Chapter 6: Forming contractual relationships
I. The contract
An agreement: takes the form of offer and acceptance
Offer: a promise to perform specified acts on certain terms
o Offeror: the person who makes an offer
o Offeree: the person to whom an offer is made
o Example: when Trackers sends out the concrete terms to Coasters,
Coasters is entitled to accept (acceptance) that offer. If so, Trackers is
obliged to follow the contract.
o Certainty: all essential terms must be set out or the contract will fail for
uncertainty. However, it does not necessarily have to meet perfection
(court will determine that)
o Invitation to treat: an expression of willingness to do business
It does not have complete content to be considered an offer (the
ITT party is assumed to be the one who is entitled to accept the
offer from the party which accepts the ITT ▯the ITT party has the
option of refusing doing the business ▯ not enforceable in the court
o Standard form contract: a “take it or leave it” contract where the
customer agrees to a standard set of terms that favors the other side.
Helps reduce transaction costs ▯potentially lower price.
o When an offer is made, in law: when the purported offer is sufficiently
comprehensive that it can be accepted without further elaboration or
o Termination of offer
Revocation: the withdrawal of an offer
o Revocation in the context of a firm offer: the law permits
offerors to revoke their offers during the set period of time
they leave their offers open if the offerees have not
purchased or given the offerors something in return.
During this time, the offerors are able to revoke their offers
even though the offerees accept the offers.
Option agreement: an agreement where, in
exchange for payment, an offeror is obligated to
keep an offer open up for a specified time.
o Revocation in the context of a tendering contract: the
law sets out that the call of an owner to contractors is an
offer rather than an invitation to treat. This way, the
contractors who accepted are committed to a set of rules.
Only the chosen contractors can proceed further into the
deal. o Lapse: the expiration of an offer after a specified or
o Rejection: an offer is automatically terminated when it is
rejected by the offeree. It can only be effective again if the
offeror revives it and sends it to the offeree, or the offeree
takes it as his own offer to send to the offeror.
o Counteroffer: the rejection of one offer and proposal of a
o Death or insanity: an offer dies if the offeree or offeror
dies. In case they already have a contract regarding death
case, death will not affect the contract. Someone becomes
insane after a contract is not bound.
Acceptance: an unqualified (complete) willingness to enter into a contract on the
terms in the offer
o Communication of acceptance
To make the acceptance legal, the offeree must communicate
through means such as in person, writing, telephone, email, etc. In
case there is a term that requires a specific way of communication,