RSM225 Contracts (Offer + Acceptance)

What is a Contract?

• Agreement between two or more people

• When a contract is formed, the parties are writing the law that will govern their relationship.

• This will create obligations and duties.

• Failure to perform these obligations will result in liability.

Elements of a Contract

1.  Offer

2. Acceptance

3. Consideration

What is an Offer?

• Tentative promise, subject to a condition or request

• Once accepted, the two parties have a contract

• An offer creates a power of acceptance in the offeree.

• There must be an act made by a party (offeror) that causes another party (offeree) to reasonably believe that a power to create a contract has been conferred upon them

Conditions of an Offer

• There must be an invitation to do business

• Must be communicated verbally, written, or by conduct.

• People must be aware an offer has been made.

Standard Form Contracts (on the back of a ticket)

• Terms printed on offer, or posted (In general, purchaser is bound by terms)

• Terms not negotiated (tickets, auto rentals)

• Must be accepted as is or rejected

• Unequal bargaining power

  • Protection from, Government regulation, Consumer protection legislation (e.g. cancellation provisions), Courts

Lapse/Void of an offer

• Reasons: 

  • Not accepted within time specified

  • Not accepted in reasonable time, if no time specified

  • Either party dies or becomes mentally incompetent

  • Lapsed offer is void and cannot be accepted 

  • Any “acceptance” is itself a new offer 

  • Revoked offer: Revocation must reach offeree before acceptance

Acceptance of offer

• Acceptance should be communicated to offerer, but acceptance can follow previous conduct or agreed-upon forms

  • Look at relationship between parties and what has constituted acceptance in the past

• Acceptance takes place once the offeree takes irrevocable steps to communicate acceptance.

• Performance of the very act that was requested in the offer can constitute acceptance (unilateral contract)

Mailed offers and acceptances

• An offer is accepted when the acceptance is posted in the mail, unless the offer specifies some other time or process

• Revocation of an offer by mail, however, is effective when the letter is received