Intent

& Offer
Elements of Contracts

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Previous session
• Contract Agreement

• Promise
• Exchanged benefits
Contract

• Source of law
• precedents
Deed

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Intent
Are the parties to the contract serious?

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Invitation to dinner
• Joey invited Amy to dinner and also invited Professor X to dinner to
impress Amy. Amy and Prof X agreed to come to Joey’s place for
dinner.
• Joey spent a lot of money to buy food and a lot of time to cook the
food.
• In the end, Professor X didn’t show up. Joey was so angry so he
brought this case to the court because he thought professor X broke
his promise.

• Do you think Joey would win?

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Intent to create a legally binding contract
• The parties to a contract must intend to create a legal relationship if
their agreement is to be binding.
• If their agreement lacks certainty, it will not be enforceable and is
best described as “an agreement to agree”.

• Commercial category
• Social/family category

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Commercial agreements
• A commercial contract is made in the course of a business. It is
presumed that the parties intended to make a legally binding
contract.
• There is no need to prove that they intended to make an agreement
which would be upheld by the civil courts.

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Social agreements
• It is presumed that social
agreements between friends and
agreements between close relatives
do not amount to legally binding
contracts.
• Such agreements do not normally
give rise to legally binding contracts.
• The presumption will not apply if it
can be shown from the
circumstances that they did intend
to be legally bound by their
agreement.
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Offer
To form a contract, one party needs to make an offer and the other party needs to
accept that offer.

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What is an offer?
• An offer is a manifestation by an Offeror: the party making the
offeror that he is willing to enter a offer.
bargain, justifying acceptance by the
offeree. Offeree: the recipient of the
• Offeror: the person who offers the offer.
exchange.
• Offeree: the person who accepts by
making a promise of his own or by an
actual performance. Offeree
Offeror
• In general, the offeree’s acceptance of Offer
the offer forms a contract.
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Valid offer
• The offer must • Be specific
• (1) identify the parties, • Be informative
• (2) describe the subject of the • 5W+1H
agreement, and
• (3) if applicable, include some • I offer to pay you for a paint job.
sort of price term (which may be • I offer to pay you $100 to paint my
an objective standard from house.
which the price can be derived,
such as fair market value). • I offer to pay you $100 to paint
the exterior walls of my house at
1 University Road.
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Invalid offer
• a. Joke It is not serious.
• An offer of joke cannot form a contract, if
the offeree knows or has reason to know
that the offer is a joke.
• b. Preliminary negotiations
• A party may indicate a desire to enter into
a contract through some kind of invitation
to negotiate, e.g., a price quotation, or a
It is not a final contract.
proposal of terms.
• c. Advertisements
• An advertisement is generally not an offer,
unless the language makes an express
promise to adhere to specific terms.
It depends.
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“An offer to the whole world”
• An advertisement offering to pay a
reward for certain information or
for lost property will generally
constitute an offer.

• The persons who can accept such

an offer are limited by the nature
of the offer.
• There is a specific cat and one
person can take it back.
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Offer or invitation
• In the law of contract, a statement may be either:
• an offer, or
• an invitation to treat, i.e., and invitation to make an offer.

• As a general rule, a statement which appears to be an offer

• if is made to one specific person, it will constitute an offer, and
• if is made to a group of people, it will constitute an invitation to make an
offer.

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Offer or invitation
• If the statement is an offer and
the offer is accepted, a contract
may result.

• If the statement is an invitation

to treat, it cannot be accepted; it
merely an invitation to make an
offer.

• Which is an offer?
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Termination of an offer
• a. Rejection or counter offer
• b. Lapse of time
• c. revocation
• d. death or incapacity

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Rejection or counteroffer
• An offer may be terminated if “No.”
the offeree rejects the offer or
gives a counteroffer.

• A counteroffer is an offer, made “What about something else?”

by the offeree to the offeror, that
proposes different terms.

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Counteroffer
• I walked into an antique shop and I asked the price of a desk..
• The dealer said, it's $500.
• If I said, “that’s too much, I’ll give you $300 for it.”
• I did not accept or reject his offer.

• But if I've said, “I’ll give you $300.”

