P A R T
3
Contracts
Introduction to Contracts
The Agreement: Offer
The Agreement: Acceptance
Consideration
Reality of Consent
McGraw-Hill/Irwin Business Law, 13/e
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
P A R T
3
Contracts
Capacity to Contract
Illegality
Writing
Rights of Third Parties
Performance & Remedies
McGraw-Hill/Irwin Business Law, 13/e
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
C H A P T E R
10
The Agreement: Offer
“There is nothing more
likely to start disagreement
among people or countries
than an agreement.”
E.B. White
Learning Objectives
 Requirements
for an offer
Intent
 Definiteness of Terms
 Special Problems
 Termination of an offer

10 - 5
Requirements for an Offer
An offer is a promise conditional on an act,
return promise, or forbearance (refraining
from doing something)
 Parties to a contract must have intent to enter
binding agreement, terms must be definite,
and the offer must be communicated to the
offeree

10 - 6
Details

Courts use the objective theory of contracts to
determine intent:


Would a reasonable person judge the offeror’s
words and acts in the context of the
circumstances to signify intent?
Definiteness requires that the offer cannot be
vague about major points

10 - 7
Price, quantity, delivery, and time for payment
term left open may be filled by inserting
presumptions in Code’s rules
Invitations to Offer

Advertisements for the sale of goods at
specified prices generally are not considered
offers, but are invitations to offer or negotiate

Advertisements offering rewards for lost property,
information, or capture of criminals are treated as
offers for unilateral contracts
Sellers at auctions and advertisements for bids are
invitations to offer

10 - 8
Termination by Revocation

An offer may be terminated by revocation if
revoked & communicated to offeree before
the offer is accepted, with the exception of:




10 - 9
Option contract in which offeror agrees not
to revoke offer for a stated time in exchange
for some valuable consideration
Offers for unilateral contracts (e.g., rewards)
Promissory estoppel circumstances
Firm offers for sale of goods
Test Your Knowledge

True=A, False = B
 Courts apply the subjective theory of
contracts when determining whether
intent to contract existed


10 - 10
The UCC often creates contractual liability
where no contract would result under
common law
Sales puffery may be deemed to be a valid
offer
Test Your Knowledge

Multiple Choice

An offer requires:






intent and communication to offeree
motive
definiteness of terms
all of the above
all of the above except (b)
Which is not an invitation to negotiate:



10 - 11
(a)
(b)
(c)
(d)
(e)
(a) Advertisement of sale
(b) Offer of Reward
(c) Auction
Thought Questions
When you go to a
department store and
purchase an item,
what have you done
according to contract
law?
 Is the law sensible
about these contracts?

10 - 12