chapter 10 contractual agreement: mutual assent davidson, knowles & forsythe business law: cases...

CHAPTER 10CHAPTER 10CONTRACTUAL AGREEMENT:CONTRACTUAL AGREEMENT:

MUTUAL ASSENTMUTUAL ASSENT

CHAPTER 10CHAPTER 10CONTRACTUAL AGREEMENT:CONTRACTUAL AGREEMENT:

MUTUAL ASSENTMUTUAL ASSENT

DAVIDSON, KNOWLES & FORSYTHE DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles Business Law: Cases and Principles

in the Legal Environmentin the Legal Environment (8 (8thth Ed.) Ed.)

2© 2004 West Legal Studies in Business© 2004 West Legal Studies in BusinessA Division of Thomson LearningA Division of Thomson Learning

BUSINESS LAW: BUSINESS LAW: Cases & PrinciplesCases & PrinciplesDavidson Davidson • Knowles • Forsythe 8• Knowles • Forsythe 8 thth Ed. Ed.

THE FIRST STEP IN THE FIRST STEP IN CONTRACT FORMATIONCONTRACT FORMATION

THE FIRST STEP IN THE FIRST STEP IN CONTRACT FORMATIONCONTRACT FORMATION

Valid offer by the offeror (the person making the offer).

Valid acceptance by the offeree (the person to whom the offer is made).

Valid offer by the offeror (the person making the offer).

Valid acceptance by the offeree (the person to whom the offer is made).



MUTUAL ASSENTMUTUAL ASSENTMUTUAL ASSENTMUTUAL ASSENT

Requires the assent of both parties to the agreement.

Parties must agree exactly to the same terms and conditions.

Without mutual assent no agreement comes into existence.

Requires the assent of both parties to the agreement.

Parties must agree exactly to the same terms and conditions.

Without mutual assent no agreement comes into existence.



THE OBJECTIVE THEORY THE OBJECTIVE THEORY OF CONTRACTSOF CONTRACTS


Offeror has the right to set the terms of the offer.

Offeror controls method of acceptance by the offeree.

Offeror must exhibit clear and present intent to offer.

Offeror has the right to set the terms of the offer.

Offeror controls method of acceptance by the offeree.

Offeror must exhibit clear and present intent to offer.




Objective: observed and verified without being distorted by personal feelings and prejudices.

Subjective: observed and verified through individual feelings and emotions.

Objective: observed and verified without being distorted by personal feelings and prejudices.

Subjective: observed and verified through individual feelings and emotions.



OFFEROFFEROFFEROFFERClear Intention to Contract and Definiteness

of the Offer– Statements of opinions, intentions, and

preliminary negotiations lack definiteness.– Offer must be specific in all particulars.

Advertisements and Auctions– Advertisements not valid offers because lack

sufficient specificity.– In auctions the law treats the bidder as the

offeror.

Clear Intention to Contract and Definiteness of the Offer– Statements of opinions, intentions, and

preliminary negotiations lack definiteness.– Offer must be specific in all particulars.

Advertisements and Auctions– Advertisements not valid offers because lack

sufficient specificity.– In auctions the law treats the bidder as the

offeror.



OFFEROFFERCommunication of the Offer to the Offeree.

– Offeror must communicated the offer to the offeree to have legal effect.

Duration of the Offer.Four methods for terminating an offer:

– Lapse;– Revocation;– Rejection;– Acceptance.

Communication of the Offer to the Offeree. – Offeror must communicated the offer to the

offeree to have legal effect.Duration of the Offer.Four methods for terminating an offer:

– Lapse;– Revocation;– Rejection;– Acceptance.



ACCEPTANCEACCEPTANCEACCEPTANCEACCEPTANCE

Usual mode of terminating an offer.Offeror and offeree have arrived at an

agreement.Binding contract exists.Involves the offeree’s assent to all the terms

of the offer.The acceptance is oral, written, or implied.

Usual mode of terminating an offer.Offeror and offeree have arrived at an

agreement.Binding contract exists.Involves the offeree’s assent to all the terms

of the offer.The acceptance is oral, written, or implied.



ACCEPTANCEACCEPTANCEMirror-Image Rule: the acceptance must

match, term by term, the provisions in the offer.

Manner and Time of Acceptance: offeree must accept in exactly the mode specified or stipulated, by the offeror in the offer. Acceptance becomes legally effective at the time of dispatch. – “Mailbox Rule”.

Mirror-Image Rule: the acceptance must match, term by term, the provisions in the offer.

Manner and Time of Acceptance: offeree must accept in exactly the mode specified or stipulated, by the offeror in the offer. Acceptance becomes legally effective at the time of dispatch. – “Mailbox Rule”.



ACCEPTANCEACCEPTANCE Silence: overt act accompanies acceptance, which

requires a clear intent to accept, prior dealings of parties may permit acceptance based on silence.

Bilateral vs. Unilateral Contracts.– Bilateral Contracts the offeree accepts by either

a direct communication to offeror or a counter-promise inferred from the offeree’s conduct.

– Unilateral Contracts the offeree accepts by merely completing the act called for in the offer.

Silence: overt act accompanies acceptance, which requires a clear intent to accept, prior dealings of parties may permit acceptance based on silence.

Bilateral vs. Unilateral Contracts.– Bilateral Contracts the offeree accepts by either

a direct communication to offeror or a counter-promise inferred from the offeree’s conduct.

– Unilateral Contracts the offeree accepts by merely completing the act called for in the offer.

chapter 10 contractual agreement: mutual assent davidson, knowles & forsythe business law: cases...

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