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Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
What You’ll Learn
How to recognize the requirements of an How to recognize the requirements of an offer (p. 114)offer (p. 114)How to distinguish between an offer and an How to distinguish between an offer and an invitation to negotiate (p. 114)invitation to negotiate (p. 114)
How to recognize the requirements of an How to recognize the requirements of an acceptance (p. 116)acceptance (p. 116)How to distinguish between an acceptance How to distinguish between an acceptance and a counteroffer (p. 117)and a counteroffer (p. 117)
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
What You’ll Learn
How to recognize when an offer has How to recognize when an offer has terminated (p. 119)terminated (p. 119)
Why It’s Important
You need to know when an offer has been You need to know when an offer has been made and when an acceptance goes into made and when an acceptance goes into effect to make sound contracts.effect to make sound contracts.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Requirements of an Offer Serious IntentDefiniteness and CertaintyCommunication to the Offeree
Section OutlineSection Outline
Requirements of an Acceptance Unconditional AcceptanceMethods of Acceptance
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Termination of an Offer RevocationRejectionCounterofferExpiration of TimeDeath or Insanity
Section OutlineSection Outline
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
The person who makes an offer is the offeror.The person who makes an offer is the offeror.The person who receives the offer is the The person who receives the offer is the offeree.offeree.
Requirements of an Offer Requirements of an Offer
An offer has three basic requirements. An offer has three basic requirements. It must be:It must be:
1.1. Made seriouslyMade seriously2.2. Definite and certainDefinite and certain3.3. Communicated to the offereeCommunicated to the offeree
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
An offer must be made with the intention of An offer must be made with the intention of entering into a legal obligation.entering into a legal obligation.
An offer made in the heat of anger or as a An offer made in the heat of anger or as a joke would not meet this requirement.joke would not meet this requirement.
Serious Intent Serious Intent
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Advertisements in newspapers, Advertisements in newspapers, magazines, and catalogs are examples magazines, and catalogs are examples of of invitations to negotiateinvitations to negotiate, which are , which are invitations to make an offer.invitations to make an offer.
Serious Intent Serious Intent Sometimes an invitation to negotiate can Sometimes an invitation to negotiate can be confused with an offer. be confused with an offer.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
An offer must be definite and certain An offer must be definite and certain to be enforceable.to be enforceable.Offers that use vague words or Offers that use vague words or terms that cannot be quantified lack terms that cannot be quantified lack definiteness and certainty.definiteness and certainty.
Definiteness and Certainty Definiteness and Certainty
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Offers may be made by any method Offers may be made by any method that communicates the offer to the that communicates the offer to the offeree, including:offeree, including:
Communication to the Offeree Communication to the Offeree
TelephoneTelephoneLetterLetterTelegramTelegram
Fax machineFax machineE-mailE-mail
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Pre-Learning Question Pre-Learning Question
Is a counteroffer the same thing as an acceptance? Why or why not?
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
To be legally binding, the acceptance To be legally binding, the acceptance must meet certain basic requirements.must meet certain basic requirements.
Requirements of an Acceptance Requirements of an Acceptance
The acceptance must be The acceptance must be unconditional.unconditional.The acceptance must follow the The acceptance must follow the rules regarding the method of rules regarding the method of acceptance.acceptance.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
The acceptance must not change the The acceptance must not change the terms of the original offer in any way. terms of the original offer in any way. This principle is called theThis principle is called the mirror image mirror image rulerule..
Unconditional Acceptance Unconditional Acceptance
Any change in the terms of the offer Any change in the terms of the offer means the offeree has not really means the offeree has not really accepted the offer.accepted the offer.The offeree has made a The offeree has made a counteroffer.counteroffer.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
If a counteroffer is made, the original offeror is If a counteroffer is made, the original offeror is not obligated to go along and no contract exists.not obligated to go along and no contract exists.The offeror becomes an offeree and may accept The offeror becomes an offeree and may accept or reject the counteroffer.or reject the counteroffer.
Unconditional Acceptance Unconditional Acceptance
Contracts for the sale of goods are exceptions to Contracts for the sale of goods are exceptions to the mirror image rule.the mirror image rule.These exceptions include contracts for personal These exceptions include contracts for personal property such as clothing, furniture, food, motor property such as clothing, furniture, food, motor
vehicles, and appliances.vehicles, and appliances.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
The time at which an acceptance takes place The time at which an acceptance takes place is important because that is when the is important because that is when the contract comes into existence.contract comes into existence.
Methods of Acceptance Methods of Acceptance
Special rules govern acceptances that take Special rules govern acceptances that take place when the parties are separated by a place when the parties are separated by a distance and must be communicated by distance and must be communicated by letters, telegrams, or fax.letters, telegrams, or fax.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
According to common law, an acceptance According to common law, an acceptance that must be sent over long distances is that must be sent over long distances is effective when it is sent.effective when it is sent.
