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Section 5.2
Offer and Acceptance
Section 5.2 Offer and Acceptance
Legal Terms
invitations to negotiate (p. 114)
mirror image rule (p. 117)
counteroffer (p. 117)
revocation (p. 120)
rejection (p. 120)
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Requirements of an Offer
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Serious Intent
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
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Unconditional Acceptance
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Unconditional Acceptance
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Methods of Acceptance
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
Methods of Acceptance
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
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.
Understanding Business and Personal Law
How Contracts Arise
Section 5.2 Offer and Acceptance
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
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End of Section 5.2
Offer and Acceptance