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“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means
just what I choose it to mean – neither more nor less.”
different things.”
“The question is,” said Humpty Dumpty, “which is to be master – that’s all.”
Lewis Carroll
I. Teacher to Teacher Dialogue
the contracting process.
The first element of a contract is finding mutual assent between the contracting parties.
Mutual assent is defined as a reciprocal agreement based on a meeting of minds of all of the
The offer must be communicated to the offeree in order to be effective.
Once a good offer is made, the other player must make his or her opening response.
Remember, that response is dictated in many ways by the terms of the offer. Under the traditional
common law mirror image rule, the acceptance must reflect the terms of the offer. If it fails to do
actions of the parties. They all have one common denominator: Sooner or later some sort of basis
for mutual assent must be found before a court will go forward with enforcement of the
agreement.
AGREEMENT
10
Chapter 10
II. Chapter Objectives
1. Define agreement, offer, and acceptance.
2. Describe the required terms of an offer.
III. Key Question Checklist
Who has the power to make an offer?
If a statement or promise is made, does it constitute a good offer, using the elements of the
IV. Text Materials
Contracts are voluntary agreements; one party makes an offer and the other accepts, so that there
is mutual assent.
Agreement
Agreement is created when an offeror’s offer is accepted by the offeree.
Offer
There are three elements for an offer to be effective: the offeror must have intended to be bound
Objective Intent – The objective theory of contracts asks the question of whether a reasonable
Express Terms – The terms of a contract must be clear and unambiguous, including the names of
Implied Terms – Under common law, if an essential term was omitted from the contract, the
Communication of an Offer – An offer must be communicated to the offeree before it can be
accepted.
Case 10.1 Contract: Marder v. Lopez
50 F.3d 445, 2006 U.S. App. Lexis 14330 (2006), United States Court of Appeals for the Ninth
Circuit
Agreement
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Facts: The movie Flashdance was based on the story of Maureen Marder. Paramount paid $2300
Decision: The U.S. court of appeals held that the release was valid and upheld the dismissal of
the actions against the defendants. Although the release language was exceptionally broad, the
court held that it was fatal to each of the claims
Ethics Questions: It would seem reasonable that Marder would receive some additional
writing, binds the parties.
Special Offers
Advertisements – These are treated as invitations to make an offer, unless they are so definite as
advertisement.
Rewards – An offer to pay a reward is treated as a unilateral contract. In order to be able to
collect the reward, the offeree must have knowledge of the offer and have performed the
requested act.
Termination of an Offer by Act of the Parties
Revocation of an Offer by the Offeror – An offer may be revoked at any time prior to its
Rejection of an Offer by the Offeree – An offer is terminated if the offeree rejects it, even
against subsequent acceptances by the offeree.
Counteroffer by the Offeree – Counteroffers simultaneously terminate an offeror’s offer and
create a new offer.
Case 10.2 Counteroffer: Ehlen v. Melvin
other party.
Issue: Was a counteroffer accepted?
Decision: No contract exists.
Chapter 10
Business Environment: Option Contract
An option contract is a contract for time.
Destruction of the Subject Matter – An offer terminates if the subject of the offer is destroyed
prior to the acceptance by the offeree.
Death or Incompetency of the Offeror or Offeree – Because capacity is a requirement for a
Supervening Illegality – Offers terminate if the object of an offer is made illegal prior to the
offer’s acceptance.
Lapse of Time – Offers expire. If a specific date is given, they expire on that date; if the offer is
Acceptance
The offeree’s assent to the terms of the offer is considered an acceptance.
contract.
Unequivocal Acceptance – The mirror image rule establishes that the offeree must accept the
terms as stated in the offer.
modification.
Critical Legal Thinking – This rule applies to common law contracts but not to sales and lease
UCC contracts. The rule is that for acceptance to exist, the offeree must accept the terms as
Silence as Acceptance – Silence is not an acceptance unless the offeree has indicated that silence
means assent, they have signed an agreement indicating acceptance of delivery as in the case of
Agreement
89
V. Key Terms and Concepts
Acceptance—“A manifestation of assent by the offeree to the terms of the offer in a
Auction—In an auction, the seller offers goods for sale through an auctioneer.
Auction with reserve—An auction in which the seller retains the right to refuse the
highest bid and withdraw the goods from sale. Unless expressly stated otherwise, an
auction is an auction with reserve.
authorized means of communication.
Contract—A contract is an agreement that meets certain additional legal criteria and is
enforceable in a court of law.
Counteroffer—A response by an offeree that contains terms and conditions different from
or in addition to those of the offer. A counteroffer terminates the previous offer.
specified means of acceptance
Express terms—Most offers and contracts set forth express terms that identify the parties,
Implied authorization—Mode of acceptance that is implied from what is customary in
Mirror image rule—States that in order for there to be an acceptance, the offeree must
accept the terms as stated in the offer.
Mutual assent—An agreement requires a “meeting of the minds” of the parties—that is,
their mutual assent to perform current or future contractual duties.
Chapter 10
to fall within the mailbox rule.
Rejection—Express words or conduct by the offeree that rejects an offer. Rejection
terminates the offer.
Revocation—Withdrawal of an offer by the offeror terminates the offer.
Reward—An award given for performance of some service or attainment. To collect a
he/she is not interested in forming a contract under the terms of the offer.
Termination of an offer by operation of law—An offer can be terminated by operation of
law.
Unequivocal acceptance—An offeree’s acceptance must be an unequivocal acceptance.
possible meaning.
