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CHAPTER 6 Offer and Acceptance 6-1 Creation of Offers 6-2 Termination of Offers 6-3 Acceptances
CHAPTER 6
Offer and Acceptance
6-1 Creation of Offers
6-2 Termination of Offers
6-3 Acceptances
6-1 Creation of Offers GOALS List the elements required to form a  contract Describe the
6-1 Creation of Offers
GOALS
List the elements required to form a
contract
Describe the requirements of an offer
Question Juan and Susan were talking one day after school. Juan would turn 16 on the
Question
Juan and Susan were talking one day after school.
Juan would turn 16 on the upcoming July 13 and
wanted to buy Susan’s car. Susan, 17, had been
working and saving her money to buy a new car.
Selling her old car for $2,800 would give her
enough to do so. She offered it to Juan for that
amount, and he accepted. Did the two friend
create a legally enforceable contract?
Minimum age to be bound by contract is 18 in most states.
Therefore if either one wanted out of the contact they would be
able too.
FOCUS What distinguishes a contract from other  agreements? Contracts are enforceable by courts. In contrast
FOCUS
What distinguishes a contract from other
agreements?
Contracts are enforceable by courts. In
contrast social agreements are not
enforceable by law.
What two actions are necessary to form an
agreement which may result in a contract
An offer and an acceptance

WHAT MUST BE IN A CONTRACT?

WHAT MUST BE IN A CONTRACT? Offer and acceptance  Genuine assent  Legality  Consideration
Offer and acceptance  Genuine assent  Legality  Consideration  Capacity  Writing 
Offer and acceptance
Genuine assent
Legality
Consideration
Capacity
Writing
Offer and Acceptance Offeror – one who makes the offer  offeree – the one whom
Offer and Acceptance
Offeror – one who makes the offer
offeree – the one whom it is made to.
Terms must be definite and accepted without
change by the party to whom it was intended to
be offered.
Without offer and acceptance the courts would
not have an agreement that could be enforced.
To enforce arbitrary terms against the parties
would be involuntary servitude and prohibited by
the Constitution
Genuine Assent An agreement based on deception,  improper pressure, certain types of mistakes is not
Genuine Assent
An agreement based on deception,
improper pressure, certain types of
mistakes is not an agreement
Legality What the parties agree to must be legal. 
Legality
What the parties agree to must be legal.
Consideration The agreement must involve both sides  receiving something of legal value as a result
Consideration
The agreement must involve both sides
receiving something of legal value as a
result of the transaction.
Without this we have merely a promise to
make a gift.
Capacity The court must not have to enforce unfair  bargains made due to a lack
Capacity
The court must not have to enforce unfair
bargains made due to a lack of ability to
contract in the first place.
Parties must be able to contract for
themselves.
Writing Some contracts are so important that the  courts must have a writing to be
Writing
Some contracts are so important that the
courts must have a writing to be sure the
proper terms are being enforced.
What elements are required to form a legally enforceable contract? offer and acceptance, genuine assent, legality,
What elements are required to
form a legally enforceable
contract?
offer and acceptance, genuine
assent, legality, consideration,
capacity, and a writing
REQUIREMENTS OF AN OFFER  Offer – is a proposal by an offeror to do something,
REQUIREMENTS OF AN
OFFER
Offer – is a proposal by an offeror to do
something, provided the offeree does
something in return.
Offer must be valid to be a contract. Three
tests that a valid offer must pass are:
Contractual intent must be present in the offer.
1.
The offer must be communicated to the offeree.
2.
3.
The essential terms of the offer must be
complete and definite.

