CHAPTER 9:

OBJECTIVES: 1. Define an offer and acceptance.

2. Identify what terms can be implied in a

contract.

3. Describe how offers are terminated by action

of the parties.

4. Define a counteroffer and describe its effects.

5. Describe how offers are terminated by

operation of law.

6. Define consideration.

7. Identify when there is inadequacy of

consideration

8. Analyze whether contracts are lacking in

consideration.

9. Describe the settlement of claims

10. Apply the doctrine of promissory estoppel.

A. AGREEMENT

1. A manifestation of two or more persons of the substance

of a contract. It requires an offer and an acceptance of

that offer.

2. Offeror - the person making the offer.

3. Offeree - the person to whom the offer is made.

4. Offer set form the terms of the offeror. The offeree has

the power to create the contract by accepting the offer.

B. REQUIREMENTS OF AN OFFER

1. The three requirements of a valid offer are

a. The objective intent to be bound by the offer,

b. Terms of offer must be definite or reasonably

certain., and

c. The offer must be communicated to the offeree.

2. Objective Intent.

a. based upon the reasonable person standard.

b. preliminary negotiations.

c. jest, anger, or undue excitement.

d. expression of an opinion.

(1) range from very clear opinions of unschooled

persons to guaranteed results by

professionals.

3. Definiteness of Terms

a. Indefinite terms cannot allow a third party (such as a

court) to enforce a contract or fashion an appropriate

remedy.

b. The offer (and the contract) must contain at the

minimum

(1) identification of the parties

(2) identification of the subject matter and

quantity

(3) consideration to be paid

(4) time of performance

c. Implied terms historically were not permitted and the

a purported contract failed. Now if a term is

reasonable certain, then the court may supply a

missing or unclear term. Mostly this is limited to

time of performance and price, since identification

of the parties and the subject matter and quantity in

the contract cannot be reasonably implied.

 

4. Communication

a. An offer cannot be accepted if it is not

communicated to the offeree by the offeror, or their

agent.

5. Special Offer Situations

a. Advertisements

(1) in most situations, an advertisement is treated

as an invitation to make an offer.

(a) But it will be an offer if the terms as so

definite or apparent that the advertiser

has the present intent to make an offer.

The product is advertised with a serial

number or the person or class of persons

to whom the advertisement applies can

be readily identified.

 

b. Rewards

(1) must have knowledge of the reward

(2) must perform the act requested

c. Auctions

(1) with reserve and without reserve

(2) with reserve: bidder is the offeror

(3) without reserve: bidder is the offeree

C. TERMINATION OF THE OFFER

1. Termination by Action of the Parties

a. Revocation of the Offer by the Offeror

b. Rejection of the Offer by the Offeree

c. Counteroffer by the Offeree

2. Termination by Operation of Law

a. Destruction of the Subject Matter

b. Death or Incompetency of the Offeror or Offeree

c. Supervening Illegality

d. Lapse of Time

3. Option Contracts

a. death or incompetency of the parties does not

terminate this offer unless it is a contract for

personal services.

 

D. ACCEPTANCE

1. Who Can Accept the Offer

a. only the offeree

2. Unequivocal Acceptance

a. the mirror image rule

3. Silence As Acceptance

a. Normally, silence does not constitute acceptance.

b. But:

(1) offeree indicated it does

(2) prior agreement of the parties

(3) prior dealings where silence was an indication

of acceptance.

(4) offeree takes benefit of the offer even though

they had a prior opportunity to reject.

 

4. Time and Mode of Acceptance

a. acceptance upon dispatch rule (mailbox rule)

b. proper dispatch rule (right address, etc.)

c. mode of acceptance (must be that authorized by the

offeror)

 

E. CONSIDERATION

1. Consideration is something of legal value given in

exchange for a promise. Comes in many forms: tangible

payment (money or property) or the performance of an act

(providing services). Also forbearance of a legal right.

2. Written contracts are presumed to be supported by

consideration. But this can be rebutted with sufficient

evidence.

3. Requirements of Consideration

a. Legal Value

(1) promisee suffers a legal detriment

(2) promisor receives a legal benefit

b. Bargained for Exchange

(1) This is the exchange the parties engage in

when arriving at a contract.

(2) gratuitous promises or promises of a gift

F. SPECIAL ISSUES CONCERNING CONSIDERATION

1. Option-to-Cancel Clauses

2. Best Efforts Contract

3. Contract Lacking Consideration

a. Illusory Promises

b. Moral Obligations

c. Past Consideration

d. Preexisting Duty

e. Illegal Consideration

4. Settlement of Claims

a. accord and satisfaction

(1) unliquidated debt

G. PROMISSORY ESTOPPEL

1. This doctrine prevents of estops a promisor from revoking

his or her promise under the following conditions:

a. The promisor made a promise.

b. The promisor should have reasonably expected to

induce the promisee to rely on the promise.

c. The promisee actually did rely on the promise and

engaged in an action or forbearance of a legal right

of a definite and substantive nature, i.e. changed

their legal position.

d. Injustice would result in the promise were not

enforced.