Chapter 10. Agreement

Chapter Objectives
Define and offer and an acceptance.
Describe the requirements of an offer.
Identify the terms that can be implied in a contract.
Describe the special offers of advertisements, rewards, and auctions.
Distinguish between auctions with reserve and auctions without reserve.
Describe how offers are terminated by action of the parties.
Define a counteroffer and describe its effects.
Define an option contract.
Describe how offers are terminated by operation of law.
Apply the mailbox rule.
Describe any changes to agreement brought about by e-commerce law.

Offer and acceptance
An agreement is the manifestation by two or more persons of the substance of a contract. The party who makes an offer is the offeror. The party to whom the offer is made is the offeree.

Requirements of an offer

• The offeree must objectively intend to be bound by the offer.
  Intent is determined using the objective theory of contracts, i.e., whether a reasonable person viewing the circumstances would conclude that the parties intended to be legally bound.
• The terms of the offer must be definite or reasonably certain.
• The offer must be communicated to the offeree.

Terms that can be implied in a contract
A court can supply missing terms in a contract. Time of performance can be implied. Price can be implied if there is a market or source from which to determine the price of an item or service. Parties or subject matter generally cannot be implied.

• An general advertisement is an invitation to make an offer. Catalogs, for example, are general advertisements. A specific advertisement is an offer. Describing a specific car for sale is a specific advertisement.
• To collect a reward, the offeree must have knowledge of the reward offer prior to completing the requested act and perform the requested act.

• Unless otherwise stated, an auction is considered an auction with reserve, i.e. it is an invitation to make an offer. The seller retains the right to refuse the highest bid and withdraw the goods from sale.
• In an auction without reserve, the seller gives up his or her right to withdraw the goods from sale and must accept the highest bid.

• Revocation of the offer by the offeror—withdrawal of an offer by the offeror terminates the offer.
• Rejection of the offer by the offeree—if the offeree rejects an offer by express words or conduct, that rejection terminates the offer.
• Counteroffer by the offeree—where the offeree responds with terms and conditions different from or in addition to those of the offer, the original offer is terminated.
• Promissory estoppel—promissory estoppel is an equitable doctrine that prevents the withdrawal of an offer by an offeror if it will adversely affect an offeree who has adjusted his or her position in justifiable reliance on the offer.
• Option contracts—an offeree can prevent the offeror from revoking his or her offer by paying the offeror compensation to keep the offer open for an agreed upon period of time.

• Destruction of the subject matter—the offer is terminated if the subject matter of the offer is destroyed through no fault of either party prior to its acceptance.
• Death or incompetence of the offeror or the offeree—the death or incompetence of either the offeror or the offeree terminates the offer.
• Supervening illegality—the offer is terminated if, prior to the acceptance of an offer, the object of the offer is made illegal.
• Lapse of time—offers may contain effective dates after which the offer terminates; in the absence of such dates, the offer terminates after a "reasonable time" dictated by the circumstances.

Acceptance is a manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts.
• Only the offeree has the legal power to accept an offer and create a contract.
• The offeree's acceptance must be unequivocal. The mirror image rule requires the offeree to accept the offeror's terms.
• The acceptance must be properly dispatched, i.e., addressed, packaged, and posted to fall within the mailbox rule. The mailbox rule states that an acceptance is effective when it is dispatched, even if it is lost in transmission.
• The offer must be accepted by an authorized means of communication. The offer can stipulate a specified means of communication.
• Generally, silence is not considered acceptance. Exceptions include:
  The offeree has indicated that silence means assent.
  The offeree signed an agreement indicating continuing acceptance until notification, e.g., book of the month club.
  Prior dealings of the parties indicate that silence means acceptance.
  The offeree takes the benefit of goods or services provided by the offeror.

• acceptance—Occurs when a buyer or lessee takes any of the following actions after a reasonable opportunity to inspect the goods: (1) signifies to the seller or lessor in words or by conduct that the goods are conforming or that the buyer or lessee will take or retain the goods in spite of their nonconformity; or (2) fails to effectively reject the goods within a reasonable time after their delivery or tender by the seller or lessor. Acceptance also occurs if a buyer acts inconsistently with the seller's ownership rights in the goods.
• agreement—The manifestation by two or more persons of the substance of a contract.
• auction with reserve—Unless expressly stated otherwise, an auction is an auction with reserve, that is, the seller retains the right to refuse the highest bid and withdraw the goods from sale.
• auction without reserve—An auction in which the seller expressly gives up his or her right to withdraw the goods from sale and must accept the highest bid.
• counteroffer—A response by an offeree which contains terms and conditions different from or in addition to those of the offer. A counteroffer terminates an offer.
• express authorization—A stipulation in the offer that says the acceptance must be by a specified means of acceptance
• implied authorization—Mode of acceptance that is implied from what is customary in similar transactions, usage of trade, or prior dealings between the parties
• implied term—A term in a contract which can reasonably be supplied by the courts.
• lapse of time—An offer terminates when a stated time period expires if no time is states, an offer terminates after a reasonable time.
• mailbox rule—A rule that states that an acceptance is effective when it is dispatched, even if it is lost in transmission.
• mirror image rule—States that in order for there to be an acceptance, the offeree must accept the terms as stated in the offer.
• objective theory of contracts—A theory that says the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties.
• offeree—The party to whom an offer to enter into a contract is made.
• offeror—The party who makes an offer to enter into a contract.
• offer—The manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
• proper dispatch—An acceptance must be properly addressed, packaged, and posted to fall within the mailbox rule.
• rejection—Express words or conduct by the offeree that rejects an offer. Rejection terminates the offer.
• revocation—Withdrawal of an offer by the offeror terminates the offer.
• reward—To collect a reward, the offeree must (1) have knowledge of the reward offer prior to completing the requested act and (2) perform the requested act.
• supervening illegality—The enactment of a statute or regulation or court decision that makes the object of an offer illegal. This terminates the offer.