Overview
This lecture discusses the requirements for creating a binding contract, focusing on the necessity of mutual promises, the concept of a bargain, and the process of making and accepting offers.
Promises vs. Contracts
- Not every promise is a contract; only certain promises are legally enforceable.
- Casual, social, or joking promises (e.g., dinner invitations) are not contracts and are not meant for court.
- Serious, or "public," promises may be enforceable if they meet legal requirements.
The Role of Bargains in Contracts
- A contract requires a bargain, meaning each side gives or promises something of value.
- Example: Buying goods in a store involves an exchange of goods for a promise to pay (performance for promise).
- Example: Agreeing to buy an antique desk involves promises from both buyer and seller (promise for promise).
Offers and Acceptance
- The person who starts the exchange sets the terms and is called the "offeror."
- The recipient of the offer is called the "offeree" and can accept the offer by making a promise or performing.
- A contract is formed when the offeree accepts the exact terms of the offer.
Counteroffers and the "Master of the Bargain" Rule
- A response with different terms (e.g., higher price) is a counteroffer, not an acceptance.
- The offeror controls the terms; only those terms can be accepted to form a contract.
- If the offeree proposes different terms, no contract is formed on the original offer.
Key Terms & Definitions
- Promise — A declaration that one will do or refrain from doing something.
- Contract — A legally enforceable agreement created by mutual promises or exchange.
- Offeror — The party who proposes the terms of an exchange.
- Offeree — The party to whom an offer is made.
- Bargain — An exchange in which each side gives or promises something of value.
- Counteroffer — A response to an offer that changes the terms and acts as a new offer.
Action Items / Next Steps
- Review the concepts of offer, acceptance, and consideration.
- Prepare for discussion on exceptions to these general rules in the next lecture.