Mos 2275 Chapter 6 Notes.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2275A/B
Desmond Mc Keon

Chapter 6: Forming Contractual Relationships The Contract  Contract must be: o An agreement (composed of offer and acceptance) o Complete (certain) o Deliberate (intention to create legal relations is present) o Supported by mutual consideration The Offer  Offer: A promise to perform specified acts on certain terms. o Once an offer is made, the other party is entitled to accept it. o Offeror: The person who makes an offer o Offeree: The person whom an offer is made to  Certainty of offer: o An offer that does not set out all the essential terms will fail for uncertainty. o This can be avoided through leaving matters to be decided in the future. If the contract resolves to litigation, the court does not speculate on what the parties would have agreed to. o However, does not have to be perfectly clear and precise in expression. If the contract resolves to litigation, the court will interpret the offer in the most reasonable manner possible.  Invitation to treat: An expression of willingness to do business. Has no legal consequences o Whether a communication is an offer or an invitation to treat depends on the intention objectively assessed. o For example, advertisements at the store are considered to an invitation to treat. If it is treated as an offer, the store owner would be liable for breach of contract if the good runs out. Similarly, the display of a product in a store is not an offer by the store, since the store maintains the option to refuse the transaction. o Standard form contract: A ‘take it or leave it’ contract where the customer agrees to a standard set of terms that favours the other side. Entered without any negotiations  Completion of contract: o An offer must be sufficiently comprehensive that it can be accepted without further clarification. o A contract is formed when a complete offer is unconditionally accepted by the other side.  Termination of offer: o If an offer is legally terminated, no contract can come into existence. o Revocation: The withdrawal of an offer by the offeror  The offeror simply has to notify the offeree of the revocation for the offer to become void.  Even the parties agree to keep the offer open until a certain time, if the offeror was not given something in return; the offeror has the right to revoke.  The parties can form an option agreement (agreement where, in exchange for payment, an offeror is obligated to keep an offer open for a specified time)  A separate contract from the original one that the can be punished in court  Common in real estate development  In a tendering contract, the contractors do not have the right to revoke a tender before a specified time or must face legal procession, to avoid difficulties in the process.  Dickinson v Dodds [1876]  Dodds delivers a message with an offer of the property, acceptable until a certain time.  Dickinson accepts the offer before the stated time, but Dodds has already sold the property.  Court decided that Dodds had the right to, and did revoke the offer and therefore it was impossible for Dickinson to accept the offer. o Lapse: The expiration of an offer after a specified or reasonable period  A judge will bring as much precision as possible to the question of whether an offer lapses, but the whole exercise is generally speculative.  The offeror should consider specifying an expiry date to avoid debate altogether.  The offeree should act quickly, given the Dickinson v Dodds case. o Rejection: The refusal to accept an offer  The offer becomes terminated and can only be accepted if the offeror revives it by offering anew.  Therefore, the risk of rejection is that the offeror may never be renewed. o Counteroffer: The rejection of one offer and proposal of a new one.  Any changes to the terms of an offer, including price, quantity, time of delivery, or method of payment is a counter offer.  Since a counter-offer is a rejection, the original offer becomes void. o Death or insanity: When the offeror or offeree dies or becomes insane, the offer generally dies. Acceptance  Acceptance: An unqualified willingness to enter into a contract on the terms of the offer o If the acceptance does not mirror the offer, it is a counter offer and no contract is formed. o Message of acceptance can be conveyed through any manner of communication that is reasonable. o However, in some cases, the offer is expressed in such a way that no communication of acceptance is needed o Normally, communication is required. If the acceptance never reaches the offeror, it has not been accepted. o Lowe (1980) Ltd v. U
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