REQUIREMENTS OF AN OFFER

Contractual intent must be present-  Must use the reasonable person test to say whether 
Contractual intent must be present-
Must use the reasonable person test to say whether
their was intent to make an offer.
Objective Test – how the external behavior of the
parties appears to a reasonable person
Subjective Test – What the person could convince the
trier of the fact that he or she really felt.
REQUIREMENTS OF AN OFFER Contractual intent must be present-  Must use the reasonable person test
REQUIREMENTS OF AN OFFER The following show non-intent to contract:  The law is not concerned
REQUIREMENTS OF AN
OFFER
The following show non-intent to contract:
The law is not concerned with what is in the mind of
the person making an offer by rather with the
appearance of this action.
Jests – Statement made as a joke
Statements made in anger or terror -
Social agreements – agreement of social agreement

REQUIREMENTS OF AN OFFER

 Preliminary negotiations – information communicated merely to induce someone to initiate bargaining. (Newspaper ads are
Preliminary negotiations – information communicated
merely to induce someone to initiate bargaining.
(Newspaper ads are just an invitation to bargain).
The offer typically comes from the party responding
to the ad.
For an Ad to be offer it must clearly be worded in ways that
address the problem of numerous people receiving the ad for
a limited amount of product. “Sold to First person or subject
to stock on hand”
Asks the offeree to perform an act as a way to accept the
offer. “to the first person to appear at the main door
Saturday 6 th and 6:00 am.”
Mismarked goods does not make the seller to accept
the wrong price.
REQUIREMENTS OF AN OFFER  Preliminary negotiations – information communicated merely to induce someone to initiate

REQUIREMENTS OF AN OFFER

Offer must be communicated to the offeree -  A person who is not the intended
Offer must be communicated to the offeree -
A person who is not the intended offeree cannot
accept the offer.
Essential terms must be complete and definite –
complete – all offers must at minimum include, price,
subject matter and quantity, either directly or
indirectly, to be legally effective. (any terms missing
not a valid offer)
Definite – each essential term must be identified
clearly.
Question Anchors Aweigh, a boat retailer, placed an ad in a local newspaper announcing a one-day
Question
Anchors Aweigh, a boat retailer, placed an ad in a
local newspaper announcing a one-day sale of
cabin cruisers for the “bargain price” of
$35,5000 each. The dealer had five cruisers in
stock, and they all were sold within one hour.
During the rest of the day, seven other would-be
buyers came in to purchase a bargain cruiser.
Did the Anchors Aweigh advertisement make
offers to the would-be buyers?
This is just an invitation to bargain. Preliminary negotiations.
Question Nick asks Kim to go to dinner at the Sunset Restaurant at 7:00 PM on
Question
Nick asks Kim to go to dinner at the Sunset Restaurant at
7:00 PM on Saturday.
Social Agreement, No contract
Andrea mentions to Sabra that she is considering selling
her car to Sheila for $750.00 Without Andrea’s
permission to do so, Sabra later tells Shelia of Andrea’s
statement. Sheila shows up with the money to buy the
car.
No communication by the offeror to the would-be offeree. No
contract unless Sheila’s actions would constitute offer if Andrea
wanted to accept it.
Tim says to Blake, I’ll buy one of your cars.”
Incomplete information no contract would result
Question The owner of a small color television set offers to sell it to a neighbor
Question
The owner of a small color television set offers to
sell it to a neighbor for $75. As the neighbor
stands there thinking about the offer, a
bystander says, “That’s a bargain. I’ll take it.”
Is there a contract between the bystander and
the owner?
No Contract because the offer was not made to the bystander.
Question In Marsha Brady’s famous “something suddenly came up episode” was there a contract for the
Question
In Marsha Brady’s famous “something suddenly
came up episode” was there a contract for the
original date.
No Social engagement not a contact.
Question The Nationwide Credit Union agreed to allow Heidi to borrow up to $10,000. Nothing was
Question
The Nationwide Credit Union agreed to allow Heidi
to borrow up to $10,000. Nothing was specified
as the length of the agreement, the rate of
interest the credit union would charge, or the
terms of repaying any loan. The credit union did
not make a loan of $8,000 to Heidi when she
requested it four months later. Is the credit
union liable for breach of contract.
No, the credit union is not liable because no contract arose. The
agreement was missing essential terms such as the rate of
interest.

