Business Law Ch. 6 Notes.docx

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Department
Management and Organizational Studies
Course
Management and Organizational Studies 2275A/B
Professor
Philip King
Semester
Fall

Description
Business Law Ch. 6 Notes Chapter 6  Before a contract can be in place, the parties must be in agreement – reach a consensus as to their rights and obligations (offer and acceptance)  Offer o Offer: a promise to perform specified acts on certain terms o Only a complete offer can form the basis of a contract – all essential terms must be set out or the contract will fail for certainty o An offer is different from a communication that merely expresses a wish to do business o The latter form of communication is called an invitation to treat: an expression of willingness to do business  No legal consequences 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  E.g. renting a car, borrowing money from the bank o When negotiations are complicated, it is important for the parties to know when an offer has been made o Offeror: the person who makes an offer o Oferee: the person to whom an offer is made o An offer can be terminated or “taken off the table” by any of the following events:  Revocation  Revoke: the withdrawal of an offer  The offeror can revoke his offer any time before acceptance simply by notifying the oferee  An offer that has been revoked does not exist anymore and therefore cannot be accepted  Revocation in the Context of a Firm Offer o The law permits offerors to revoke their offers despite a promise to leave the offer open for a set period of time (called a firm offer)  E.g. party A promises to leave their offer on the table for 30 days but party B does not provide something in return for this promise – no legal consequences for revoking the offer o Option agreement: an agreement where, in exchange for payment, an offeror is obligated to keep offer open for a specified time o Usually in real estate o If the offeror withdraws the offer before the option agreement permits, he has committed a breach of contract, and the oferee can sue for damages  Revocation in the Context of a Tendering Contract o When an owner wishes to secure competitive bids to build a large project, it typically calls for tenders o In response, contractors (tenderers) submit tenders that set out a price for the work to be done o Supreme Court of Canada devised a new legal structure for how tenders are to be understood o Instead of regarding the call for tenders as an invitation to treat, the call for tenders was an offer of a preliminary contract known as Contract A o Contract A requires the tenderer not to revoke its tender for a specified period of time o Should the tenderer seek to revoke its tender before the specified period of time has elapsed, it is likely a breach of Contract A and subject to legal action by the owner  Lapse  Lapse: the expiration of an offer after a specified or reasonable period  Two ways: may contain a date upon which it expires or it will remain open for a reasonable period of time  Rejection  Rejection: the refusal to accept an offer  The offer can be accepted only if the offeror revives it by offering it anew or if the oferee presents its own offer  Rejecting an offer means that it may never be renewed by the other side  Counteroffer  Counteroffer: the rejection of one offer and proposal of another  Original offer is automatically terminated  Death or insanity  If the offer concerns a contract that would not require the affected party to personally perform it, a court may decided that the offer could be accepted notwithstanding the party’s death  Acceptance o Acceptance: an unqualified willingness t
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