Chapter 12 Recap:- Offer + Acceptance = Agreement - Agreemento Definite, not vague meeting of minds- Unjust enrichmento Benefit received, opportunity to rejectTermination by operation - Offers can terminate automatically, before acceptanceo 1. Lapse of timeo 2. Destruction of propertyo 3. Death/incompetence of either partyo 4. Illegality - Family Video Caseo Written offer to buy Home Folks Restauranto Restaurant burns down. Contract?o Court: No contract, even if Family Video didn’t know of the fireMailbox Rule- Auto Insurance policy renewal o March 14: mailed check o March 15: expiration dateo March 16: car crasho 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 provisionsE-Signatures- Valid in most business situations- Some exceptions (UCC, banking, wills)- This class: common law contracts, not UCCPreliminary 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 millionCounteroffers and Silence- McGurn v. Bell Microproducts- Severance after 1 months or 24 months- Courto Reasonable person would understand acceptance of counteroffer, due to silence Consideration- Relevant to modern business- Definitiono Bargained-for exchange where each party gives something of legal value (not a gift)Three Forms of Consideration- Three forms of considerationo Promise, with no prior dutyo Action, with no prior dutyo 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, duressHamer v. Sidway- Famous cause from 1891. Why relevant?- Promise: $5,000 for clean living- Enforceable contract?o Forbearance equals consideration to form binding contractConsideration in Practice- Preexisting duty- Construction company example - $100K becomes 150K- Courto Need bargained for exchange. Only valid if you get something in returnfor price increase.- Past consideration- Now that you’re a VP, we need a noncompeting- Courto Continued employment is not enough. Need something new in return for noncompeting- The Scenarioo Larry offers to sell car for $10,000o Sally pays $150 for mechanic’s inspectiono Larry decides to sell to Jim- Revocation and Acceptanceo Valid sale to Jim?o Valid acceptance by Sally?o Mailbox rule?- The Lawo Revocation: valid when received by offereeo Acceptance: valid when sent by offereeo Can be risky for both parties. Solution?- Option Contractso What if Larry promises not to revoke?o Not enforceable because no consideration (unenforceable gift)o Add consideration to create enforceable option contract- Option contracto Sally pays Larry $200 to hold offer open o How much money?o How long to hold the offer openo Must be bargained-for exchange - Option Contracts in Businesso Mergers and Acquisitions  Facebook considering to buy snapchato Real estate (earnest money)o Option contract: buy a due diligence periodo Option contract: buy a due diligence