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Chapter 5

Chapter 5 BU231.docx

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Wilfrid Laurier University
Valerie Irie

BU231 Chapter 5 – Formation of a Contract: Offer and Acceptance Week 2 The Role of Contract Law -Voluntary legal relationships -Parties choose to make a contract and only then become legally obligated to comply with its terms The Nature of a Contract -Contract – a set of promises that the law will enforce The Nature of an Offer -Offer – a description of a promise one party is willing to make, subject to the agreement of the other party -Offeror – the person making the offer -Offeree – the person to whom the offer is made The Communication of an Offer -The form of an offer is not important as long as it is heard and understood -In most situations, an offeror communicates orally or in writing Written Offers Standard Form Contracts: Their Risks and Benefits -Offers do not have to be in writing -Businesses that sell to the general public often present the terms of their offers in written documents handed to their customers, or they post notices containing terms on their business websites -Cannot change the terms – ex. Terms on a website -Standard form contract- an offer presented in a printed document or notice, the terms of which cannot be changed by the offeree, but must be accepted as is or rejected Required Notice of Terms -Courts begin by presuming that an unqualified acceptance of an offer is an acceptance of every term of that offer -The ticket holder is generally bound by the term whether they knew of it or not Unusual or Unexpected Terms -An offeree may be willing to accept terms printed on a ticket or displayed on a poster because she assumes, reasonably, that the risk related closely to the bargain she has made -I the offeree signs a document, a stronger presumption arises that she has accepted all the terms it contains; avoiding the consequences becomes much more difficult The Lapse and Revocation of an Offer Lapse -Lapse – the termination of an offer when the offeree fails to accept it within a specified time, or if no time is specified, then within a reasonable time -An offer may lapse in the following ways: -when the offeree fails to accept within a time specified in the offer -when the offeree fails to accept within a reasonable time, if the offer has not specified any time BU231 Chapter 5 – Formation of a Contract: Offer and Acceptance Week 2 limit -when either of the parties dies or becomes insane prior to acceptance Revocation -An offeror may be able to revoke an offer at any time before acceptance, even when it has promised to hold the offer open for a specified time – the offeror must provide notice of revocation to make it effective Options -Option – a contract to keep an offer open for a specified tie mini return for a sum of money -In an option, the offeree makes a contract with the offeror in the following general terms: the offeree agrees -Exercise an option – accept the offer contained in an option Rejection and Counter-Offer By the Offeree -In business negotiations the parties often make a number of offers and counter-offers, but until an offer by one side is accepted without alteration, modification, or condition by the other, there is no contract; the parties have no legal obligation to one another -The making of a counter-offer is a rejection of the earlier offer and brings it to an end The Elements of Acceptance Positive and Unconditional -Acceptance must be certain and unconditional and must be a positive act, whether in words or in conduct -If acceptance is by conduct, the conduct must refer unequivocally to the offer made -Silence can be a sufficient mode of acceptance only if the parties have habitually used this method to communicate acceptance in previous transactions, or have agreed between themselves in advance that silence is sufficient -Negative option billing – a practice of adding services and sending bills without request and relying upon the customer to cancel if they don’t wish the service Communication to the Offeror -An offeree must communicate acceptance to the offeror -Some types of offers can be accepted without communication because the offeror asks only that the offeree perform an act, implying that the act will amount to acceptance The Moment of Acceptance -The moment a contract is formed by acceptance of
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