What are the elements necessary for an effective acceptance?

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Fundamentals of Business Law
Summarized Cases, 8th Ed., and Excerpted Cases, 2nd Ed.
ROGER LeROY MILLER
Institute for University Studies
Arlington, Texas
GAYLORD A. JENTZ
Herbert D. Kelleher Emeritus
Professor in Business Law
University of Texas at Austin
Learning Objectives
• What elements are necessary for an effective
offer? What are some examples of
nonoffers?
• In what circumstances will an offer be
irrevocable?
• What are the elements necessary for an
effective acceptance?
• What is consideration? What is required for
consideration to be legally sufficient?
• In what circumstances might a promise be
enforced despite a lack of consideration?
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
2
Agreement
• An essential element of contract
formation is AGREEMENT:
– OFFER, and
– ACCEPTANCE.
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
3
Requirements of the Offer
•
•
•
•
Serious Intention,
Reasonably Definite Terms, and
Communication to Offeree.
CASE 8.1 Lucy v. Zehmer (1954).
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
4
Offer: Intention
•
•
•
•
Opinions are not offers.
Good Intentions are not offers.
Preliminary Negotiations are not offers.
Advertisements and Circulars are
considered “invitations to negotiate.”
• Auctions are not offers.
• Agreements to Agree are not offers.
– CASE 8.1 Basis Technology Corp. v.
Amazon.com, Inc. (Mass, 2008).
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
5
Offer: Definiteness
• Offer must have reasonably definite
terms so a court can determine
whether breach occurred.
– Offer can require acceptance to be
worded in such a way for contract to be
formed.
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
6
Offer: Communication
• Communication: Offer must be
communicated to offeree.
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Termination of the Offer
• By Act of the Parties.
• Revocation by Offeror (unless
irrevocable).
• Rejection by Offeree (or counteroffer).
• Operation of Law:
– Lapse of time.
– Destruction of the subject matter.
– Death or incompetence of Offeror or Offeree.
– Supervening illegality of proposed contract.
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a part of South-Western Cengage Learning.
8
Acceptance
• Voluntary act by Offeree that shows
assent to original terms.
• Unequivocal Acceptance: “Mirror Image”
Rule.
– Offeree must unequivocally accept offer.
– Additional terms may be considered a
counteroffer.
• Silence as Acceptance.
– Ordinarily silence is not acceptance, unless
offeree has duty to speak (benefit of services).
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Acceptance
• Communication of Acceptance.
– Authorized Means of Communication is either
express or implied by form of offer (e.g., U.S.
mail, fax, email).
• “Mailbox Rule”: Offeree accepts offer
when the acceptance is dispatched.
• Authorized Means of Acceptance:
Offeree must accept the offer in the form it
was received, unless offer requires a
different method (e.g., Fed-Ex, or receipt
by Offeror).
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
10
Consideration and Its
Requirements
• Consideration is value given in return
for a promise.
– Something of legally sufficient value,
– Given in a bargained-for-exchange between
the parties.
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Legal Sufficiency and Adequacy
• Sufficient consideration must be
something of value in the eyes of the
law.
• Adequate consideration is “fair”
although courts do not generally
consider this.
• If consideration is inadequate (e.g.,
fraud) courts may strike down the
contract as unconscionable.
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a part of South-Western Cengage Learning.
12
Agreements That Lack
Consideration
• Pre-Existing Duty.
– Unforeseen Difficulties.
– Rescission and New Contract.
• Past Consideration.
– CASE 8.3 Access Organics, Inc. v.
Hernandez (Montana, 2008).
• Illusory Promises.
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a part of South-Western Cengage Learning.
13
Settlement of Claims
• Accord and Satisfaction.
– Amount of debt must be in dispute.
– If liquidated debt (uncertain) accord and
satisfaction cannot occur.
• Release.
– Good faith, signed writing,
consideration.
• Covenant Not to Sue.
– Does not always bar further recovery.
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
14
Promissory Estoppel
• Promissory Estoppel (“detrimental reliance”)
doctrine applies when a person relies on the
promise of another to her legal detriment.
• Promisor is “estopped” (precluded) from
revoking the promise. There must be:
– Clear and definite promise with substantial
reliance
– Justice is served by enforcement of the promise.
Copyright © 2010 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
15
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