExpiration of TimeDeath or Insanity

Section OutlineSection Outline



How Contracts Arise

The person who makes an offer is the offeror.The person who makes an offer is the offeror.The person who receives the offer is the The person who receives the offer is the offeree.offeree.

Requirements of an Offer Requirements of an Offer

An offer has three basic requirements. An offer has three basic requirements. It must be:It must be:

1.1. Made seriouslyMade seriously2.2. Definite and certainDefinite and certain3.3. Communicated to the offereeCommunicated to the offeree



How Contracts Arise

An offer must be made with the intention of An offer must be made with the intention of entering into a legal obligation.entering into a legal obligation.

An offer made in the heat of anger or as a An offer made in the heat of anger or as a joke would not meet this requirement.joke would not meet this requirement.

Serious Intent Serious Intent



How Contracts Arise

Advertisements in newspapers, Advertisements in newspapers, magazines, and catalogs are examples magazines, and catalogs are examples of of invitations to negotiateinvitations to negotiate, which are , which are invitations to make an offer.invitations to make an offer.

Serious Intent Serious Intent Sometimes an invitation to negotiate can Sometimes an invitation to negotiate can be confused with an offer. be confused with an offer.



How Contracts Arise

An offer must be definite and certain An offer must be definite and certain to be enforceable.to be enforceable.Offers that use vague words or Offers that use vague words or terms that cannot be quantified lack terms that cannot be quantified lack definiteness and certainty.definiteness and certainty.

Definiteness and Certainty Definiteness and Certainty



How Contracts Arise

Offers may be made by any method Offers may be made by any method that communicates the offer to the that communicates the offer to the offeree, including:offeree, including:

Communication to the Offeree Communication to the Offeree

TelephoneTelephoneLetterLetterTelegramTelegram

Fax machineFax machineE-mailE-mail



How Contracts Arise

Pre-Learning Question Pre-Learning Question

Is a counteroffer the same thing as an acceptance? Why or why not?



How Contracts Arise

To be legally binding, the acceptance To be legally binding, the acceptance must meet certain basic requirements.must meet certain basic requirements.

Requirements of an Acceptance Requirements of an Acceptance

The acceptance must be The acceptance must be unconditional.unconditional.The acceptance must follow the The acceptance must follow the rules regarding the method of rules regarding the method of acceptance.acceptance.



How Contracts Arise

The acceptance must not change the The acceptance must not change the terms of the original offer in any way. terms of the original offer in any way. This principle is called theThis principle is called the mirror image mirror image rulerule..

Unconditional Acceptance Unconditional Acceptance

Any change in the terms of the offer Any change in the terms of the offer means the offeree has not really means the offeree has not really accepted the offer.accepted the offer.The offeree has made a The offeree has made a counteroffer.counteroffer.



How Contracts Arise

If a counteroffer is made, the original offeror is If a counteroffer is made, the original offeror is not obligated to go along and no contract exists.not obligated to go along and no contract exists.The offeror becomes an offeree and may accept The offeror becomes an offeree and may accept or reject the counteroffer.or reject the counteroffer.

Unconditional Acceptance Unconditional Acceptance

Contracts for the sale of goods are exceptions to Contracts for the sale of goods are exceptions to the mirror image rule.the mirror image rule.These exceptions include contracts for personal These exceptions include contracts for personal property such as clothing, furniture, food, motor property such as clothing, furniture, food, motor

vehicles, and appliances.vehicles, and appliances.



How Contracts Arise

The time at which an acceptance takes place The time at which an acceptance takes place is important because that is when the is important because that is when the contract comes into existence.contract comes into existence.

Methods of Acceptance Methods of Acceptance

Special rules govern acceptances that take Special rules govern acceptances that take place when the parties are separated by a place when the parties are separated by a distance and must be communicated by distance and must be communicated by letters, telegrams, or fax.letters, telegrams, or fax.



How Contracts Arise

According to common law, an acceptance According to common law, an acceptance that must be sent over long distances is that must be sent over long distances is effective when it is sent.effective when it is sent.


