Exam 2: Offers and Offer Termination

Offer

A communicated promise or commitment to perform or refrain from a specified act on stated terms.

Three elements of an offer

Serious objective intent, reasonably definite terms, and communication to the offeree.

Serious objective intent

Words and conduct showing a reasonable person that the offeror seriously intends to enter a bargain.

Definiteness

Contract terms must be sufficiently clear to identify the parties’ obligations and determine whether a breach occurred.

Common-law definite terms

Generally include the parties, subject matter, consideration, and timing of payment or performance.

Communication of an offer

The offer must be communicated to the offeree before the offeree can accept it.

Obvious jokes and offers

An obvious joke generally does not demonstrate serious contractual intent.

Statement of future intention

A statement describing a future plan rather than a present commitment; ordinarily not an offer.

Preliminary negotiations

Discussions or invitations to negotiate that ordinarily do not create a power of acceptance.

Ordinary advertisements

Generally invitations for customers to make offers rather than offers themselves.

Invitation to bid

A request for others to submit offers.

Submitted bid

A definite proposal that ordinarily constitutes an offer the recipient may accept.

Preliminary agreement

An initial agreement that may bind if the parties intend to be bound and agree on material terms.

Output contract

An agreement in which a buyer purchases a seller’s entire good-faith output of a specified product.

Requirements contract

An agreement in which a buyer purchases its good-faith requirements for a product from a particular seller.

Revocation

Withdrawal of an offer by the offeror before effective acceptance, unless the offer is irrevocable.

Effective time of revocation

Revocation generally becomes effective when received by the offeree.

Rejection

An offeree’s refusal of an offer, generally terminating the power to accept it.

Effective time of rejection

Rejection generally becomes effective when received by the offeror.

Counteroffer

A response that rejects the original offer and proposes a new bargain.

Counteroffer and material terms

A response conditioning agreement on a changed material term ordinarily constitutes a counteroffer under common law.

Request for information

A question about an offer that does not necessarily reject it or propose a replacement bargain.

Option contract

A separate contract supported by consideration that keeps an offer open for a specified period.

Gratuitous promise to keep an offer open

An unsupported promise that ordinarily does not prevent revocation of an otherwise revocable offer.

Reliance and irrevocability

Substantial justifiable reliance may prevent an offeror from revoking an offer.

Offer termination by operation of law

An offer may end through lapse of time, destruction of its specific subject matter, death or incompetence of a party, or supervening illegality.

Lapse of time

Termination when the stated acceptance deadline or a reasonable time expires.

Attempted acceptance after rejection

Generally constitutes a new offer rather than acceptance of the terminated original offer.