Ch. 9 Agreement

Agreement

Parties must agree on the terms of the contract and manifest to each other their Mutual Assent to the same bargain.

What two events evidence an agreement?

Offer and Acceptance. One party offer a certain bargain to another party. Who then accepts that bargain.

What is an offer?

A promise or commitment to do or refrain from doing some specified action in the future.

Under common law, what three elements are needed to make the offer effective?

1. The offeror must have a serious intention to become bound by the offer
2. The terms of the offer must be reasonably certain, or definite
3. The offer must be communicated to the offeree.

The first requirement for an effective offer is...?

Intent

How is intent determined?

By what a reasonable person in the offeree's position would conclude that the offeror's words and actions meant.

Expression of Opinion

An expression of opinion is not an offer. It does not indicate an intention to enter into a binding agreement.

A statement of Future intent

Statement of intention to do something in the future is not an offer.

Preliminary Negotiations

A request or invitation to negotiate is not an offer. It only expresses willing to discuss possibility of entering into a contract.

Advertisements

In general, advertisements are not treated as offer to contract, but as invitations to negotiate.

Agreements to Agree

Agreements to agree to the material terms of a contract at some future date. Traditionally are not enforceable, but today can be if it is clear that the parties intended to be bound.

Definiteness of Terms

An offer must have reasonably definite terms to that a court can determine if a breach has occurred and can give an appropriate remedy.

What terms define if an offer is reasonably definite?

1) The identification of parties
2) Identification of object or subject matter of contract (work to do, identify goods)
3) The consideration to be paid
4) The time of payment, delivery, or performance.

Communication

Third element of effective offer. Offer must be communicated to offeree.

Termination of offer

The communication of an effective offer to an offeree gives the offeree the power to make contract through acceptance. But power of acceptance can be terminated by action of parties or operation of law.

Revocation of the Offer by the offeror

Offerors act of withdrawing an offer is known as revocation. Unless irrevocable, offer can be revoked as long as communicated to offeree before acceptance.

How can revocation be expressed?

Through written statement or performance of acts that are inconsistent with existence of the offer, and made known to offeree (Selling property)

Option Contract

Form of irrevocable offer. Created when an offeror promises to hold an offer open for a specified period of time in return for a payment given by offeree. Take away offerors power to revoke.

Termination by Rejection of offer by offeree.

If offeree rejects the off, by words or conduct, the offer is terminated. Any attempt after rejection to accept, will be construed as a new offer.

Termination by Counteroffer by Offeree

Rejection of the original offer and the simultaneous making of a new offer.

Mirror Image Rule

Requires the offeree's acceptance to match the offeror's offer exactly to mirrow the offer.

Termination by operation of law

Power of the offeree to transform the offer into a binding, legal obligation can be terminated by operation of law.

What events can terminate an offer by operation of law?

1) Lapse of time (Expires at end of time)
2) Destruction of specific subject matter of the offer (S.matter of offer is destroyed)
3)Death or incompetence of the offeror or offeree
4)Supervening illegality of the proposed contract.

Acceptance

Voluntary act by offeree that shows assent (Agreement) to the terms of an offer. May consist of words or conduct.

Unequivocal acceptance

To exercise the power of acceptance effectively, the offeree must accept unequivocally. Same idea as Mirror image rule.

Communication as Acceptance

In a bilateral contract (Promise for Promise) communication is necessary.

Mode and Timeliness of Acceptance

In bilateral contracts, acceptance must be made timely. Acceptance is generally timely if it is made before the offer is terminated.

The Mailbox Rule

Acceptance taks effect at the time the offeree gives possession to the U.S. postal service. Does not apply to instantaneous forms of communication.

Authorizes means of acceptance

Means of acceptance can be authorized by offeror or implied by circumstances. (overnight-delivery) Effective when means are employed

Substitute Method of Acceptance

If offeror authorizes a particular method of acceptance, but the offeree accepts by a different means, acceptance may still be effective is substitute serves same purpose.

What the difference with using a substitute method?

Acceptance is not effective on dispatch, no contract will be formed until acceptance is received by the offeror.