Powerpoint from textbook Business Law - the ethical, global, and e-commerce environment to accompany BA 330 course at the University of Alaska Fairbanks.

1. Introduction to Contracts
The Agreement: Offer
The Agreement: Acceptance
Consideration
Reality of Consent
© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

2. Contracts
Capacity to Contract
Illegality
Writing
Rights of Third Parties
Performance and Remedies
© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

3. The Agreement: Offer
There is nothing more likely to
start disagreement among
people or countries than an
agreement.
E.B. White
© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

4. Learning Objectives
 Requirements for an offer
Intent

 Definiteness of Terms
 Special Problems
 Termination of an offer
10 - 4

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 - 5

6. Intent
 An offeror must indicate present intent to
contract, or the intent to meet the contract
obligation upon acceptance
 Courts use the objective theory of contracts:
 Would a reasonable person judge the offeror’s
words and acts in the context of the
circumstances to signify intent?
10 - 6

7. Definiteness of Terms
 Offer and resulting contract must be definite
and certain
 Offer cannot be vague about major points
 Example:
 “I’ll paint your house until I’m tired” is vague,
but “I’ll finish painting your house in three days”
is definite
 Armstrong v. Rohm and Haas Company, Inc.
10 - 7

8. Armstrong v. Rohm and Haas
Company, Inc.
 Facts:
 Plaintiffs worked at a manufacturing plant closed
by RH, which gave employees a choice: accept a
severance package or transfer to another facility
 Plant manager told plaintiffs to accept severance
and begin a company, stating that RH “would like
to” give plaintiffs “all [outsourced] work”
 Plaintiffs followed manager’s suggestions, but
there was little work since RH still outsourced
elsewhere, so plaintiffs sued for breach of contract
10 - 8

9. Armstrong v. Rohm and Haas
Company, Inc.
 Court’s Decision:
 Defendant’s alleged promise is too vague to
ascertain a reasonably certain basis for providing
an appropriate remedy
 Court listed issues about the alleged “contract”
 The lack of definiteness is fatal because the court
cannot supply these terms
 RH’s alleged promise is therefore unenforceable
as a matter of law
10 - 9

10. Definiteness Under the UCC
 UCC often creates contractual liability where
no contract would result under common law
 Article 2 sales contracts can be created “in
any manner sufficient to show agreement,
including conduct…” [2–204(1)]
 A price, quantity, delivery, and time for
payment term left open in a contract can be
filled by inserting a presumption found in
the Code’s rules
10 - 10

11. Advertisements
 Advertisements for the sale of goods at
specified prices generally are not considered
offers, but are invitations to offer or negotiate
 Examples: flyers, handbills, catalogs listing
prices, “for sale” ads in newspaper or yard
 Sales puffery is not an offer
10 - 11

12. Rewards
 Advertisements offering rewards for lost
property, information, or capture of
criminals are treated as offers for unilateral
contracts
 To accept the offer and receive the reward, an
offeree must perform the requested act
10 - 12

13. Auctions and Bids
 Sellers at auctions and
advertisements for bids
are generally treated as
making an invitation to
offer, so those who bid
are making an offer that
the seller may accept or
reject
10 - 13

14. Termination by Revocation
 An offer may be terminated by revocation if
revoked & communicated to offeree before
the offer is accepted
 Exceptions:
 Option contract in which an offeror agrees not
to revoke the 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
10 - 14

15. Other Methods of Termination
 Rejection: Offeree expressly rejects (unwilling to
accept) offer or impliedly rejects the offer by
making a counteroffer
 An offer to contract on terms materially
different from the terms of the original offer
 Lapse of time and expiration of offer
 Death or disability of either party
 Destruction of subject matter
 Subsequent illegality
10 - 15

16. Test Your Knowledge
 True=A, False = B
 Courts apply the subjective theory of
contracts when determining whether
intent to contract existed
 The UCC often creates contractual liability
where no contract would result under
common law
 Sales puffery may be deemed to be a valid
offer
10 - 16

17. Test Your Knowledge
 Multiple Choice
 An offer requires:
(a) Intent and communication to offeree
(b) Motive
(c) Definiteness of terms
(d) All of the above
(e) All of the above except (b)
10 - 17

18. Test Your Knowledge
 Multiple Choice
 Which is not an invitation to negotiate:
(a) Advertisement of sale
(b) Offer of Reward
(c) Auction
10 - 18

19. 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 - 19