• And the dealer said, “OK, I’ll do it at $300.”
• Then we’ve got a deal.

• But if he said, “no way. The price is $500.”

• I said, “all right, I’ll pay you $500.”
• We've still got a deal.
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• Is it the original deal or a different deal?
Counteroffer
• The counteroffer takes the first offer off the table.

• If you've rejected it, made a counteroffer, then the original offer is off
the table.

• Why?
• Because the offeror now withdraws the original offer and he is free to
sell it to someone else.

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Lapse of time
• The amount of time may be specified or, if unspecified, must be
reasonable based on the circumstances surrounding the offer and
attempted acceptance.

• If the offeror does not specify the duration of his offer, it will lapse
after a reasonable period of time; what is reasonable depends upon
all the circumstances, including the nature of the goods.

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Different scenarios – Scenario 1
• I walked into an antique store and found a really beautiful desk. I
went to the antique dealer, and I said, I’ll offer you $500 for the desk.
• He said, I’ll think about it.
• I spent some time looking around, and I walked out.
• Then, a year later, a truck puts the desk outside my door.

• Do I have to pay $500 for it?

• What do you think?

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Scenario 2
• If I walked out and came back after lunch,
• and the dealer said: “yes, I’ll take the $500, I’ll deliver it to you the
next day."

• How long is too long?

• It depends.

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Scenario 3
• What if the antique dealer saw me getting a doughnut and a cup of coffee
across the street?
• He walked across the street 10 minutes later and said, “good, you’ve got a
deal.”
• Is that OK?
• Does the fact that I walked out of the store make a difference?
• Does it make a difference from the situation where I walked out of the
store, but then I walked back in, and he says, “good, you’ve got a deal?”

• Think about it.

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Scenario 4
• If the dealer followed me into the coffee shop, there’s a real question
whether my offer is still open.
• If I walk back into his store 10 minutes later after my coffee, and he
says, “I accept,” it’s much more likely that's going to make a deal and
a completed contract.

• Can you think why?

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Scenario 5
• What about the example where he says nothing, and a year later, the
desk shows up in front of my door?
• At some point before he‘s accepted my offer, but my offer is not open
anymore, so that his delivery of the desk no longer results in a
contract.

• If I said, “I am offering you $500 for this desk and you have until
tomorrow morning to accept,” then after tomorrow morning, my offer
automatically expires.
• And his delivery no longer results in a contract.
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Death or incapacity
• An offer may be terminated by the death or legal incapacity of either
party.

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Revocation
• Once an offer has been made, the offeror may change his mind and d
ecide to withdraw his offer.
• This process is called revocation of an offer.

• An offer may be withdrawn at any time prior to acceptance, but, in or

der to be legally effective, the withdrawal must be communicated to a
ll the persons to whom the offer was made.

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Irrevocable offers
• Option contracts are created when the offeror keeps an offer open for
a limited amount of time, in exchange for the offeree’s consideration.

• Typically, a unilateral contract will form an irrevocable option contract

when the offeree begins to perform.

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Keep an offer open
• If there is a legally binding
contract to keep an offer open
for a certain period of time, the
offeror will be liable in damages
for breach of contract.
• If there is a second contract to
ask the offeror to keep the offer
open for a period of time, then
during the period of the option,
he cannot withdraw his offer,
because he has promised not to.
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Example
• A man saw a house and wanted to buy it for $3,000,000 but his wife would not be back in one week.
• He asked the seller to keep the price open for a week and he would pay $200 to the seller for
keeping the price open,
• He got an option from the seller.
• An option is a contract about a contract.

• The seller offered the man $3,000,000.

• And the man said to him “I can’t tell you. Give me a week.”
• Has he accepted this offer?

• When the man said to him, “I’ll give you $200, if you promise to keep that offer open for a week,”
the man gave him $200, and the seller accepted it.
• That means, for that week, the seller of the house may not close this offer.

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Option
• An offeror may specify that his offer is open for a certain period of
time.

• There are two offers:

• 1, an offer made to a person (the first offer)
• 2, an offer to keep the first offer open for a period of time (the second
offer).

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