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Contracts and Their Formation

Contracts and Their Formation. “It’s a deal, I’ll take it”. Offer and Acceptance. OBE-118, Section 3 Fall 2004. What is a Contract?. An exchange of promises between several different parties (or sometimes a act for a promise) that the

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Contracts and Their Formation

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  1. Contracts and Their Formation “It’s a deal, I’ll take it” Offer and Acceptance OBE-118, Section 3 Fall 2004

  2. What is a Contract? • An exchange of promises between several different parties (or sometimes a act for a promise) that the .

  3. Basic Elements of a Contract Usually looked at as six elements Agreement (or “Mutual Assent”) Consideration Capacity Legality Genuineness of assent Writing and Form

  4. Classifying Contracts • Bilateral versus Unilateral • Express versus • Formal versus • Oral versus Written • V____, V____, V_____, and Unenforceable • Goods versus Services

  5. Promise Act Understanding a Unilateral Contract Offer Acceptance Bilateral: Promise Unilateral: Promise

  6. Formation • Mutual Agreement or Mutual Assent • Requires acceptance of an offer • The “objective theory of contracts” resolves issues as to what was an offer,

  7. Offer Basic Elements of an offer • Serious objective intent by offeror • Terms reasonable definite and certain • Offer communicated to offeree No:

  8. Acceptance • Voluntary act that expresses assent or agreement to terms of offer • Unequivocal or absolute • Communicated to the offeror No:

  9. Did the Offer Survive to be Accepted? Offer Acceptance

  10. Revocation of Offers • Direct repudiation • Behavior conforming to repudiation • Generally, revocation must be received by offeror or offeror’s agent. • Irrevocable offers

  11. Termination by Rejection • Words or acts that convey “no” Termination by Counteroffer • A rejection with a new offer • Watch out for inquiries: “Would you accept $50? • Mirror-image rule (common law)

  12. Termination by Operation of Law • Lapse of time • Destruction of Subject matter • Death or incompetence of offeror • Illegality of proposed contract

  13. Complications I Acceptance rule: acceptance by authorized manner effective when dispatched (also called the mailbox rule) Authorized manner: (General rule) same means that offeror used or one that is commercially reasonable and quicker. Revocation versus Acceptance Revocation rule: Revocation is effective when received

  14. Complications II Rule: A unilateral contract is accepted by performing and once performance has commenced the offeree has a reasonable period of time to complete performance Accepting a Unilateral Contract

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