Business Law Text Exercises 9th

Edition LeRoy Solutions Manual

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 Answers to Issue Spotters,
Straight to the Point,
Real Law, and Ethical Questions

CHAPTER 9

OFFER AND ACCEPTANCE

ANSWERS TO ISSUE SPOTTERS

1A. Fidelity Corporation offers to hire Ron to replace Monica, who has given Fidelity a
month’s notice to quit. Fidelity gives Ron a week to decide whether to accept. Two days
later, Monica signs an employment contract with Fidelity for another year. The next day,
Monica tells Ron of the new contract. Ron immediately sends a letter of acceptance to
Fidelity. Do Fidelity and Ron have a contract? Why or why not? No. Revocation of an offer
may be implied by conduct inconsistent with the offer. When the corporation hired someone else,
and the offeree learned of the hiring, the offer was revoked. The acceptance was too late.

2A. While visiting the Web site of Cyber Investments, Dani encounters a popup box that
reads, “Our e-mail daily newsletter E-Profit is available by subscription at the rate of one
dollar per issue. To subscribe, enter your e-mail address below and click on ‘SUBSCRIBE.’
“Dani enters her e-mail address and clicks on “SUBSCRIBE.” Has Dani entered into an
enforceable contract? Explain. Dani has entered into an enforceable contract to subscribe to E-
Profit. In this set of facts, the offer to deliver, via e-mail, the newsletter was presented by the
offeror with a statement of how to accept—by clicking on the “SUBSCRIBE” button. The offeree
had an opportunity to decline the offer by not clicking on the button before making the contract.
This is a click-on agreement.

A-1

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A-2 APPENDIX A: ANSWERS TO END-OF-CHAPTER QUESTIONS

ANSWERS TO STRAIGHT TO THE POINT QUESTIONS

1A. How can an offeror or offeree terminate an offer? An offer can be terminated by the
parties in one of three ways. An offeror can revoke, or withdraw, it. An offeree can simply reject it.
Or an offeree can reject an offer and simultaneously make a new one—a counteroffer.

2A. In what ways might the law terminate an offer? An offer terminates automatically by law
when the period of time specified in the offer has passed. An offer is automatically terminated if
the specific subject matter of the offer is destroyed before the offer is accepted. The power to
accept the offer is terminated when the offeror or offeree dies or becomes incapacitated (unless
the offer is irrevocable). A statute or court decision that makes an offer illegal automatically
terminates an offer.

3A. What is the “mailbox rule”? The “mailbox rule” is a rule providing that the acceptance of
an offer becomes effective on dispatch. Exceptions to this rule include an offeree’s use of a
substitute means to accept instead of the offeror’s authorized method. In that circumstance, no
contract will be formed until the acceptance is received.

4A. What is the mirror image rule? According to the mirror image rule, an offeree must
accept an offer without adding to or changing any of the terms. If an acceptance is subject to new
conditions, or its terms materially change the offer, it may be deemed a counteroffer.

5A. What must occur for the Uniform Electronic Transactions Act (UETA) to apply to a
transaction? The UETA has been enacted in most states and applies to some e-contracts. Thus,
the first conditions for the application of the UETA is the law’s enactment in the appropriate
jurisdiction and a deal evidenced by an e-contract. Otherwise, for the UETA to apply, each party
to a transaction must agree to conduct it by electronic means.

ANSWERS TO REAL LAW QUESTIONS

9–1A. Acceptance
The terms for a settlement that Lucas originally e-mailed to Altisource are most likely to be
considered by a court to satisfy the element of agreement to establish a contract. One of the
elements for the formation of a valid contract is agreement—mutual assent to the terms of a
bargain. Agreement is evidenced by an offer and an acceptance. An offeree’s acceptance of an
offer leads to the creation of an enforceable contract. Acceptance is a voluntary act that shows
assent. The act may consist of words or conduct. The acceptance must be unequivocal—it must

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accessible website, in whole or in part.
 CHAPTER 9: OFFER AND ACCEPTANCE A-3

mirror the terms of the offer.

