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Importance of Agreement Law. Formation of a contract.
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Importance of Agreement Law www.assignmentpoint.com
Formation of a contract The backbone of the contract is agreement, often referred to as mutual assent or a meeting of the minds All contracts are made by the process of lawful offer and lawful AcceptanceOffer alone and acceptance alone are inactive or powerless ,but an offer together with acceptance leads to a contract An offer may lapse for want of acceptance or be revoked before acceptances. Acceptance converts the offer into a promise then it is too late to remove it www.assignmentpoint.com
Offer • Q needed to hire an accountant for his business. He hoped to get someone with great qualifications and references and he hoped to pay $2,000 per month plus benefits. R applied for the job and was given an interview. after some preliminary discussions, Q told R she could have the job at $2,000 per month • A party propose specific terms upon which she is willing to deal. • Communication of a willingness to enter into a transaction; • Offer is made • An ‘offer’ is a statement of the terms by which the person making the offer is prepared to be bound www.assignmentpoint.com
Counter offer • R, however, was hoping to get a higher paying job and she was concerned about death of a job security. her response was that she was flattered to be offered the job, but that she need at least $3,000 per month plus a one-year job guarantee. • the other party may make his own proposal or may reject the proposal or altogether. In such instances, no contract is yet formed. • Offer is reelected and a new offer is created • That is called counter offer www.assignmentpoint.com
Negotiation • Q's response was to suggest a compromise: He was willing to pay $2,600 per month and would give her a one year contract at the end of a 3 month probationary period if her work was satisfactory. • Another offer is created • R said, "fine, i'll start work on monday as you suggested." Q: "see you then.“ • Agreement is usually achieved through negotiationand ultimately offer and acceptance. www.assignmentpoint.com
The offer or the proposal or the promise • An offer is a communication of a willingness to make an exchange in such a way that the person receiving the communication should reasonably understand that acceptance is sought and will result in a contract. • When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence – he is said to make a proposal or offer • A proposal when accepted becomes a promise. www.assignmentpoint.com
Offeror and offeree • The person making proposal is called the promiser and the person accepting the proposal is called the promisee • The promisor or the person making an offer called offeror the person to whom the offer is made call offeree. • Offer is precise proposal made by offeror to offeree to begin negotiations www.assignmentpoint.com
Rules Regarding offer • An offer may be expressed or implied • An offer may be made to definite person , to some definite class of person or to world at large • Legal relationship is required- agreements occur between family members , Social agreements occur between friends and acquaintances does not lead to a binding contract • An offer may be conditional- conditions must communicate clearly . Condition mustbe reasonable • Printed contracts www.assignmentpoint.com
Rules regarding offer When called upon to determine whether a particular communication was in fact an offer, courts look for three essential elements: an offer must • 1) show that the offeror intends to be bound, • 2) include reasonably definite terms, and • 3) be communicated to an offeree. • Offers needs to be distinguished from other similar things • theory that says the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties. • No valid negotiationcontract results from: Preliminary s www.assignmentpoint.com
Offeror intends to be bound, • A mere statement or intention is not an offer • Statements of interest or future opinion, • inquiries seeking information about potential transactions, reply • price quotes, time table , catalogue • invitation to bargain • placing an item up for auction is • Advertisements- A general advertisement is an invitation to make an offer. A specific advertisement is an offer. • Auction - • Circulars , Goods displayed in shops • Proposals made as obvious jokes or in the heat of anger will typically not show intent to be bound, and hence, will not be offers. www.assignmentpoint.com
Intent to be bound • An offeror's intent to be bound is judged objectively: intent to be bound exists if a reasonable person viewing the circumstances would find intent to be bound. The offeror's actual or subjective intent is irrelevant.. • @CASE 4 FACTS: The Mitchells bought a used safe at an auction for $50. The safe contained a locked, inside compartment, a fact that was known to all parties prior to the sale. After the auction, the Mitchells had the safe opened by a locksmith who discovered $32,207 inside. The seller of the safe sought to recover the money arguing that it did not intend to offer the contents of the safe for sale, but only the safe itself. www.assignmentpoint.com
Advertisements, Rewards Advertisements -A general advertisement is an invitation to make an offer. A specific advertisement is an offer. Rewards- An offer to pay a reward is an offer to form a unilateral contract. To collect a reward, the offeree must: • Have knowledge of the reward offer prior to completing the requested act • Perform the requested act In an auction sale, asking for bids is an invitation to negotiate. A person making a bid is making an offer, and the acceptance of the highest bid by the auctioneer is an acceptance of that offer and gives rise to a contract. www.assignmentpoint.com
Reasonably certain terms • The terms of an offer must be clear enough to the offeree to be able to decide whether to accept or reject the terms of the offer. • If the terms are indefinite, the courts cannot enforce the contract or determine an appropriate remedy for its breach • a communication must contain definite terms to qualify as an offer. Further, the failure to include reasonably definite terms suggests that the speaker expects further negotiations and does not expect to conclude a contract with acceptance of that communication. • In most cases essential terms include: • The parties to the contract, • The subject matter of the exchange • the quantity of goods to be sold. • Consideration to be paid • Time of performance www.assignmentpoint.com
