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Dynamic business law 4e kubasek 4e CH14

Chapter 14

Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education.

• LO14-1: What are the elements of a valid
• LO14-2: How may an offer terminate?
• LO14-3: What are the elements of an


Chapter 14 Hypothetical Case 1
• Alex Hollington frequently stops by during economics professor Perry
Conaway's office hours to discuss the latest lecture or homework
assignment, or to just shoot the breeze. While chatting, Conaway mentions
that he needs to do some spring cleaning and that his well-worn 1997 Volvo

for sale. Conaway has a late-model, "pre-loved" Porsche in mind as a
replacement for his old Swedish tank. He tells Hollington that he will offer
him the Volvo for $400. Hollington responds, "Let me think about it."
The spring semester goes by, and summer transpires as well. At the
beginning of the new academic year, Hollington stops by his favorite
professor's office and says, "Professor Conaway, I have decided to buy your
Volvo for $400." Conaway responds, "Alex, with state budget cuts in place
and the resulting freeze on my salary, I have decided to keep my old Volvo. I
am truly sorry, but I cannot sell it to you."
• Is Professor Conaway legally obligated to sell Hollington his 1997 Volvo?
Why or why not?


Chapter 14 Hypothetical Case 2
• Tom Garrity, Bill Simmons, and Edward Yang were close friends. Their friendship had
developed over their mutual love for vintage stereo equipment, and the three often
spent hours with each other, admiring their electronic collections, monitoring online
auctions for vintage receivers and speakers, and playing music.
On several occasions, Yang has expressed his interest in a particular stereo receiver
Garrity owned, a Marantz Model 4400. Yang often told Garrity that if he ever wanted
to sell the receiver, he would like to be the first to be considered as a buyer.
Last Saturday morning, Garrity and Simmons were at Garrity's house. During their
conversation, Garrity stated, "Bill, I know how much Edward loves my Marantz 4400
receiver, and I have too much stereo equipment in the house. In fact, Sarah [Tom's
wife] has given me an ultimatum: Either a good portion of the receivers and speakers
go, or I go! I have decided that I will sell my Marantz 4400 to Edward for $200. It's
worth at least $600, and it's the only Marantz receiver that I own, but I've decided
that I would like to continue to live in this house, and my wife hasn't given me any
other options except to sell some of this stuff!"


Chapter 14 Hypothetical Case 2
Later that day, Yang appeared at Garrity's house. He enthusiastically proclaimed,
"Tom, Bill told me about your offer, and I will take the Marantz 4400 for $200. This is
the classic receiver as far as I am concerned, and I am forever grateful to you! I

promise I will take care of it, and you can have lifetime visitation rights! Oh, and please
tell Sarah I said thanks!"
Garrity was perplexed. After his conversation with Simmons on Saturday morning, he
had decided to keep the Marantz 4400 and sell all of his other receivers. He knew that
his next statement would test his friendship with Yang: "Edward, I'm sorry, but I have
decided not to sell the Marantz 4400. We can discuss selling any of my other
receivers, but the Marantz is off-limits."
Yang's reply? "We have an agreement, Tom. You made me an offer, and I accepted
your offer. Here is the $200. Where is the receiver?"
• Is there a contract between Tom Garrity and Edward Yang?


Elements of a Valid Offer
• Manifestation of offeror's intent to be bound
• Intent determined by objective, reasonable person
• Preliminary negotiations and advertisements do
not constitute offers

• Definite and certain terms (all material terms
• Communication of offer to offeree (or
offeree's agent)


• Auction with reserve
• Seller merely expresses intent to receive offers
• Auctioneer (as representative of seller) may
withdraw item from auction at any time before
hammer falls (signaling acceptance of offer)
• Before hammer falls, bidder/offeror may revoke

• Auction without reserve
• Seller must accept highest bid

Termination of Offer
• Revocation
• Rejection
• Counteroffer
• Death/incapacity of offeror
• Destruction of subject matter of offer
• Subsequent illegality of subject matter of offer
• Lapse of time
• Failure of condition(s) specified in offer

• Definition:
• Representation of offeree's intent to be bound by terms of
offer through either performance or return promise.

• Silence generally does not constitute acceptance
• Terms of acceptance must be identical to terms of
offer (mirror-image rule)
• Effective when communicated by offeree to offeror
• If no method of communicating acceptance
specified in offer, any reasonable means of
acceptance effective (examples: telephone, mail, fax,


The Mailbox Rule
• Definition:
• Acceptance by mail effective when placed in
mailbox; however, revocation of offer effective
only when received by offeree

• Not applicable via instantaneous


Chapter 14 Hypothetical Case 3
• Keith Avondale is in the market for a new big screen flat-panel television. While reviewing
the Sunday newspaper, he notices a full-page advertisement from Transistor Town. The
advertisement includes a 45-inch flat-panel television for $29. Surprised by the remarkably
low price, and eager to purchase his new TV, Avondale makes plans to be at the store when
it opens on Monday morning.
Avondale is the first customer to arrive at the store on Monday, waiting outside when the
front doors open. He rushes into the store and announces to the first sales representative
he sees, "I'll take a 45-inch flat-panel television for $29!"
The sales representative immediately refers Avondale to the store manager, who directs
Avondale to his office. The store manager explains to Avondale that the advertisement was
an unfortunate mistake, resulting from miscommunication between Transistor Town and
the newspaper publisher. The manager goes on to say that the intended advertised price
was $299, but that he would be willing to sell the described television to Avondale for
$249, Transistor Town's cost for the television. Avondale objects, demands that Transistor
Town sell the television for $29, and informs the store manager that his brother is a trial
• Who wins?


Chapter 14 Hypothetical Case 4
• Rachel Siddons, an architect, has been in negotiations with Dorland Architects
for several weeks for a job. At long last, she receives a contract in the mail. The
terms of the contract aren't as ideal as she would have liked, but she decides to
accept the offer.
The contract states that Siddons must respond by mail within five days. She was
on vacation for when the contract arrived, so she is unsure when it actually
arrived. To be safe, she responds via email and agrees to the contract terms.
The next week, Siddons resigns from her position at her current firm and then
reaches out to Quinn Bigos, the vice president of human resources at Dorland,
to discuss a start date. To her shock and surprise, Bigos tells her that because
she did not respond via the required method, the offer is null and void, and the
job has been given to another candidate.
• Is Bigos right? Is the offer void because Siddons didn't respond via the manner in
which the contract specified?


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