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Chapter 8Chapter 8Contracts: Contracts: AgreementAgreement
and Consideration and Consideration
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• What elements are necessary for an effective offer? What are some examples of nonoffers?
• In what circumstances will an offer be irrevocable?
• What are the elements that are necessary for an effective acceptance?
• What is consideration? What is required for consideration to be legally sufficient?
• In what circumstances might a promise be enforced despite a lack of consideration?
Learning Objectives
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Agreement
• An essential element of contract formation is AGREEMENT: – OFFER, and– ACCEPTANCE.
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Offer--Requirements• Elements:
– Serious Intention,– Reasonably Definite Terms, and– Communication to Offeree.– CASE 8.1 Lucy v. Zehmer (1954).
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Offer--Requirements
• Serious Intention:– Opinions are not offers.– Good Intentions are not offers.– Preliminary Negotiations are not
offers.– Agreements to Agree are not
offers.– Auctions are not offers.
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Offer--Requirements
• Definiteness: Offer must have reasonably definite terms so a court can determine whether breach occurred.– CASE 8.2 Satellite Entertainment
Center, Inc. v. Keaton (2002).• Communication: Offer must be
communicated to offeree.
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Offer—Termination• By Act of the Parties.• Revocation by Offeror (unless
irrevocable).• Rejection by Offeree (or
counteroffer).• Operation of Law: lapse of time,
destruction, death or incompetence, supervening illegality.
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Acceptance• Voluntary act by Offeree that shows
assent to terms of original offer.• Mirror Image Rule.
– Offeree must unequivocally accept offer.– Additional terms may be considered a
counteroffer.• Acceptance by Silence.
– Ordinarily silence is not acceptance, unless offeree has duty to speak (benefit of services).
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Acceptance• Communication of Acceptance.
– Authorized Means of Communication is either express or implied by form of offer (e.g., U.S. mail, fax, email).
– “Mailbox Rule”: Offeree accepts offer when the acceptance is dispatched to Offeror in the form it was received, unless offer requires a different method (e.g., Fed-Ex, or receipt by Offeror).
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Consideration and Its Requirements
• Consideration is value given in return for a promise.– Something of legally sufficient value,– Given in a bargained-for-exchange
between the parties.
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Legal Sufficiency and Adequacy• Sufficient consideration must be
something of value in the eyes of the law.• Adequate consideration is “fair” although
courts do not generally consider this.• If consideration is inadequate (e.g., fraud)
courts may strike down the contract as unconscionable.
• CASE 8.3 Seaview Orthopaedics v. National Healthcare Resources, Inc. (2004).
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Contracts That Lack Consideration• Pre-Existing Duty.• Unforeseen Difficulties.• Past Consideration.• Illusory Promises.
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Settlement of Claims
•Accord and Satisfaction.•Release.•Covenant Not to Sue.
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Promissory Estoppel• Promissory Estoppel (“detrimental
reliance”) doctrine applies when a person relies on the promise of another to her legal detriment.
• Promisor is “estopped” (precluded) from revoking the promise. There must be:– Clear and definite promise with substantial
reliance– Justice is served by enforcement of the promise.