CHAPTER 7 REVIEW

1. CHAPTER 7 REVIEW Offer and Acceptance

2. 6 PARTS OF A CONTRACT • Offer and Acceptance- Both sides agree on mutual terms • Genuine Assent- Entering under your own free will (Not being forced) • Consideration- both sides gain something • Capacity- Understanding your actions • Legality- legal agreement • Writing- some contracts must be written to be considered valid

3. OFFER AND ACCEPTANCE • Agreed on “mutual” terms • Only person offer was made to (Offeree) may accept • If a group, offeree is the person WHO accepts • Terms of the offer must be clear, detailed and complete

4. Elements of offer and acceptance • Agreement is “serious” and legal • The terms of the agreements are clear, definite and complete • Communicated to offeree • Only the offeree can accept • Terms agreed to by offeree match the offer’s terms (Mirror image rule) • Communicated back to offeror (Acceptance) OFFER ACCEPTANCE

5. Contracts • Agreements “Courts” will enforce • Social Agreements are not legally enforceable contracts (Taking someone on a date) • Contracts create legal links between individuals, businesses and anyone involved in a legal agreement • All serious agreements are “not” considered contracts “unless” all 6 parts of contract are satisfied

6. Test of a reasonable person • Since you can never really know what is in the mind of a person, you need a test to determine if you can agree what someone “thought” another person was thinking • This is a legal test to determine what someone meant when they entered a contract

7. FACTS AND CIRCUMSTANCES • These are the things going on when an offer was made to determine if the person who made the offer was in fact “serious” • If a person looks mad and the circumstances of their offer was made when they were mad, the offer will not be determined as serious. • For example, if a person grabs a $2000 watch and throws it on the ground, then tells a friend “This thing never works, I’d give it to you for free” they are not serious.

8. Preliminary NEGOTIATIONS • These are the things 2 people say to each other to determine if the other person is serious about selling an item and if they can get it for the price they want. • Ex) “I see you want to sell your home. Would you take $200,000 for it?” The person responds “No, that is well below what I am asking”. Response “What would you take then?”

9. Essential Information • All important items needed to make the contract terms complete • Names, dates, times, money, description of items • If any key item is missing, the contract is considered too vague or incomplete to be a valid agreement

10. ADVERTISEMENTS • “Usually” NOT considered offers, as they would need to make sure they are clear about the number of items for sale and make the customer do something to accept • Ads are considered “invitations” to an offer, as the consumer would need to come in to accept and can still negotiate the price.

11. ACCEPTANCE OF OFFER • “Only” allowed to be done by the person who the offer is made it (Offeree) • Cannot have a friend or relative say “She will accept, I’ll do it for her” • No person other than the one the offer was made to may accept unless its made to a group

12. Acceptance rules • MUST accept the final offers terms exactly as they were offered (Mirror Image rule) • Must be made within the time frame allowed (If time is agreed) • Only offeree can accept • Acceptance must be communicated back in some way

13. HOW CAN OFFERS END? • Revocation- the offeror takes back offer • Time stated- If time ends, so does offer • Reasonable time ends- If what would be a reasonable time elapses, offer ends • Rejection by Offeree- once the Offeree rejects the offer, they cannot change their mind at a later date and accept • Counteroffer- Any “Change in terms” ends the original offer • Death or Insanity- Either party

14. KEEPING OFFERS OPEN Common law • Oversees non-business contracts • Options (Collateral) must be given to keep offer open UCC Law • Oversees business contracts (Retailers) • Firm Offers (Signed written agreements) • Good for 3 months

15. OPtions • “Only” used with common law agreements (Non-Business related) • Based on collateral (Money or property used to keep offer open to buy time to decide) • Part of agreement

16. Firm Offer • “Only” used with UCC Law based agreements (Retailers or business) • NO collateral is needed • Usually in form of rain check or small written contract • Protected for 3 months or more

17. Mirror Image Rule • Means the acceptance must match the offer “exactly” as its offered • Any change in the offer’s terms is a counteroffer and therefore ends the original offer

18. Unilateral Acceptance • If the offeree must perform in some way to accept an offer • Ex) If I tell an employee “If you decide to work overtime this weekend, I’ll pay you double-time even though I only need to pay you time and a half”

19. Bilateral Acceptance • Most offers are bilateral • A promise for a promise • Ex) Going to the store and paying for goods at the cash register. I get the goods and the store gets the money

20. When these take effect OFFERS • Take effect when received • Can be made in person, mail, email, etc.. ACCEPTANCES • Take effect when Sent • If mailed, acceptance is based on mail stamp or email through time and date

21. Acceptances • Offeror may require way acceptance must be made (For example, in writing through the mail) • Offeror may tell offeree acceptance does not take effect until it is received

22. silence • An offeror may NOT word a contract offer to trick a person into agreeing by saying nothing • Illegal • Silent acceptance only work when you have a relationship with person or business • Ex) Stocking Pepsi on store shelves

23. Implied terms • Things that are understood without being spoken or agreed to • Its understood that you will pay for goods before leaving a store • Clear offers means the terms are explained in a way both parties understand • I am selling a 2009 GE refrigerator

24. Questions???