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Lecture 3

BUS 393 Lecture 3: Bus393 Chapter 3


Department
Business Administration
Course Code
BUS 393
Professor
Richard Yates
Lecture
3

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Bus393 Chapter 3
Contract- a voluntary exchange of promises or commitments between parties that
is legally enforceable in out court.
Consensus 共共
The only consensus is that the terms are clear and unambiguous.
If parties leave important terms to be negotiated later, there is no contract.
Oer creates the "rst legal consequence. It is a tentative 共共共共; 共共共; 共共共共 promise
that contains the terms of the anticipated contract. O&er is only the "rst step in the
creation of a contract, it imposes no legal obligation on the o&eror.
Invitation does not create legal obligations **
O&er or contract need not be in writing **
For the communication to be an o&er, it must contain all of the important terms of
the contract. This usually requires, at a minimum, the identi"cation of the parties to
the agreement, the subject matter, and the price to be paid.
The problem of communication sometimes arises when the o&eror wants to include
an exemption clause that restricts or limits his or her liability in the transaction.
Where that exemption clause appears on the back of the ticket or receipt, there
must be something on the front directing the party to the terms on the back.
O&eror is free to withdraw the o&er any time before acceptance, even when he or
she has indicated it would remain open. This is called revocation 共共.
Example: Joe o&ered to sell his car for $5000 and Sam responded by saying ,” I will
give you $4500”, Joe’s original o&er ended with Sam’s counter-o&er. If Joe said no,
and Sam responded with,”Okay, I will give you 5000,” that constitutes a new o&er
from Sam, not an acceptance of Joe’s original o&er.
The right the o&eror to change his or her mind and revoke 共共 the o&ter anytime is
often an impediment 共共 to doing business.
Therefore, it is possible to create a situation where the o&er cannot be revoke and
must remain open until expiration at a speci"c time. This is called an option
agreement.
The o&eror is now bound in a separate contract to hold the o&er. (Usually required a
little $)
Acceptance
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