Question

G. Whiz Sports Shop published this advertisement in the local newspaper. “Congratulations to the winners of
G. Whiz Sports Shop published this advertisement
in the local newspaper. “Congratulations to the
winners of the Tour de France! Now you too can
be a champ! Get an 18-sped Blue Lightning
bicycle for only $2,295 – marked down from
$2,795, the manufacturer’s suggested retail
price. What a bargain. Come and get it!”
Baxter visited the discount store the following
day and said, “I’ll take on of the Blue Lightning
bike.” The clerk replied, “Sorry we had only ten
bikes in stock and they’ve all been sold.” Was
the advertisement an offer?
No, the advertisement was not an offer because it did not address
the problem of a limited quantity of the bikes.
What are the requirements of an offer? The offer must have contractual intent, be complete and
What are the requirements of an
offer?
The offer must have contractual intent,
be complete and definite, and in some
fashion be communicated to the offeree
by the offeror.
6-2 Termination of Offers GOALS Describe the various ways to end offers  Explain how an
6-2 Termination of Offers
GOALS
Describe the various ways to end offers
Explain how an offeree can ensure an
offer will remain open
FOCUS Can offers to contracts be terminated at  different times depending on the subject matter
FOCUS
Can offers to contracts be terminated at
different times depending on the subject
matter of the offer?
They can be.

Question

On May 15 th , Melissa offered to sell her collection of baseball cards for $3,000
On May 15 th , Melissa offered to sell her collection of
baseball cards for $3,000 at anytime before the first of
the next month to her friend and fellow collector, Raoul.
While Raoul was trying to raise the money, Melissa had
second thoughts. So she called Raoul and said, “I’ve
changed my mind, I’m not interested in selling the
cards.” Raoul responded, “It’s too late, you said the
offer would be open for this whole month. This is just
the 20 th , and I’ve got the money so I accept.” Was
Melissa’s offer terminated before Raoul’s attempted
acceptance?
Because Melissa revoked first, there was no offer for Raoul to
accept. The promise to keep it open until the end of the month
was not legally binding to her.
HOW CAN OFFERS BE ENDED? Once made an offer does not last forever. It can be
HOW CAN OFFERS
BE ENDED?
Once made an offer does not last forever. It can be
terminated in a variety of ways.
Revocation by the offeror
Revocation – the right to withdraw an offer before it is accepted is
know as the right of revocation. Not effective until communicated
to the offeree.
Can revoke anytime before it is accepted by the offeree. Even if
promised to keep open.
Time stated in the offer –
When making an offer it may be stated how and when the offer
must be accepted. If not within that time or way no contract.
Reasonable length of time
When nothing is said in the offer about how long it will remain
open, it will end after a reasonable time. It depends on the
surrounding circumstances.

HOW CAN OFFERS BE ENDED?

HOW CAN OFFERS BE ENDED? Rejection by the offeree  When offeree clearly rejects the offer,
Rejection by the offeree  When offeree clearly rejects the offer, the offer is terminated 
Rejection by the offeree
When offeree clearly rejects the offer, the offer is terminated
(unless renewed th the original offeror)
Counteroffer
When offeree changes the offeror’s terms in important ways
and sends it back to the offeror. This becomes the new
offer.
Death or insanity of either the offeror or offeree
Contracts are agreements voluntarily entered into by the
parties and subject to their control. These people do not
have control.
Destruction of the specific subject matter
If whatever was offered is destroyed no contract.
Explain two ways in which offers can be terminated.
Explain two ways in which offers
can be terminated.

HOW CAN AN OFFER BE KEPT OPEN?

HOW CAN AN OFFER BE KEPT OPEN? Options –  If the offeree gives the offeror
Options –  If the offeree gives the offeror something of value in  return for
Options –
If the offeree gives the offeror something of value in
return for a promise to keep the offer open, this
agreement is itself a binding contract called an
option. Offer cannot be withdrawn during the period
of the option.
Firm offers
A written offer stating how long it is to stay open
called a firm offer. The UCC makes firm offers
binding for the time stated but not longer than 3
months. Applies to Merchants.

