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BUSINESS LAW II
Methods: Termination of an Offer
By the Acts of the Parties
BUSINESS LAW II
Methods: Termination of an Offer
1. An offer can be revoked at any time without liability unless the offer is irrevocable.
2. Option contracts, merchants’ firm offers, and, in some circumstances, the promissory estoppel theory render offers irrevocable.
Revocation: (3)
By the Acts of the Parties
BUSINESS LAW II
Methods: Termination of an Offer
3. Except for public offers, revocation is not effective until received by the offeree or the offeree’s authorized agent.
Revocation: (3)
By the Acts of the Parties
BUSINESS LAW II
Methods: Termination of an Offer
By the Acts of the Parties
BUSINESS LAW II
Methods: Termination of an Offer
Rejection: (2)
By the Acts of the Parties
BUSINESS LAW II
Methods: Termination of an Offer
1. Rejection of an offer is accomplished by words or actions that demonstrate a clear intent
not to accept the offer or consider the offer further. Inquiries about an offer do not constitute a rejection.
2. A rejection is not effective until received by the offeror or an authorized agent of the offeror.
Rejection: (2)
By the Acts of the Parties
BUSINESS LAW II
Methods: Termination of an Offer
By the Acts of the Parties
BUSINESS LAW II
Methods: Termination of an Offer
Counteroffer
By the Acts of the Parties
BUSINESS LAW II
Methods: Termination of an Offer
A counteroffer is a rejection of the original offer and the making of a new offer. Inquiries are not rejections.
Counteroffer
BUSINESS LAW II
Methods: Termination of an Offer
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
Lapse of Time (2)
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
1. If a time period for acceptance is stated in the offer, the offer ends
at the stated time.
2. If no time period for acceptance is stated, the offer terminates at the end of a reasonable period.
Lapse of Time (2)
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
Destruction
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
Destruction of the specific subject matter of the offer terminates the offer.
Destruction
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
Death or Incompetence
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
Death of incompetence of either the offeror or the offeree terminates an offer, unless the offer is irrevocable.
Death or Incompetence
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
Illegality
By Operation of Law
BUSINESS LAW II
Methods: Termination of an Offer
Supervening illegality terminates an offer.
Illegality
Consideration
• The value given in return for a promise1. Something of legal value
a. May be a promise
b. May be performancei. An act
ii. A Forbearance
iii. Creation, modification or destruction of a legal relation
2. Must be a Bargained-for exchange
Legal Sufficiency of Consideration
• Legally detrimental to the promisee
• Legally beneficial to the promisor– Hamer v. Sidway 1891
Adequacy of Consideration
• Freedom to enter bad deals• Courts don’t normally inquire
– Except• When inadequacy indicates fraud, duress, undue
influence, lack of bargained-for exchange, incompetence
– Adhesion contract – unequal bargaining power
– Unconscionability
K’s Lacking Consideration
• Preexisting duty– Building a pool- no holdups or extortion– Contra: unforeseen difficulties– Rescission
• Past consideration or donative promises
Problem Areas
• Uncertain performance = illusory– No bargaining, solely on one side’s discretion,
reservation of unfettered right to terminate
– Except: requirements and output contracts
• Settlement of claims– Accord and Satisfaction between debtor and creditor
• Debt must be in dispute– Contra: unliquidated debt ES Herrick v. Maine Wild Blueberry
Co.
Settlement of Claims
• Release – No further liability Bennett v. Shinoda Floral, Inc.
1. Must be given in good faith
2. Stated in a signed writing
3. Accompanied by consideration
• Covenant Not to Sue– Further liability possible
Promises Enforceable Without Consideration
• Promise to pay debt barred by a SOL
• Detrimental Reliance, or promissory estoppel– Matherne Coontractor, Inc. v. Grinnell Fire Protection
– Must have a clear/definite promise
– Promisee must justifiably rely
– Reliance must be substantial/definite
– Justice will be served by enforcement
• Charitable subscriptions
Definition of Consideration
BUSINESS LAW II
Consideration
Definition of Consideration
Consideration is the value given in exchange for a promise. A contract cannot be formed without sufficient consideration. Consideration consists of three elements . . . .
BUSINESS LAW II
Consideration
BUSINESS LAW II
Consideration
Three Elements of Consideration
BUSINESS LAW II
Consideration
Three Elements of Consideration
BUSINESS LAW II
1. Legal value – Something of legal value must be given in exchange for a promise. In addition to money, value may be an act, a forbearance, a change in a legal relation, or a promise.
2. Bargained-for exchange – there must be bargained-for
exchange.
Consideration
Three Elements of Consideration
BUSINESS LAW II
3. Legal sufficiency – Consideration must be legally sufficient.
Consideration
BUSINESS LAW II
Consideration
Legal Sufficiency of Consideration
BUSINESS LAW II
Consideration
Legal Sufficiency of Consideration
BUSINESS LAW II
To be legally sufficient, consideration must be either legally detrimental to the promisee (the one to whom the promise is made) or legally beneficial to the promisor (the one making the promise). Doing something, promising to do something, forbearing from doing something, or promising to forbear from doing something that one is otherwise entitled to do is legally sufficient consideration to bind another’s promise.
Consideration
Legal Sufficiency of Consideration
BUSINESS LAW II
Consideration
Legal Sufficiency of Consideration
BUSINESS LAW II
The following types of promises normally are not enforceable because they lack sufficient consideration:
1. A promise to perform a preexisting duty.
2. A promise to perform an act that has already been performed (past consideration).
Consideration
BUSINESS LAW II
Consideration
Adequacy of Consideration
BUSINESS LAW II
Consideration
Adequacy of Consideration
Adequacy of consideration relates to how much consideration is given and whether a fair bargain was reached. Courts will inquire into the adequacy of consideration (if the consideration is legally sufficient) only when fraud, undue influence, duress, or unconscionability may be involved.
BUSINESS LAW II
Consideration
End of Consideration
End of Methods by Which an Offer Can Be Terminated
