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Exam 2 Notes (Got A+ on the test)

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Louisiana State University
Business Law
BLAW 3201

Chapter 10 Mutual Assent IntrooThe manner in which parties usually show mutual assent is by offer and acceptanceoThe law applies an objective standard and is concerned only with the assent agreement or intention of a party as it reasonably appears from his words or actions The law of contracts is not concerned with what a party may have actually thought or the meaning that he intended to convey even if his subjective understanding or intention differed from the meaning he objectively indicated by word or conductOfferoAn offer is a definite proposal or undertaking made by one person to another which manifests a willingness to enter into a bargain The person making the proposal is the offeror the person to whom it is made is the offereeoThe offeror simply confers upon the offeree the power to create a contract by accepting the offer Until the offeree exercises this power the outstanding offer creates neither rights nor liabilitiesoAn offer may take several forms 1 it may propose a promise for a promise 2 it may be a promise for an act unilateral contract 3 it may be in the form of an act for a promise inverted unilateral contractoEssentials of an offerCommunicationThe offeror must communicate the offer in an intended manner to the offereeAn offer may be made to the general public No person however can accept such an offer until and unless he has knowledge that the offer existsIntentThe intent of an offer is determined objectively from the words or conduct of the partiesThe courts sometimes consider subjective intention in interpreting the parties communicationsOccasionally a person exercise her sense of humor the promisor intends the promise as a joke and the promisee as a reasonable person should understand it to be such if the intended jest is so successful that the promisee believes that the joke is in fact an offer and so believing accepts the objective standard applies and the parties have entered into a contractA promise made under obvious excitement or emotional strain is likewise not an offerIt is important to distinguish language that constitutes an offer from that which merely solicits or invites offers these lack intent and are therefore not deemed offers these proposals of an offer to accept but do not bring about a contract include preliminary negotiations advertisements and auctionsPreliminary negotiationsoIf a communication creates in the mind of a reasonable person in the position of the offeree an expectation that his acceptance will conclude a contract then the communication is an offeroIf it does not then the communication is a preliminary negotiationoInitial communications between potential parties to a contract often take the form of preliminary negotiations through which the parties either request or supply the terms of an offer that may or may not be givenoA statement that may indicate a willingness to make an offer is not in itself an offerAdvertisementsoA merchant might refrain from making offers by merely announcing that he has goods for sale describing the goods and quoting prices he is simply inviting his customers to make offers to him to buy the goodsoHis advertisements circulars quotation sheets and merchandise displays are not offers because 1 they do not contain a promise and 2 they leave unexpressed many terms that would be necessary to the making of a contractoA seller is not free to advertise goods at one price and then raise the price once demand has been stimulated such conduct is prohibited by the Federal Trade Commission as well as by legislation in many statesoIn some circumstances a public announcement or advertisement may constitute an offer if the advertisement or announcement contains a definite promise of something in exchange for something else and confers a power of acceptance upon a specified person or class of persons the typical offer of a reward is an example of a definite offerAuction salesoThe auctioneer at an auction sale does not make offers to sell the property that is being auctioned but invites offers to buyoA bidder is free to withdraw his bid at any time prior to its acceptanceoThe auctioneer is likewise free to withdraw the goods from sale unless the sale is advertised or announced to be without reserve if it is without reserve the auctioneer may not withdraw an article or lot put up for sale unless no bid is made within a reasonable time DefinitenessThe terms of a contract must be reasonably certain so as to provide a court with a basis for determining the existence of a breach and for giving an appropriate remedyIt is a fundamental policy that contracts should be made by the parties and not by the courts accordingly remedies for breach must have their basis in the parties contractWhere the parties have intended to form a contract the courts will attempt to find a basis for granting a remedy missing terms may be supplied by course of dealing usage of trade or inference The more terms the parties leave open the less likely it is that they have intended to form a contractThe terms essential to all contracts cannot be stated however material terms would usually include the subject matter price quantity quality terms of payment and durationOpen termsoWith respect to agreements for the sale of goods the Code provides standards by which omitted terms may be determined provided the parties intended to enter into a binding contractoUnder the Code an offer for the purchase or sale of goods may leave open particulars of performance to be specified by one of the parties any such specification must be made in good faith and within limits set by commercial reasonablenessoGood faith is defined as honesty in fact in the conduct or transaction concerned commercial reasonableness is a standard determined in terms of the business judgment of reasonable persons
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