Question

The Downings had placed their idle factory building on the market for $950,000. Robinson, a developer,
The Downings had placed their idle factory
building on the market for $950,000. Robinson,
a developer, was interested in buying it, but she
needed time to persuade a group of investors to
join her in a syndicate to purchase the building.
Robinson offered $10,000 to the Downings to
keep the offer open to her alone for 60 days.
The Downings accepted the money. Are they
now legally bound to keep the offer open to the
Robinson.
This was an option and the Downings could not legally withdraw
the offer or sell to another party during the 60 days.

Question

While her car was in Prescott’s garage for repairs, Wood noticed a large, seemingly unused, metal
While her car was in Prescott’s garage for repairs, Wood
noticed a large, seemingly unused, metal tool chest in
the corner, complete with about 400 standard and
metric tools. Wood offered to buy it for $3,000 and said,
“You can take a week to think about it before you decide
whether to accept.” Four days later, before Prescott had
responded, Wood told Prescott that she was withdrawing
her offer as she had found a better set for less money.
Can Prescott still accept Wood’s original offer? If wood
had put the offer in writing, could she have withdrawn
it before the week was over?
Yes, Wood can withdraw an offer even when he promised to leave
it open. A firm offer or option is required to bind on offer to the
promise to leave an offer open.

Question

Frank saw a wheelchair advertised in the paper for sale for $900. When he called the
Frank saw a wheelchair advertised in the paper for sale for
$900. When he called the seller, who had bought it to
use while he was recovering from a skiing accident, the
seller said it had not yet been sold. Frank drove out to
see it but found it needed work. So Frank offered $700.
The seller seemed insulted, and said he wasn’t
interested at that price. Frank left. About an hour later,
he went back and found the wheelchair had not been
sold. He then offered the $900 specified in the ad.
However, the seller refused to sell it to him. Frank
became upset and sued to get the court to force the
owner to sell it to him for $900.
Will the seller have to
do so? Why or why not?
No, the seller’s offer at $900 was rejected by Frank so he cannot
later accept it.

Question

Gus walked into his local hardware store to buy exterior paint for his house. It was
Gus walked into his local hardware store to buy
exterior paint for his house. It was on sale for
$35.00 a gallon. Gus wanted to check around
but didn’t want to lose the change to buy at the
sale price. In response to Gus’s request, the
manager of the paint department wrote Gus a
not stating, “Gus Almondson may buy up to 15
gallons of Old Dutch Exterior Grade paint for $35
per gallon anytime within the next two weeks.”
The manager signed and dated the note. Is this
offer binding?
Yes, this is a firm offer and therefore a binding offer.

Question

Phil was talking with Sharon about Opie, his Springer Spaniel dog. Phil explained that Opie has
Phil was talking with Sharon about Opie, his
Springer Spaniel dog. Phil explained that Opie
has a strong personality, loves to snuggle up to
people, likes to eat “people food,” and is a good
watchdog. Sharon liked Opie a lot and needed a
dog. She asked Phil how much he paid for Opie.
Phil said, “I paid $75, but I wouldn’t sell Opie for
ten times that amount. Sara said, “Well okay,
it’s a deal then. I’ll give you $800, more than
ten times the $75.” Has Opie been sold?
Opie has not been sold because Phil did not make an offer.
How could an offeree ensure that an offer will stay open for a set period of
How could an offeree ensure that
an offer will stay open for a set
period of time?
Options or Firm offers
6-3 Acceptances GOALS Discuss the requirements of an effective  acceptance  Determine at what point
6-3 Acceptances
GOALS
Discuss the requirements of an effective
acceptance
Determine at what point in time an
acceptance is effective
FOCUS Scenario John makes an offer to Paul. Paul is not  interested, but Paul’s friend,
FOCUS
Scenario
John makes an offer to Paul. Paul is not
interested, but Paul’s friend, who was
standing nearby, hears the offer and says
she accepts.
Question
Has a contract been formed?
No, it can only be accepted by the
person(s) whom it has been made.

WHAT IS REQUIRED OF AN ACCEPTANCE?