In this problem, Lucas was not paid for work for which it had been hired and which it had
performed. The contractor filed a suit against Altisource to recover. Before the trial, Lucas e-
mailed the terms of a settlement to the defendant. Altisource e-mailed a response that did not
challenge or contradict the proposal and indicated agreement to it. Two days later, however,
Altisource forwarded a different settlement document that contained additional terms. But because
Lucas clearly set out the terms of a settlement in its e-mail and Altisource responded without
contradiction or challenge, it is most likely that the original proposal would be held to meet the
requirement of agreement to establish a valid contract.
In the actual case on which this problem is based, on Lucas’s motion to enforce the original
settlement without the additional terms, the court issued a judgment to enforce it. A state
intermediate appellate court affirmed the lower court’s judgment for the reasons stated above.

9–2A. Offer
No. Statewide and Kemper did not have an enforceable agreement. Under the mirror image rule,
the offeree’s acceptance must match the offeror’s offer exactly. If the acceptance changes or adds
to the terms of the original offer, it will be considered a counteroffer. A counteroffer is a rejection of
the original offer and the simultaneous making of a new offer. If an offer is rejected, it is
terminated.
Here, the purported settlement agreement was not enforceable because Statewide’s
response to Kemper’s offer was not unconditional or identical to her terms. In response, Statewide
demanded that Kemper place settlement funds into an escrow account. This change or addition to
the terms of the original offer constituted a counteroffer—a rejection of Kemper’s original offer and
the simultaneous making of a new offer. And Kemper refused the new demand.
In the actual case on which this problem is based, a court enforced the settlement. On
Kemper’s appeal, a state intermediate appellate court reversed, holding that Statewide’s response
to Kemper’s offer constituted a counteroffer, which she rejected.

9-3A. Acceptance
The essential elements of a contract include an offer and an acceptance. To become a binding
contract, an offer must be accepted.
In the facts set out in this problem, Wright made a counteroffer to the terms of the parties’
oral contract by crossing out the protection period provision in the copy of the agreement. Crilow
did not accept Wright’s proposed alteration, but she did perform under the terms of the parties’
oral agreement. Thus, it could be concluded that the parties entered into a binding oral agreement
for Crilow’s services that contained the protection period provision. During the term of the
contract, Crilow showed Wright’s property to Ballway, who bought it after the contract expired but
before the end of the protection period. Because there was no acceptance of the proposal to
remove the protection period, it was in effect when Ballway bought the property, and Crilow is
entitled to a commission on the sale.

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accessible website, in whole or in part.
A-4 APPENDIX A: ANSWERS TO END-OF-CHAPTER QUESTIONS

© 2019 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 CHAPTER 9: OFFER AND ACCEPTANCE A-5

In the actual case on which this problem is based, the court entered a judgment in Crilow’s
favor on the reasoning stated above.

ANSWERS TO ETHICAL QUESTIONS

9-4A. Intent
Some might claim that not enforcing all such promises is unfair to individuals who rely on the
promises to do whatever is required to obtain the purported prize. Others would argue that such
promises should be given the same consideration as any other statements, which, for example,
may be made in jest and be unenforceable for that reason.

9–5A. Intention
The court is most likely to hold that Traylor and the Grand Master did not enter into a contract.
The court could base this conclusion on the ground that their conversation was only a preliminary
negotiation. For a contract to exist, there must be mutual assent to the agreement’s essential
terms. Mutual assent generally takes the form of an offer and an acceptance. An offer consists of
a promise to perform in exchange for a return promise. A request or invitation to negotiate
performance is not an offer. Agreeing to negotiate is not a promise to contract to perform. It is only
an expression of a willingness to discuss the possibility of entering into a contract.
Here, the constitution of the Prince Hall Grand Lodge of Washington provides that the
Grand Master “shall decide all questions of * * * Masonic law.” Grand Master Gregory Wraggs
suspended Lonnie Traylor’s membership for “un-Masonic conduct.” Traylor asked Wraggs to
revoke the suspension, and presented a “Memo of Understanding.” Wraggs agreed to talk but
declined to revoke the suspension and did not sign the memo. Traylor alleged breach of contract.
But according to the principles stated above, there was no contract. Hence, there was no breach.
This should have been obvious to Traylor. His refusal to accept the situation, and his
choice to file a suit against the Grand Lodge in the face of circumstances that did not support his
claim, indicates a lack of ethics. Zealous assertion of an arguably sustainable position can be
ethical—in fact, not to take a stand on such a position may be unethical. But to act on a patently
false claim, at least in the context of this case, betrays a lack of ethics.
In the actual case on which this problem is based, the court granted Grand Lodge’s motion
for summary judgment. On Traylor’s appeal, a state intermediate appellate court affirmed the
judgment.

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accessible website, in whole or in part.