Dynamic business law 4e kubasek 4e CH14

Chapter 14 Agreement Copyright © 2017 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGrawHill Education Overview • 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? 14-2 Chapter 14 Hypothetical Case • 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 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? 14-3 Chapter 14 Hypothetical Case • 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 (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? 14-5 Elements of a Valid Offer • Manifestation of offeror's intent to be bound • Intent determined by objective, reasonable person standard • Preliminary negotiations and advertisements not constitute offers • Definite and certain terms (all material terms included) • Communication of offer to offeree (or offeree's agent) 14-6 Auctions • 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 14-7 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 14-8 Acceptance • 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, e-mail) 14-9 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 1410 Chapter 14 Hypothetical Case • 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? 1411 Chapter 14 Hypothetical Case • 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? 1412 ... Transistor Town sell the television for $29, and informs the store manager that his brother is a trial lawyer • Who wins? 1411 Chapter 14 Hypothetical Case • Rachel Siddons, an architect, has been in