Methods of Acceptance Methods of Acceptance
An acceptance is implied when the offeree An acceptance is implied when the offeree accepts by the same or a faster means than accepts by the same or a faster means than that used by the offeror.that used by the offeror.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
The authorization of an acceptance The authorization of an acceptance can also be implied by any reasonable can also be implied by any reasonable means, including:means, including:
Methods of Acceptance Methods of Acceptance
Past practices between the partiesPast practices between the partiesThe usual method in the tradeThe usual method in the tradeCustomary means in comparable Customary means in comparable transactions transactions
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Termination of an offer may occur in Termination of an offer may occur in any of the following five ways:any of the following five ways:
Termination of an Offer Termination of an Offer
1.1. RevocationRevocation2.2. RejectionRejection3.3. CounterofferCounteroffer4.4. Expiration of timeExpiration of time5.5. Death or insanity Death or insanity
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
RevocationRevocation is the taking back of an is the taking back of an offer by the offeror.offer by the offeror.
Revocation Revocation
Rejection Rejection RejectionRejection, or refusal, of an offer by , or refusal, of an offer by the offeree brings the offer to an end.the offeree brings the offer to an end.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
A counteroffer ends the first offer. A counteroffer ends the first offer. The offeree creates a new offer, which the The offeree creates a new offer, which the original offeror may accept or reject.original offeror may accept or reject.
Counteroffer Counteroffer
Expiration of TimeExpiration of TimeIf the offeror sets a time limit for the If the offeror sets a time limit for the acceptance of the offer, it must be honored.acceptance of the offer, it must be honored.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
If the offeror dies or becomes insane If the offeror dies or becomes insane before the offer is accepted, the offer before the offer is accepted, the offer comes to an end.comes to an end.
Death or Insanity Death or Insanity
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Reviewing What You Learned
1. What are the requirements of an offer?
Section 5.2 Assessment
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Reviewing What You Learned
Serious intent, clear and definite terms, and communication to the offeree.
Section 5.2 Assessment
Answer
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Reviewing What You Learned
2. What is the difference between an offer and an invitation to negotiate?
Section 5.2 Assessment
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Reviewing What You Learned
An offer empowers the offeree to accept its terms and create a contract. An invitation to negotiate is an invitation to the other party to make an offer.
Section 5.2 Assessment
Answer
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Reviewing What You Learned
3. What are the requirements of an acceptance?
Section 5.2 Assessment
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Reviewing What You Learned
Must be unconditional and must follow the rules regarding the method of acceptance.
Section 5.2 Assessment
Answer
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Reviewing What You Learned
4. What is the difference between an acceptance and a counteroffer?
Section 5.2 Assessment
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Reviewing What You Learned
An acceptance creates a contract. A counteroffer means that the original offer has not been accepted. The offeree has made a new offer, which the original offeror may accept or reject.
Section 5.2 Assessment
Answer
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Reviewing What You Learned
5. When is an offer terminated?
Section 5.2 Assessment
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Reviewing What You Learned
Upon revocation by the offeror, on rejection by the offeree, when a counteroffer is made, after the expiration of a set period of time, and/or the death or insanity of the offeror.
Section 5.2 Assessment
Answer
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Section 5.2 Assessment
Critical Thinking ActivityIdentifying an Offer Why is it important to be able to distinguish between an offer and an invitation to negotiate?
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Section 5.2 Assessment
Answers will vary, but should recognize that by understanding the difference between the two; a buyer won’t confuse an advertisement with an offer.
Critical Thinking Activity AnswerIdentifying an Offer
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Section 5.2 Assessment
Legal Skills in ActionInvitations to Negotiate Tina believes that she can compel a used car dealership to sell her a car that was advertised in the newspaper. She believes the advertisement is an offer that she intends to accept tomorrow.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Section 5.2 Assessment
Legal Skills in ActionInvitations to Negotiate Write a paragraph that explains why advertisements in a newspaper are considered invitations to negotiate rather than offers.
Understanding Business and Personal Law
Offer and Acceptance Offer and Acceptance Section 5.2Section 5.2
How Contracts Arise
Section 5.2 Assessment
Legal Skills in Action AnswerInvitations to Negotiate Answers will vary, but should explain that sellers usually have limited merchandise to sell and cannot possibly sell an advertised product to everyone who sees an ad.
SECTION OPENER / CLOSER:INSERT BOOK COVER ART
Offer and AcceptanceOffer and AcceptanceEnd of Section 5.2End of Section 5.2