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CHAPTER 9:

AGREEMENT AND CONSIDERATION

OBJECTIVES: 1. Define an offer and acceptance.

2. Identify what terms can be implied in a

3. Describe how offers are terminated by action

4. Define a counteroffer and describe its effects.

5. Describe how offers are terminated by

6. Define consideration.

7. Identify when there is inadequacy of

8. Analyze whether contracts are lacking in

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

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

3. Definiteness of Terms

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

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

(1) identification of the parties

(2) identification of the subject matter and

(3) consideration to be paid

(4) time of performance

c. Implied terms historically were not permitted and the

4. Communication

a. An offer cannot be accepted if it is not

5. Special Offer Situations

a. Advertisements

(1) in most situations, an advertisement is treated

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

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

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

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

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

(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

c. The promisee actually did rely on the promise and

d. Injustice would result in the promise were not