Section 5.2 Offer and Acceptance
What You’ll Learn
How to recognize the requirements of an
offer (p. 114)
How to distinguish between an offer and an
invitation to negotiate (p. 114)
How to recognize the requirements of an
acceptance (p. 116)
How to distinguish between an acceptance
and a counteroffer (p. 117)
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
What You’ll Learn
How to recognize when an offer has
terminated (p. 119)
Why It’s Important
You need to know when an offer has been
made and when an acceptance goes into
effect to make sound contracts.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section Outline
Requirements of an Offer
Serious Intent
Definiteness and Certainty
Communication to the Offeree
Requirements of an Acceptance
Unconditional Acceptance
Methods of Acceptance
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section Outline
Termination of an Offer
Revocation
Rejection
Counteroffer
Expiration of Time
Death or Insanity
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Requirements of an Offer
The person who makes an offer is the offeror.
The person who receives the offer is the
offeree.
An offer has three basic requirements.
It must be:
1. Made seriously
2. Definite and certain
3. Communicated to the offeree
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Serious Intent
An offer must be made with the intention of
entering into a legal obligation.
An offer made in the heat of anger or as a
joke would not meet this requirement.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Serious Intent
Sometimes an invitation to negotiate can
be confused with an offer.
Advertisements in newspapers,
magazines, and catalogs are examples
of invitations to negotiate, which are
invitations to make an offer.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Definiteness and Certainty
An offer must be definite and certain
to be enforceable.
Offers that use vague words or
terms that cannot be quantified lack
definiteness and certainty.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Communication to the Offeree
Offers may be made by any method
that communicates the offer to the
offeree, including:
Telephone
Fax machine
Letter
E-mail
Telegram
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Pre-Learning Question
Is a counteroffer the same thing as an
acceptance? Why or why not?
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Requirements of an Acceptance
To be legally binding, the acceptance
must meet certain basic requirements.
The acceptance must be
unconditional.
The acceptance must follow the
rules regarding the method of
acceptance.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Unconditional Acceptance
The acceptance must not change the
terms of the original offer in any way.
This principle is called the mirror image
rule.
Any change in the terms of the offer
means the offeree has not really
accepted the offer.
The offeree has made a counteroffer.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Unconditional Acceptance
If a counteroffer is made, the original offeror is
not obligated to go along and no contract exists.
The offeror becomes an offeree and may accept
or reject the counteroffer.
Contracts for the sale of goods are exceptions to
the mirror image rule.
These exceptions include contracts for personal
property such as clothing, furniture, food, motor
vehicles, and appliances.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Methods of Acceptance
The time at which an acceptance takes place
is important because that is when the
contract comes into existence.
Special rules govern acceptances that take
place when the parties are separated by a
distance and must be communicated by
letters, telegrams, or fax.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Methods of Acceptance
According to common law, an acceptance
that must be sent over long distances is
effective when it is sent.
An acceptance is implied when the offeree
accepts by the same or a faster means than
that used by the offeror.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Methods of Acceptance
The authorization of an acceptance
can also be implied by any reasonable
means, including:
Past practices between the parties
The usual method in the trade
Customary means in comparable
transactions
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Termination of an Offer
Termination of an offer may occur in
any of the following five ways:
1. Revocation
2. Rejection
3. Counteroffer
4. Expiration of time
5. Death or insanity
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Revocation
Revocation is the taking back of an
offer by the offeror.
Rejection
Rejection, or refusal, of an offer by
the offeree brings the offer to an end.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Counteroffer
A counteroffer ends the first offer.
The offeree creates a new offer, which the
original offeror may accept or reject.
Expiration of Time
If the offeror sets a time limit for the
acceptance of the offer, it must be honored.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Death or Insanity
If the offeror dies or becomes insane
before the offer is accepted, the offer
comes to an end.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Reviewing What You Learned
1. What are the requirements of an
offer?
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Reviewing What You Learned
Answer
Serious intent, clear and definite terms,
and communication to the offeree.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Reviewing What You Learned
2. What is the difference between an
offer and an invitation to negotiate?
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Reviewing What You Learned
Answer
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Reviewing What You Learned
3. What are the requirements of an
acceptance?
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Reviewing What You Learned
Answer
Must be unconditional and must follow the
rules regarding the method of acceptance.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Reviewing What You Learned
4. What is the difference between an
acceptance and a counteroffer?
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Reviewing What You Learned
Answer
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Reviewing What You Learned
5. When is an offer terminated?
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Reviewing What You Learned
Answer
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Critical Thinking Activity
Identifying an Offer
Why is it important to be able to distinguish
between an offer and an invitation to
negotiate?
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Critical Thinking Activity Answer
Identifying an Offer
Answers will vary, but should recognize
that by understanding the difference
between the two; a buyer won’t confuse an
advertisement with an offer.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Legal Skills in Action
Invitations 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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Legal Skills in Action
Invitations to Negotiate
Write a paragraph that explains why
advertisements in a newspaper are
considered invitations to negotiate rather
than offers.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Section 5.2 Assessment
Legal Skills in Action Answer
Invitations 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.
Understanding Business and Personal Law
How Contracts Arise
SECTION OPENER / CLOSER:
INSERT BOOK COVER ART
End of Section 5.2
Offer and Acceptance