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Business Law Chapter 12 Notes

by: Caspian Roberts

Business Law Chapter 12 Notes ACCT 2700 - 001

Marketplace > Auburn University > Accounting > ACCT 2700 - 001 > Business Law Chapter 12 Notes
Caspian Roberts
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Here are the notes from Chapter 12!
Business Law
Robert Hollis Cochran
Class Notes
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This 6 page Class Notes was uploaded by Caspian Roberts on Thursday April 21, 2016. The Class Notes belongs to ACCT 2700 - 001 at Auburn University taught by Robert Hollis Cochran in Fall 2015. Since its upload, it has received 57 views. For similar materials see Business Law in Accounting at Auburn University.


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Date Created: 04/21/16
Chapter 12 “There are no shortcuts to any place worth going.” “Anything worth having is worth working for.” Agreement: Offer Termination of Offer o An offer may be terminated prior to acceptance by either:  Action of the Parties o or by  Operation of Law. Termination by Action of Parties: o Acceptance o Revocation of the Offer by the Offeror:  Offer can be withdrawn anytime before Offeree accepts the offer  Effective when the Offeree or Offeree’s agent receives it  If the offer has been accepted, it can’t be revoked o Rejection of the Offer by the Offeree:  Rejection by the Offeree (expressed or implied) terminates the offer  Effective only when it is received by the Offeror or Offeror’s agent  Once a rejection of an offer is made, the offer is finished unless the Offeror brings it back. o Counteroffer by the Offeree  Rejection of original offer and the simultaneous making of a new offer  Mirror Image Rule: At common law, any change in terms automatically terminates the offer and substitutes the counteroffer. o Bottom Line:  Acceptance  Mirror Image Rule  Revocation  Rejection  Counteroffer  Termination by Operation of Law: o Lapse of Time:  Offer terminates by law when the period of time specified in the offer has passed  If no time period for acceptance is specified, the offer terminates ate the end of a reasonable period of time o Destruction of the Subject Matter: If it occurs before acceptance of the offer , then the offer is canceled o Death or Incompetence of the Offeror or Offeree: automatically terminates unless it is an irrevocable offer o Supervening Illegality of the Proposed Contract: legislation or court decision automatically terminates offer or renders contract unenforceable. Agreement: Acceptance  Unequivocal Acceptance: The “Mirror Image” Rule  Silence as Acceptance: o General Rule: Offeree should not be legally obligated to affirmatively reject and offer  Communication of Acceptance: o Every communication required in contracts has to be received by the other party to be valid except Acceptance o General Rule: in bilateral contracts, acceptance is timely if made before offer is terminated o Mailbox Rule: Acceptance is effective when Offeree places the acceptance in the mailbox (Default Rule)  Mode and Timeliness o Substitute Method of Acceptance  If the offer calls for a specific way of acceptance that should be the only way you accept. Use and alternative way at your own risk  Ex: California Warehouse case  Agreement in E-Contracts  Full contract should be available to both parties (at least hyperlink)  Terms of Acceptance should be clear o Forum-Selection Clause o Click-On Agreements: “I accept” or “I Agree”  E Signatures: o Any electronic means of agreeing to an electronic contract is valid if it clearly indicates “intent to be bound” “x” or “check mark Sample Questions T/F An agreement must have both an offer and an acceptance True Generally, what the parties intend to do matters in determining what a contract means. False An offer may be terminated by: Operation of the Law and Actions of the Parties The Objective Theory of Contracts has no effect on offer termination “No case of action arises from a bare promise” - Legal Maxim Elements of Consideration:  Generally, consideration must have: o “Legally Sufficient Value” o And o A “Bargained-for-Exchange”  Consideration Definitions: o It’s something of value that is promised, given, or done that has the effect of making an agreement a legally enforceable contract  First Element, “legal value”: o Value o Promise o Performance o Forbearance – Failure to do something (or choosing not to do something of value)  Case 13.1 Hamer v. Sidway (1891)  Hamer = school kid in Iowa that was brilliant and went through the 12 grade when no one else in the county had  “If you can go 4 years without drinking, smoking, gambling, cussing, or womanizing, you get $10,000” said Hamer’s Uncle to him  Hamer does so, and Uncle is like “good job bro, you get the mullah”  Hamer graduates, goes to see his uncle, finds out Uncle died, and his cousins decided to not pay him the money  Judge said that Hamer gave all those things up because of the contract, because the promise he made was based in value  Second Element, bargained-for-exchange: o Must provide basis for the bargain o Both parties must be able to say “yes” or “no” o Something of legal value must be exchanged between the parties. Key Point: Both parties must get and give consideration. But Why? Adequacy of Consideration:  General Rule o Courts typically will not consider adequacy of consideration. Why? Value? o In general, the law does not protect a person from entering into an unwise contract o Rarely, courts may look at the contract, if there is a large “shockingly inadequate” disparity in the amount consideration exchanged. Is there really “consent”  “If You think education is expensive, try ignorance”  Where is consideration in a contract? o Both parties bring consideration and give consideration  Why do we have to have consideration in a contract? o Without it, the contract is not valid  T/F Consideration has to be essentially equal in any contract o False Agreements that lack Consideration: Preexisting Duty o Promise to do what one already has a legal duty to do doesn’t constitute legally sufficient consideration  Past Consideration: o Is not consideration because the bargained for exchange element is missing o Past consideration is Consideration = False o Past Consideration is Not Consideration = True  Illusory Promises: o Promise hasn’t definitely promised to do anything (no promise at all)  Gift Promises: o 1 party gives consideration, the other doesn’t T/F : You agree to pay Eddie $1,000 if he quits smoking. This is a valid contract. True Settlement of Claims:  Accord and Satisfaction: o Debtor offices to pay a lesser amount than the creditor purports to be owed o The debt (amount owed) must be in dispute o The Accord = new agreement o Satisfaction occurs when new agreement (accord) is completed (release) Exceptions to the Consideration Requirement:  Promises to Pay debts Barred by the Statute of Limitations  Charitable subscriptions = gifts o Generally unenforceable, but courts now rely on promissory estoppel if reliance Sample Questions T/F In contract law, the term consideration refers to the serious thought that underlies a party’s intent to enter into a contract False T/F In contract law if a promise is made, it will be enforced False


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