Forming Contractual Relationships Ch 6.docx

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Management and Organizational Studies
Course Code
Management and Organizational Studies 2275A/B
Frederick King

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Forming Contractual Relationships 10/1/2012 12:04:00 PM Chapter 6 An Agreement  Before a contract can take place, the parties must be in agreement  The agreement then takes the form of offer and acceptance Offer  Offer – a promise to enter into a contract on specified terms as soon as the off is accepted o Certainty of offer – all essential terms must be set out or the contract will fail for uncertainty  Invitation to Treat o An offer is different from a communication that merely expresses a wish to do business o Invitation to treat – simply a willingness to do business  Advertisements in retail stores are invitations to treat  Display of goods – invitation to treat  Customer takes item to cash register – offer to purchase at sticker price  Clerk takes payment – acceptance of offer o Standard form contract – “take it or leave it” contract, where a customer agrees to a standard set of terms that typically favors the other side o A contract is formed only when a complete offer is unconditionally accepted by the other side o Offeror – person who makes the offer o Offeree – the person to whom as offer is made  Termination of Offer o An offer can be accepted only if it is “alive” o An offer can be terminated or “taken off the table” by any of the following events:  Revocation  With drawl of an offer  The offeror can revoke his off at any time before acceptance by notifying the offeree  Case: Bigg v. Boyd Gibbins Ltd. 1971, C.A.  Negotiated for the purchase and sale of real estate by the plaintiff to the defendant  Defendant denied a contract was made although wrote “I accept your offer” in a letter to the plaintiff  Court sided with the plaintiff, saying a contract had been made  Case: Dickinson v. Dodds 1876, C.A.  Dodds informed Dickinson he was selling his property and that it would be open for acceptance until 9 am on the Friday  Dickinson delivered an acceptance to Dodds at 7 am on the Friday morning, but Dodds said he had already sold it  Court sided with Dodds – although he said the offer was open until Friday morning, that did not bind Dodds to wait for an answer from Dickinson  Lapse  Expiration of an offer after a specified or reasonable period  Lapse in one of two ways:  Contract may contain a date upon which it expires  If there is no expiry date, the offer will remain open for a reasonable period of time  Rejection  The refusal to accept the offer  Counteroffer  The offeree is turning down the offer and proposing a new offer in its place  Death or insanity Acceptance  When an offer made by one party is unconditionally and unequivocally accepted by the other party, a contract is formed  Communication of acceptance o In order to effect legal acceptance, the offeree must communicate, by words or conduct, an unconditional assent to the offer in its entirety o If an offer requires a specific method of communicating acceptance, the offeree must use that method o Case: Lowe Ltd. v. Upper Clements Family Theme Park Ltd. (1990) (S.C.T.D.)  Bougie wanted to lease a crane to construction on the theme park, but Lowe didn’t want to agree to the length of the terms  Buxton, the theme park’s general manager, sent Lowe a
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