Communication to offeree • An offer is not effective until and unless it is voluntarily communicated to the offeree. • If an individual learns about an anticipated offer inadvertently or through some third party before the offeror has chosen to communicate that offer, the offer cannot be accepted or result in a contract. • Offer must be communicated by offeror or offeror’s authorized agent. www.assignmentpoint.com
Termination of offers • An offer can be revoked at any time before it has been accepted, but that must be communicated to the offeror. Once an offer has been accepted a contract has been made and any attempt not to carry it out according to its terms will be a breach. • The offer to contract will terminate upon the following events • By notice- Revocation • Withdrawal of an offer by the offeror terminates the offer. • An offeror can revoke an offer at any time prior to its acceptance by the offeree. • By Rejection or refusal • Express words or conduct by the offeree that rejects an offer. • Rejection terminates the offer. • By counter offer- A response by an offeree that contains terms and conditions different from or in addition to those of the offer.A counteroffer terminates an offer www.assignmentpoint.com
Termination of the Offer by Operation of Law By failure of condition precedent • Destruction of the subject matter • The offer terminates if the subject matter of the offer is destroyed through no fault of either party prior to its acceptance. • Death or incompetency of the offeror or offeree • The death or incompetency of either party terminates the offer. • Supervening illegality • The enactment of a statute, regulation, or court decision that makes the object of an offer illegal. • This action terminates the offer. • Lapse of time • An offer terminates when a stated time period expires. • After expiry of reasonable time www.assignmentpoint.com
The acceptance • Acceptance occurs when offeree gives concept to offer made by offeror • An acceptance is an unconditional agreement to all the terms of an offer. • In the case of an offer for a unilateral contract, the offeror requests the performance of an act as acceptance. The only way to accept this type of offer is to perform the act. • In the more common offer for a bilateral contract, the acceptance is made by communicating assent to the proposal, or in other words, promising to give the consideration requested in return for the consideration offered. www.assignmentpoint.com
Rules regarding Acceptance • It must be an absolute and unqualified acceptance of all terms- The acceptance must not change the terms of the original offer in any way. This principle is called the mirror image rule • Conditional acceptance is counter offer not the acceptance • Contracts subject to condition- subject to approval • Clarification is not acceptance • The acceptance must be expressed in some usual manner – by word or by conduct • Medium and manner of acceptance-. -If an offer demands acceptance in a particular medium or manner, the offeree must follow those requirements. If nothing then Reasonable manner and medium.- past practices between the parties www.assignmentpoint.com
Rules regarding Acceptance • Silence, Mental Acceptance Or Excommunicated Acceptance , being equivocal, is not an acceptance. • Time of acceptance - In order to effectively accept an offer, the offeree must have a valid offer that has not expired by any of the means • The acceptance should made after the offer and while the offer is in force • An acceptance is complete – when it put in a course of transmission to proposer www.assignmentpoint.com
An offer by post • An offer by post cannot have any effect until it has been received and the same is true of a postal revocation. However as soon as you post an acceptance you have made a contract even if the offereor doesn’t know that yet and as long as you can prove correct posting is effective even if it is never received. • Mailbox Rule • A rule that states that an acceptance is effective when it is dispatched, even if it is lost in transmission. • If an offeree first dispatches a rejection and then sends an acceptance, the mailbox rule does not apply to the acceptance. www.assignmentpoint.com
Mailbox rules • June 1: offeror sends offer • June 2: offeror sends revocation of offer • June 3: offer is received by offeree • June 3: offeree sends acceptance to offeror • June 4: revocation of offer is received by offeree • June 5: acceptance is received by offeror • Valid acceptance? Yes. • Mailbox rules: • Acceptance is good on sending here june 3 • Revocation is good on receipt here june 4 • Acceptance occurred prior to revocation • There is a valid acceptance www.assignmentpoint.com
Time and Mode of Acceptance • Proper Dispatch Rule • The acceptance must be properly dispatched. • The acceptance must be properly addressed, packaged, and posted to fall within the mailbox rule. • Under common law, if an acceptance is not properly dispatched, it is not effective until it is actually received by the offeror. www.assignmentpoint.com
Express Authorization A stipulation in the offer that says the acceptance must be by a specified means of communication. Use of an unauthorized means of communication makes acceptance not effective. Implied Authorization Mode of acceptance that is implied from what is customary in similar transactions, usage of trade, or prior dealings between the parties. Mode of Acceptance www.assignmentpoint.com
Offer and Acceptance: Summary www.assignmentpoint.com
Offeror makes an offer Offeree accepts offer unconditionally Offeree changes or adds terms Offeree rejects offer Contract Arises No contract exists Counteroffer Original offeror accepts counteroffer unconditionally Original offeror changes or adds terms Original offeror rejects counteroffer Counteroffer Acceptance of an Offer www.assignmentpoint.com
Revocation Prior to Acceptance* By Offeror Death or Incapacity Time Limitations Placed in the Offer Rejection By Offeree Counteroffer Death or Incapacity *Options and firm offers excepted Termination of an Offer www.assignmentpoint.com
