BUSINESS LAW
Alternate Edition 11thEd.
Jentz  Miller  Cross
Chapter 11
Contracts: Agreement
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
Introduction
 Agreement = offer and acceptance.
 Parties must show mutual assent to terms
of contract.
 Once an agreement is reached, if the
other elements of a contract are present, a
valid contract is formed.
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a part of South-Western Cengage Learning.
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§1: Requirements of the Offer
 Offeror’s serious intention.
 Definiteness of terms.
 Communication to Offeree.
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Offer-Serious Intention
 Contract is judged by what a reasonable
person in the Offeree’s position would
conclude about the offer.
– CASE 11.1 Lucy v. Zehmer (1954).
 Offers made in anger, jest, or undue
excitement are usually not offers.
 Expressions of opinion are not offers.
Copyright © 2009 South-Western Legal Studies in Business,
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Offer-Serious Intention
 Statements of intention, preliminary negotiations,
and agreements to agree, are not offers.
– CASE 11.2 Basis Technology Corp. v.
Amazon.com (2008).
 Advertisements, catalogues, price lists, and
circulars are treated as invitations to negotiate,
and not as offers.
– CASE 11.3 Trell v. American Association of
Advancement of Science (2007).
 Auctions.
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Offer-Definiteness of Terms
 Terms (Expressed or Implied).
– Identification of the parties.
– Object or subject matter of the contract.
– Consideration to be paid.
– Time of payment, Delivery, or Performance.
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Offer-Communication
Offeree’s knowledge of the offer:
– Directly by the Offeror, or
– Use of Agents.
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§2: Termination of the Offer
 An offer may be terminated prior to
acceptance by either:
– Action of the Parties; or by
– Operation of Law.
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Termination by
Action of the Parties
 Revocation of the Offer by the Offeror:
– Offer can be withdrawn anytime before Offeree
accepts the offer.
– Effective when the Offeree or Offeree’s agent
receive it.
– Exceptions: Irrevocable Offers.
• Option Contract: Promise to hold an offer open for a
specified period of time in return of consideration.
•
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Termination by
Action of the Parties
– Exceptions (Cont’d):
• Detrimental Reliance or Promissory Estoppel
where Offeree relies on offer to his or her
detriment, thus Offeror is barred from revoking
the offer.
• Detrimental Reliance and Partial Performance
where offeree partially performs in response to
an offer to form a unilateral contract.
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Termination by
Action of the Parties
 Rejection of the offer by the Offeree:
– Rejection by the Offeree (expressed or
implied) terminates the offer.
– Effective only when it is received by the
Offeror or Offeror’s agent.
 A counteroffer by the Offeree is a
rejection of the original offer and making
of a new offer (“mirror image” rule).
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Termination by Operation of Law
 Lapse of Time.
– Offer terminates by law when the period of
time specified in the offer has passed.
– If no time period for acceptance is specified,
the offer terminates at the end of a reasonable
period of time.
 Destruction of the Subject Matter.
 Death or Incompetence of the Offeror or
Offeree.
 Supervening Illegality of the Proposed
Contract.
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§3: Acceptance
 Acceptance is the:
– Voluntary act (expressed or implied),
– by the Offeree that,
– shows assent (agreement),
– to the terms of an offer.
 Unequivocal: The “Mirror Image” Rule.
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Silence as Acceptance
 Acceptance of Services by Silence.
– Sometimes Offeree has a duty to speak.
 Prior Dealings and Acceptance.
– Silence can be acceptance if there are prior
dealings.
 Solicited Offers.
– Offeree has a duty to reject.
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Mode and
Timeliness of Acceptance
 Mail Box Rule - Acceptance becomes
effective on dispatch, providing that
authorized means of communication is
used. Offeree accepts by using the
stipulated means of acceptance.
– Offeror specifies (expressly or impliedly) how
acceptance should be made.
– Effective when dispatched (mailed, shipped).
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Authorized Means of
Acceptance
 Exceptions to Mailbox Rule:
– If acceptance is not properly dispatched by
the Offeree.
– If Offeror specifies that acceptance will not
be effective until it is received.
– If acceptance is sent after rejection,
whichever is received first is given effect.
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Authorized Means of
Acceptance
 Unauthorized Means of Acceptance.
– Not effective until it is received by the Offeror.
If timely sent and dispatched it is considered
to have been effective on its dispatch.
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§ 4: Technology and
Acceptance Rules
 Traditional rules provide framework for
digital age.
 But traditional rules may not apply to
acceptances via Fed Ex, email, or fax.
 Generally, ‘mailbox rule’ does not apply to
online offers.
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a part of South-Western Cengage Learning.
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