An acceptance is implied when the offeree An acceptance is implied when the offeree accepts by the same or a faster means than accepts by the same or a faster means than that used by the offeror.that used by the offeror.



How Contracts Arise

The authorization of an acceptance The authorization of an acceptance can also be implied by any reasonable can also be implied by any reasonable means, including:means, including:


Past practices between the partiesPast practices between the partiesThe usual method in the tradeThe usual method in the tradeCustomary means in comparable Customary means in comparable transactions transactions



How Contracts Arise

Termination of an offer may occur in Termination of an offer may occur in any of the following five ways:any of the following five ways:

Termination of an Offer Termination of an Offer

1.1. RevocationRevocation2.2. RejectionRejection3.3. CounterofferCounteroffer4.4. Expiration of timeExpiration of time5.5. Death or insanity Death or insanity



How Contracts Arise

RevocationRevocation is the taking back of an is the taking back of an offer by the offeror.offer by the offeror.

Revocation Revocation

Rejection Rejection RejectionRejection, or refusal, of an offer by , or refusal, of an offer by the offeree brings the offer to an end.the offeree brings the offer to an end.



How Contracts Arise

A counteroffer ends the first offer. A counteroffer ends the first offer. The offeree creates a new offer, which the The offeree creates a new offer, which the original offeror may accept or reject.original offeror may accept or reject.

Counteroffer Counteroffer

Expiration of TimeExpiration of TimeIf the offeror sets a time limit for the If the offeror sets a time limit for the acceptance of the offer, it must be honored.acceptance of the offer, it must be honored.



How Contracts Arise

If the offeror dies or becomes insane If the offeror dies or becomes insane before the offer is accepted, the offer before the offer is accepted, the offer comes to an end.comes to an end.

Death or Insanity Death or Insanity



How Contracts Arise

Reviewing What You Learned

1. What are the requirements of an offer?

Section 5.2 Assessment



How Contracts Arise


Serious intent, clear and definite terms, and communication to the offeree.


Answer



How Contracts Arise


2. What is the difference between an offer and an invitation to negotiate?




How Contracts Arise


An offer empowers the offeree to accept its terms and create a contract. An invitation to negotiate is an invitation to the other party to make an offer.


Answer



How Contracts Arise


3. What are the requirements of an acceptance?




How Contracts Arise


Must be unconditional and must follow the rules regarding the method of acceptance.


Answer



How Contracts Arise


4. What is the difference between an acceptance and a counteroffer?




How Contracts Arise


An acceptance creates a contract. A counteroffer means that the original offer has not been accepted. The offeree has made a new offer, which the original offeror may accept or reject.


Answer



How Contracts Arise


5. When is an offer terminated?




How Contracts Arise


Upon revocation by the offeror, on rejection by the offeree, when a counteroffer is made, after the expiration of a set period of time, and/or the death or insanity of the offeror.


Answer



How Contracts Arise


Critical Thinking ActivityIdentifying an Offer Why is it important to be able to distinguish between an offer and an invitation to negotiate?



How Contracts Arise


Answers will vary, but should recognize that by understanding the difference between the two; a buyer won’t confuse an advertisement with an offer.

Critical Thinking Activity AnswerIdentifying an Offer



How Contracts Arise


Legal Skills in ActionInvitations to Negotiate Tina believes that she can compel a used car dealership to sell her a car that was advertised in the newspaper. She believes the advertisement is an offer that she intends to accept tomorrow.



How Contracts Arise


Legal Skills in ActionInvitations to Negotiate Write a paragraph that explains why advertisements in a newspaper are considered invitations to negotiate rather than offers.



How Contracts Arise


Legal Skills in Action AnswerInvitations to Negotiate Answers will vary, but should explain that sellers usually have limited merchandise to sell and cannot possibly sell an advertised product to everyone who sees an ad.

SECTION OPENER / CLOSER:INSERT BOOK COVER ART

Offer and AcceptanceOffer and AcceptanceEnd of Section 5.2End of Section 5.2

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