CONTRACTS OUTLINE Essay

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1CONTRACTS OUTLINE
By Dr. Robert R. Wills

I. AGREEMENT

A. Offer –An offer is defined as an indication of willingness to enter into a contract. An offeror is the person making the offer. An offeree is the person to whom the offer is made.
1. Essentials of an Offer –An offer must be communicated to the offeree, must manifest an intent to enter into a contract, and must be sufficiently definite and certain.
a. Communication–To have the mutual assent required to form a contract, the offeree must know about the offer. The offeror must communicate the offer in an intended manner. The communi­cation must be made or authorized by the offeror. An offer need not be stated or communicated by words. Conduct from which a reasonable person may infer a proposal in return for either an act or a promise amounts to an offer. An offer may be made to the general public, but no person can accept such an offer unless he knows that the offer exists.
b. Intent–To have legal effect, an offer must manifest an intent to enter into a contract.
(1)Preliminary Negotiations –Initial communications between the potential parties to a contract in many cases take the form of preliminary negotiations rather than an offer. A statement that may indicate a willingness to make an offer is not itself an offer.
(2) Advertisements –Advertisements are generally considered to be invitations seeking offers, because they are not sufficiently definite and certain. However, if the advertisement or an­nouncement contains a definite promise of something in exchange for something else and confers a power of acceptance, it may constitute an offer.
(3) Auction Sales –The auctioneer at an auction sale does not make offers to sell the property being auctioned but invites offers to buy. The bid is an offer, and if it is accepted, a contract results. A bidder is free to withdraw his bid at any time prior to its acceptance, and the auc­tioneer is free to withdraw the goods unless the sale is advertised to be without reserve.
c. Definiteness –The terms must be clear enough to provide a court with a basis for determining the existence of a breach and for giving an appropriate remedy.
(1) Open Terms–Under the UCC, an offer for the purchase or sale of goods may leave open particulars of performance. The Code provides standards to determine open terms and re­quires such specification be made in good faith and within limits set by commercial reason­ableness. Good faith is defined as honesty in fact in the conduct or transaction concerned. Commercial reasonableness is a standard measured by the judgment of reasonable persons familiar with the customary practices in the type of transaction involved and with regard to the facts and circumstances of the case. (2) Output and Requirements Contracts–Output and requirements contracts are valid under the Code so long as there is an objective standard for their application and the parties act in good faith. An output contract is an agreement of a buyer to purchase the entire output of a seller’s factory. A requirements contract is an agreement of a seller to supply a buyer with all his re­quirements for certain goods.
2. Duration of Offers –An offeree’s power to accept an offer continues until the offer terminates.
a. Lapse of Time –An offer remains open for the specified time period. If no time is stated, the offer will terminate after a reasonable period of time.
b. Revocation –Cancellation of an offer by an offeror brings an offer to an end. The offeror may revoke the offer by giving notice to the offeree. The notice effectively terminates the offer when it is received by the offeree. An offer made to the general public is revoked only by giving equivalent publicity to the revocation as was given to the offer. Certain limitations have been imposed on the offeror’s power to revoke.
(1) Option Contracts–Contracts which provide that an offer will stay open for a specified period of time are enforceable if they comply
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