Business Law: Ch 6
Offer and Acceptance
What Must Be in a Contract
• Contract – agreement between two or more
parties that creates obligations
• Six requirements to a contract
1. Offer and Acceptance
•
•
•
Offeror – person making offer
Offeree – person offer made too
Terms must be definite and accepted without change
by the party to whom it is intended to be offered
Six Requirements for a Contract
2. Genuine Assent – Agreement must not be
based on one party’s deceiving another, on
an important mistake, or on the use of unfair
pressure exerted to obtain the offer or
acceptance
3. Legality – What the parties agree to must be
legal
Six Requirements for a Contract
4. Consideration – Agreement must involve
both sides receiving what the law considers
value in some form as a result of the
transaction
5. Capacity – Person must have legal ability to
contract for themselves
6. Writing – Some agreements must be placed
in writing to be fully enforceable in court
Requirements for an Offer
• Offer – Proposal by an offeror to do
something, providing the offeree does or
refrains from doing something in return.
• Requirements
1. Contractual Intent must be present
2. The offer must be communicated to the offeree
3. The essential terms of the offer must be
complete and definite
Contractual Intent
• Jest – Words that take the form of offers but
which are spoken as a joke
– Law is not concerned with what is actually in the
mind of a person making what might be
considered an offer
– If your joke is considered an offer by a reasonable
person, then you have made an offer
– If you are serious about your offer, but a
reasonable person interprets it as a joke, then we
have no legally enforceable offer
Offer Must Be Communicated
• Person who is not the intended offeree cannot
accept the offer
• Person cannot accept an offer without
knowing it has been made
Essential Terms Must Be Complete and
Definite
• Sale of Real Estate
– Proper legal description of the real estate
– Price
– Full term for payment
– Date for delivery
– Date for delivery of the deed
• Essential terms must be definite
6-1 Assessment
• Turn to page 113 and complete the
assessment
6-1 Assessment
1.
2.
3.
4.
5.
True
B (Genuine dissent)
True
False
False
6-1 Assessment
6. No contract because the offer was not
communicated to the bystander. Bystanders
statement is an offer.
7. No, social engagement not a contract
8. No, the credit union is not liable because of
no contract. The agreement was missing
essential detail.
9. The ad was not an offer because it did not
address the problem of a limited quantitu.
How can offers be ended?
• Revocation by the offeror
– The right to withdraw an offer before it is
accepted
– At any time before it is accepted by the offeree,
the offer can be revoked
– Revocation is not effective until it is
communicated to the offeree
How can offers be ended?
• Time stated in the offer
– The offeror may state how and when the offer must
be accepted
– Example: On October 10, the Mercantile Bank sent a
letter to Jimmy, who had applied for a loan. In the
letter, Mercantile offered to lend $50,000 on specified
terms and stated that the acceptance had to be in
writing and received no later than October 18. Jimmy
mailed his acceptance on October 17 which was not
received until October 20. There is no contract
How can offers be ended?
• Reasonable length of time
– If no time is stated, the offer will end after a
reasonable length of time, which depends on the
circumstances
– Example: different length of time for produce and
a bulldozer
How can offers be ended?
• Rejection by the Offeree
– Offeree clearly reject the offer, the offer is
terminated
How can offers be ended?
• Counteroffer
– Offeree changes the offeror’s terms in important
ways and sends it back to the offeror.
– The counteroffer becomes the new offer.
• Death or Insanity of either offeree or offeror
• Destruction of the specific subject matter
How can an offer be kept open
• Option – offeree give something of value in
return for a promise to keep the offer open
• Firm Offer – Same as option that applies to
merchants (individuals who regularly deal in
the goods being bought or sold)
– The UCC (Uniform Commercial Code) makes firm
offers binding for the time stated, but not for
more than three months
6-2 Assessment
• Turn to page 117 and complete the
assessment
What is Required of an Acceptance
• Acceptance – When a party to whom an offer
has been made agrees to the proposal.
• Acceptance must:
1. Come from the person or persons to whom the
offer was made
2. Match the terms in the offer
3. Be communicated to the offeror
Acceptance Communicated
• Unilateral Acceptance – Offeror promises
something in return for the offereee’s
performance
– Example: The offeror publicly promises to pay a
$100 reward.
• Bilateral Acceptance – Both parties promise to
do something
6-3 Assessment
• Turn to page 121 and complete the
assessment