Chapter Thirteen: Formation of Contracts

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Offer

expresses enthusiasm of offeror to enter into a contractual agreement

To make an offer

the offeror must appear to intend to create a binding obligation

When a social invitation is made or when an offer is made in obvious jest or excitement

There is no contract

An advertisement in a newspaper is considered

an invitation to negotiate and is not an offer that can be accepted

An offer, and the resulting contract

must be definite and certain

If an offer is indefinite or if an essential provision is lacking

no contract arises from an attempt to accept it

If minor, ministerial, and nonessential terms are left for the future determination

the agreement is not to vague

When contract is to indefinite to be enforced

a court finds the intent of the parties and reaches conclusion that the contract is not indefinite

An offer and the resulting contract appearing indefinite may be made definite

by reference to another writing

An agreement may also be made definite

by reference to prior dealings of the parties and to trade practices

Some omitted terms may be

implied by law

A duty defined only in terms of best efforts is

accepted and is not to indefinite to be enforced

Divisible Contracts

when agreement consists of two or more parts and calls for corresponding performance of each part by the parties

Indefinite terms often tied to concept of

good faith performance or to independent factors that will be ascertainable at some time in the future

The indefinite term might be tied to

market price, cost to complete, production, or sales requirement

The law recognizes binding contracts in the case of a

requirements contract

Requirements contract

contract to buy all requirements of the buyer from the seller

The law also recognizes as binding an

output contract

Output contract

contract of producer to sell the entire production or output to given buyer

Sometimes offeree performs the act called for by the offeror

without knowing of the offer's existence

Offers may be terminated by

revocation, counteroffer, rejection, lapse of time, death or disability of a party, or subsequent illegality

Offeror can revoke offer

before it is accepted

Ordinary offer may be revoked

at any time before it is accepted even if stated period has not expired

Revocation of offer is effective

only when it is made known to offeree

Written revocation is effective when

it is delivered to offeree

Option Contracts

a binding promise to keep an offer open for a stated period of time or until a specific date

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