RSM225H1 Chapter Notes -Rescission, Non-Compete Clause, Fax

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28 Jan 2013
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Daniel R. Shear 2000 2012
All rights reserved. 1
CH. 8: CONTRACTS:
FORMATION (OFFER AND ACCEPTANCE)
Contract Elements - Overview:
Contract Requirements (all 4 must be met): “O + A + C + I”
Offer: one party (“offeror”) must offer (verbally, in writing, or by
conduct) to make a contract (“c”) and specify all key terms
+ Acceptance: other party (“offeree”) must accept that offer, on those terms,
without any changes
+ Consideration: the (accepted) offer must require each party to give
something “in return for” what the other party must give (some
exceptions see Ch. 9 Contracts: Formation (Consideration and
Intention))
+ Intention: outward conduct of each party must show serious intention
to make c
Contract Elements - Offer:
(1) Terms of Offer:
offer must include (or refer to, or provide formula for determining) all key
terms to be valid
exception: price: if price not addressed in offer:
if past practice for setting price, law assumes parties will follow
that practice
“quantum meruit” (see also Ch. 9 Contracts: Formation
(Consideration and Intention)) must pay “reasonable” price
offer terms must be clear and unambiguous (or offer not valid)
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Daniel R. Shear 2000 2012
All rights reserved. 2
(2) Offer vs. “Invitation to Make Offer”:
a party may make an offer, or invite the other party to make an offer
the law treats some situations as only an invitation only:
goods on store shelves, racks
goods shown in catalogues
advertisements (where ad refers to type of item(s) being sold but
does not indicate which specific one(s) are being sold)
“invitation” does not satisfy “offer” element – “accepting” invitation
= making offer
(3) “Ticket Cases”:
involve “take it or leave it” standard form offers presented in written
document (e.g. “ticket” or “receipt”), or posted on notice(s), or both
offers typically accepted by conduct (e.g. paying for ticket, parking
car in lot, etc.)
nothing signed, no negotiation
law imposes a “reasonable notice” requirement:
only bound by those terms in offer for which reasonable notice
given at time contract made
the more unreasonable or unexpected the term, the more clearly
the notice must be to qualify as “reasonable notice”
(4) Signing Contract:
creates strong presumption: read, understood and accepted all terms
some exceptions - see below under “Contract Elements -
Acceptance
(5) When an Offer Ends:
offer “lapses” (expires):
(i) at the time (if any) specified in the offer
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Daniel R. Shear 2000 2012
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(ii) after a “reasonable time” (if no specific time mentioned)
consider: subject matter of offer, typical “turnover” for that
type of subject matter, circumstances under which offer made
(iii) upon either party dying or becoming insane
offer is revoked (withdrawn):
(i) if offeror communicates revocation (either directly to offeree, or
indirectly through someone else)
communication must actually be received by offeree
revocation by mail only effective when actually received by
offeree
unclear whether faxed revocation “actually received” when
arrives in fax machine, or when viewed by offeree
(ii) if it becomes unreasonable for offeree to believe offer still open
offer is rejected (or offeree makes counter-offer)
(6) Promise to Keep Offer Open:
not binding unless offeror receives “consideration” in return for this
promise
i.e. must make separate contract (offeror promises to keep offer open for
specified time, in return for consideration from offeree) called
“option” oroption agreement
in effect there could be two contracts: (1) option agreement, and (2)
contract that would result if original offer in question is ultimately
accepted
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