Agreement and Consideration
- offer -- an offer is a manifestation by one party of a willingness to enter into a contract
- offeror -- the party, who makes an offer
- offeree -- the party to whom an offer is made. This party has the power to create an agreement by accepting the terms of the offer.
Requirements of an offer
- objective intent -- the intent to enter into a contract is determined by the objective theory of contract -- that is, whether a reasonable person viewing the circumstances would conclude that the parties intended to be legally bound
- definite terms -- the terms of an offer must be definite. So that the agreement between the parties can be determined. Reasonable terms (ex. price, time for performance) may be implied.
- communication -- the offer must be communicated to the offeree by the offeror
Special offer situations
- advertisement
- general rule -- generally, an advertisement is an invitation to make an offer
- exception -- an advertisement is an offer if it is the definite and specific as to show that the advertiser's intent is to be bound to the terms of the advertisement
- reward -- a reward is an offer to create a unilateral contract
- auction
- auction with reserve -- an auction with reserve is an invitation to make an offer. The seller retains the right to refuse the highest bid and withdrawal the good from sale
- auction without reserve -- an option without reserve is an offer. The seller must accept the highest bid above the minimum bid. This type of auction, must be stipulated.
Termination of an offer by action of the parties
- revocation -- the offeror may revoke an offer any time prior to its acceptance by the offeree
- rejection -- an offer is terminated if the offeree rejects the offer by his or her words or conduct
- counteroffer -- a counteroffer by the offeree terminates the offeror's offer and create a new offer
Termination of an offer by operation of law
- distraction of the subject matter -- an offer terminates if the subject matter of the offeror is destroyed prior to acceptance through no fault of either party
- death or incompetency -- the death or incompetency of either the offer or the offeree prior to the acceptance terminates the offer
- supervening illegality -- if prior to the acceptance of an offer the object of the offer is made illegal by statute, regulation, court decision, were other mall, the offer terminates
- lapse of time -- an offer terminates upon the expiration of a stated time in the offer. If necktie misstated, the offer terminates after a "reasonable on."
Option contract
if an offer repays the offeror compensation to keep them offer open for an agreed upon period of time, an option contract is created. The offeror cannot sell the property to anyone else during the option peroid.
Acceptance
acceptance is manifestation of asset by the offeree to the terms of the offeror. Acceptance of the offer by the offeree creates a contract.
Rules for acceptance
- mirror image rule -- under the common wall of contracts, and offeree must accept the terms offered by the offeror to create a contract. Any change in terms by the offeree constitutes a counteroffer, not an acceptance.
- acceptance-upon-dispatch rule -- unless otherwise provided in the offer, acceptance is effective when it is dispatched by the offeree. this rule is often called the mailbox rule.
- proper dispatch rule -- an acceptance must be properly addressed, packaged, and have prepaid postage or delivery charges to be effective when dispatched. Generally, improperly dispatched acceptances are not effective until actually received by the offeror.
- mode of acceptance -- acceptance must be by the express means of communication stipulated in the offer, or, if no means is stipulated, then by reasonable means in the circumstances
Consideration
Consideration involves a thing of value being given in exchange for a promise. It may be tangible or intangible property, performance of a service, forbearance of a legal right, or another thing of value.
Requirements of consideration
- legal value -- something of legal value must be given as consideration. Either the promise he suffers a legal detriment or the promisor receives a legal benefit
- bargained-for-exchange -- a contract must arise from a bargained-for-exchange. Gift promises gratuitous promises are unenforceable because they lacked considerationshe
Special contracts
- requirements contracts -- contracts where the buyer agrees to purchase all the requirements for the item from a single seller are enforceable if the parties act in good faith
- output contracts -- contracts where the seller agrees to sell all its production to a single buyer are enforceable. If the parties acting good-faith
- best efforts contracts -- contracts that require a party to use its best efforts to accomplish the objective of the contract are enforceable
Contracts lacking consideration
The following contracts are unenforceable because they lacked consideration:
- illegal consideration -- promised to retain from doing an illegal act
- illusory promise -- if one were both parties to a contract can choose not to perform their contract will duties
- moral obligation -- promise made out of a sense of moral obligation, honor, love, or affection
- pre-existing duty -- promise to perform an act or do something that a person is already under an obligation to do
- past consideration -- promise based on a party's past consideration
Settlement of claims
Award and satisfaction. This is a compromise agreement were the parties agree to settle a contract dispute and do so.
- unliquidated debt -- this is a debt in which reasonable persons would disagree as to the amount owed. It can be compromised without the payment of new consideration.
- liquidated debt -- this is a debt that is due and certain. It cannot be compromised unless new consideration is paid
Commissary estoppel
Commissary estoppel is a policy-based equitable doctrine that prevents a promise or from revoking his or her promise even though the promise lacks consideration. The requirements are:
- the promise made a promise
- the promise or should have reasonably expected to induce the promised to rely on the promise
- the promisee actually relied on the promise and engaged in an action or forbearance of a right of a definite and substantial nature
- injustice would because the promise were not enforced
