Dynamic business law 4e kubasek 4e CH14

Chapter 14 Hypothetical Case 2• Tom Garrity, Bill Simmons, and Edward Yang were close friends.. On several occasions, Yang has expressed his interest in a particular stereo receiver Garr

Chapter 14

Agreement

Copyright © 2017 Hill Education All rights reserved No reproduction or distribution without the prior written consent of

McGraw-Hill Education.

• LO14-1: What are the elements of a valid

offer?

• LO14-2: How may an offer terminate?

• LO14-3: What are the elements of an

acceptance?

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Chapter 14 Hypothetical Case 1

• Alex Hollington frequently stops by during economics professor Perry

Conaway's office hours to discuss the latest lecture or homework

assignment, or to just shoot the breeze While chatting, Conaway mentions

that he needs to do some spring cleaning and that his well-worn 1997 Volvo

for sale Conaway has a late-model, "pre-loved" Porsche in mind as a

replacement for his old Swedish tank He tells Hollington that he will offer

him the Volvo for $400 Hollington responds, "Let me think about it."

The spring semester goes by, and summer transpires as well At the

beginning of the new academic year, Hollington stops by his favorite

professor's office and says, "Professor Conaway, I have decided to buy your

Volvo for $400." Conaway responds, "Alex, with state budget cuts in place

and the resulting freeze on my salary, I have decided to keep my old Volvo I

am truly sorry, but I cannot sell it to you."

• Is Professor Conaway legally obligated to sell Hollington his 1997 Volvo?

Why or why not?

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Chapter 14 Hypothetical Case 2

• Tom Garrity, Bill Simmons, and Edward Yang were close friends Their friendship had

developed over their mutual love for vintage stereo equipment, and the three often

spent hours with each other, admiring their electronic collections, monitoring online

auctions for vintage receivers and speakers, and playing music

On several occasions, Yang has expressed his interest in a particular stereo receiver

Garrity owned, a Marantz Model 4400 Yang often told Garrity that if he ever wanted

to sell the receiver, he would like to be the first to be considered as a buyer

Last Saturday morning, Garrity and Simmons were at Garrity's house During their

conversation, Garrity stated, "Bill, I know how much Edward loves my Marantz 4400

receiver, and I have too much stereo equipment in the house In fact, Sarah [Tom's

wife] has given me an ultimatum: Either a good portion of the receivers and speakers

go, or I go! I have decided that I will sell my Marantz 4400 to Edward for $200 It's

worth at least $600, and it's the only Marantz receiver that I own, but I've decided

that I would like to continue to live in this house, and my wife hasn't given me any

other options except to sell some of this stuff!" 14-4

Chapter 14 Hypothetical Case 2

(cont'd)

Later that day, Yang appeared at Garrity's house He enthusiastically proclaimed,

"Tom, Bill told me about your offer, and I will take the Marantz 4400 for $200 This is

the classic receiver as far as I am concerned, and I am forever grateful to you! I

promise I will take care of it, and you can have lifetime visitation rights! Oh, and please

tell Sarah I said thanks!"

Garrity was perplexed After his conversation with Simmons on Saturday morning, he

had decided to keep the Marantz 4400 and sell all of his other receivers He knew that

his next statement would test his friendship with Yang: "Edward, I'm sorry, but I have

decided not to sell the Marantz 4400 We can discuss selling any of my other

receivers, but the Marantz is off-limits."

Yang's reply? "We have an agreement, Tom You made me an offer, and I accepted

your offer Here is the $200 Where is the receiver?"

• Is there a contract between Tom Garrity and Edward Yang?

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Elements of a Valid Offer

• Manifestation of offeror's intent to be bound

• Intent determined by objective, reasonable person

standard

• Preliminary negotiations and advertisements do

not constitute offers

• Definite and certain terms (all material terms

included)

• Communication of offer to offeree (or

offeree's agent)

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• Auction with reserve

• Seller merely expresses intent to receive offers

• Auctioneer (as representative of seller) may

withdraw item from auction at any time before

hammer falls (signaling acceptance of offer)

• Before hammer falls, bidder/offeror may revoke

bid

• Auction without reserve

• Seller must accept highest bid

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Termination of Offer

• Revocation

• Rejection

• Counteroffer

• Death/incapacity of offeror

• Destruction of subject matter of offer

• Subsequent illegality of subject matter of offer

• Lapse of time

• Failure of condition(s) specified in offer

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• Definition:

• Representation of offeree's intent to be bound by terms of

offer through either performance or return promise

• Silence generally does not constitute acceptance

• Terms of acceptance must be identical to terms of

offer (mirror-image rule)

• Effective when communicated by offeree to offeror

• If no method of communicating acceptance

specified in offer, any reasonable means of

acceptance effective (examples: telephone, mail, fax,

The Mailbox Rule

• Definition:

• Acceptance by mail effective when placed in

mailbox; however, revocation of offer effective

only when received by offeree

• Not applicable via instantaneous

communication

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Chapter 14 Hypothetical Case 3

• Keith Avondale is in the market for a new big screen flat-panel television While reviewing

the Sunday newspaper, he notices a full-page advertisement from Transistor Town The

advertisement includes a 45-inch flat-panel television for $29 Surprised by the remarkably

low price, and eager to purchase his new TV, Avondale makes plans to be at the store when

it opens on Monday morning.

Avondale is the first customer to arrive at the store on Monday, waiting outside when the

front doors open He rushes into the store and announces to the first sales representative

he sees, "I'll take a 45-inch flat-panel television for $29!"

The sales representative immediately refers Avondale to the store manager, who directs

Avondale to his office The store manager explains to Avondale that the advertisement was

an unfortunate mistake, resulting from miscommunication between Transistor Town and

the newspaper publisher The manager goes on to say that the intended advertised price

was $299, but that he would be willing to sell the described television to Avondale for

$249, Transistor Town's cost for the television Avondale objects, demands that Transistor

Town sell the television for $29, and informs the store manager that his brother is a trial

lawyer.

• Who wins?

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Chapter 14 Hypothetical Case 4

• Rachel Siddons, an architect, has been in negotiations with Dorland Architects

for several weeks for a job At long last, she receives a contract in the mail The

terms of the contract aren't as ideal as she would have liked, but she decides to

accept the offer

The contract states that Siddons must respond by mail within five days She was

on vacation for when the contract arrived, so she is unsure when it actually

arrived To be safe, she responds via email and agrees to the contract terms

The next week, Siddons resigns from her position at her current firm and then

reaches out to Quinn Bigos, the vice president of human resources at Dorland,

to discuss a start date To her shock and surprise, Bigos tells her that because

she did not respond via the required method, the offer is null and void, and the

job has been given to another candidate

• Is Bigos right? Is the offer void because Siddons didn't respond via the manner in

which the contract specified?

14-12