WHAT IS REQUIRED OF AN ACCEPTANCE? Only offerees may accept  The acceptance must match the
Only offerees may accept  The acceptance must match the offer  Acceptance must be communicated
Only offerees may accept
The acceptance must match the offer
Acceptance must be communicated to the
offeror

WHAT IS REQUIRED OF AN ACCEPTANCE?

WHAT IS REQUIRED OF AN ACCEPTANCE? Only offerees may accept –  If made to general
Only offerees may accept –  If made to general public then anyone can accept. 
Only offerees may accept –
If made to general public then anyone can accept.
The acceptance must match the offer
Mirror image rule – requires that the acceptance must
exactly match the terms contained in the offer.
Under the UCC an attempted acceptance of an offer
for a contract for a sale of goods can be valid where
the offer and acceptance agree. Anytime a consumer
is involved the consumer is singled out for protection
against unagreed to terms being included in the
contract without the consumer’s consent.
WHAT IS REQUIRED OF AN ACCEPTANCE? Acceptance must be communicated to the offeror  Silence cannot
WHAT IS REQUIRED
OF AN ACCEPTANCE?
Acceptance must be communicated to the offeror
Silence cannot be an acceptance of an offer.
bilateral acceptance –
Most offers are these (bilateral contracts) Contains two promises
Can be accepted by giving a promise
unilateral acceptance –
Indicate acceptance by offeree by performing a certain act.
Unilateral Contracts
Example promise to pay reward to anyone who returns a lost
camera. When camera returned is acceptance of offer.
Modes of contractual communication
When acceptances are effective –
Court say acceptance is effective when sent by the same means
used for the offer or by faster means.
Acceptances sent by mail generally take effect when properly
posted.
The offeror may specify what is necessary means of acceptance.
What are the requirements of an effective acceptance? Must come from the intended offeree, match the
What are the requirements of an
effective acceptance?
Must come from the intended offeree, match
the terms of the offer, and be communicated
to the offeror in a proper and timely fashion.

Question

When Blithely found Jack on Blithely’s used car lot looking at an SUV, she introduced herself
When Blithely found Jack on Blithely’s used car lot
looking at an SUV, she introduced herself and
then showed him the features of the vehicle.
After a period of time they discussed the price,
and then she opened the driver’s door for him.
As he slid behind the wheel, she said, “Tell you
what. I believe that once a customer gets
behind the wheel of one of these beauties, he’s
sold. So, if you don’t say no within the next ten
seconds, we’ve got a deal at $15,750.” Jack
said nothing within the ten seconds. Did Jack
legally agree to Blithely’s offer.
No Contract would result by the silence.

Question

To help pay for housing renovations, Jeanne placed an ad on the bulletin board at the
To help pay for housing renovations, Jeanne placed an ad
on the bulletin board at the public golf course showing a
picture of her prized set of golf clubs, her phone
number, and the figure $2,000. Eve, after seeing the ad
called Jeanne and then drove to her house with $2,000
in hand. When se presented the $2,000 to Jeanne, the
latter refused it, stating that she had received several
calls raising it to $2,500. Can Eve sue and force Jeanne
to accept her $2,000 for the clubs. Why or why not?
No. The $2,000 was merely an invitation to negotiate.
Therefore, Eve’s presenting the $2,000 was not an acceptance but
an offer. Jeanne has as much right to raise that price as others
do to try and get her to lower it.

Question

Office Suppliers, Inc. ordered 2,000 of 20lb. paper from Dimension Paper for $1.75 per ream to
Office Suppliers, Inc. ordered 2,000 of 20lb. paper
from Dimension Paper for $1.75 per ream to be
delivered at the Office Suppliers warehouse on
April 24. Dimension responded that 2,000 reams
would be delivered on April 25 at the price of
$1.75 per ream. Office Suppliers made no
further response. Has a valid contract been
formed? If so, what are the terms? If not, why
not?
A Valid contract has been formed based on Office Suppliers offer.
UCC code minor changes