Chapter 12 Recap Offer Acceptance Agreement Agreement o Definite not vague meeting of minds Unjust enrichment o Benefit received opportunity to reject Termination by operation Offers can terminate automatically before acceptance o 1 Lapse of time o 2 Destruction of property o 3 Death incompetence of either party o 4 Illegality Family Video Case o Written offer to buy Home Folks Restaurant o Restaurant burns down Contract o Court No contract even if Family Video didn t know of the fire Mailbox Rule Auto Insurance policy renewal o March 14 mailed check o March 15 expiration date o March 16 car crash o March 17 22 received and cashed check Court o Valid renewal if sent before expiration date What if check were lost in the mail o It wouldn t matter The contract would still be formed Internet Agreements Reasonable person not whether you actually read it Legal realism Practical approach Forum selection choice of law provisions E Signatures Valid in most business situations Some exceptions UCC banking wills This class common law contracts not UCC Preliminary Negotiations Letter of Intent LOI or Term Sheet Framework for future deal Or enforceable contract House Flipping Case Mr Davis and A E TV Flip this House Davis share revenue 50 50 A E No real estate risk A E I get it broad approval 13 episodes produces 8 million revenue In isolation vs in contract Would a reasonable person in Davis shoes be justified in believing there s agreement o Yes enough context to show oral contract existed Davis wins 4 million Counteroffers and Silence McGurn v Bell Microproducts Severance after 1 months or 24 months Court o Reasonable person would understand acceptance of counteroffer due to silence Consideration Relevant to modern business Definition o Bargained for exchange where each party gives something of legal value not a gift Three Forms of Consideration Three forms of consideration o Promise with no prior duty o Action with no prior duty o Refrain from action with legal right to act forbearance Market Value and Consideration Consideration usually obvious in business o Apple gives you an iPhone You pay money Even a peppercorn will suffice Except for fraud undue influence duress Hamer v Sidway Famous cause from 1891 Why relevant Promise 5 000 for clean living Enforceable contract o Forbearance equals consideration to form binding contract Consideration in Practice Preexisting duty Construction company example 100K becomes 150K Court o Need bargained for exchange Only valid if you get something in return for price increase Past consideration Now that you re a VP we need a noncompeting Court o Continued employment is not enough Need something new in return for noncompeting The Scenario o Larry offers to sell car for 10 000 o Sally pays 150 for mechanic s inspection o Larry decides to sell to Jim Revocation and Acceptance o Valid sale to Jim o Valid acceptance by Sally o Mailbox rule The Law o Revocation valid when received by offeree o Acceptance valid when sent by offeree o Can be risky for both parties Solution Option Contracts o What if Larry promises not to revoke o Not enforceable because no consideration unenforceable gift o Add consideration to create enforceable option contract Option contract o Sally pays Larry 200 to hold offer open o How much money o How long to hold the offer open o Must be bargained for exchange Option Contracts in Business o Mergers and Acquisitions Facebook considering to buy snapchat o Real estate earnest money o Option contract buy a due diligence period o Option contract buy a due diligence period