Advertisement of Peter - Assignment Example

Table of contents: Question one: Introduction Peter put up an advertisement in a local newspaper to sell a racing bicycle. He stated he would accept a price of $ 200 or higher. Jonathan read the advertisement and was interested in buying the racing bicycle. He telephone Peter and said he had only $ 160, but Peter insisted on $ 180. Jonathan demanded to see if the bicycle was in good condition before making the purchase decision and he could only get more money in two days time. Mary also saw the advertisement and offered to buy the bicycle for $ 190. Peter accepted the price of $ 190 and Mary took the bicycle away. The case scenario deals with the conditions surrounding the formation of valid business contracts. A contract is defined as an agreement between two parties that creates legal obligation to the two parties to perform or abstain from performing a certain obligation or action (Farnsworth, 1991). A contract must entail an offer by one party and acceptance of the offer by the other party. The advertisement placed in the local newspaper by Peter is not an offer but an invitation to treat. Peter is inviting interested persons to make an offer for the purchase of the bicycle. Accordingly, advertisements are classified as invitations to treat since the seller can refuse to sell the item at price if it is mistakenly marked (Blum, 2007). The advertisement is displayed to a larger number of people with an undefined way of selecting whom to sell the bicycle. For instance, the advertisement does not clarify whether to sell the bicycle to the first person to accept the labeled price. It this case, the advertisement is geared at generating interests and prolonging negotiations towards the formation of the contract (Stone, 2005). After the invitation to treat, Jonathan makes an offer to through a telephone to purchase the racing bicycle at a price of $ 160. However, rules of contract stipulate that the subject matter of contract must be present at the time of making the offer. According to the Uniform Commercial code, Jonathan’s offer is valid even though he uses electronic communication. In this case, Jonathan is uncertain about the condition of the bicycle. On the other hand, Peter does not accept the offer made by Jonathan and decides to make a counter offer thus extinguishing the offer made by Jonathan. A counter offer is an offer that is made in response to one that has been offered previously that the other party during the negations (Stone, 2005). Through insisting on a price of $ 180 for the racing bicycle, Peter demonstrates that he has not accepted Jonathan’s offer of $ 160 and his actions are legally construed as a counter offer to sell the racing bicycle at $ 180. Surprisingly, Jonathan’s acceptance of the offer to buy the racing bicycle at $ 180 is not binding since it is made subject to conditions. The law of acceptance requires unqualified acceptance of all the offered terms to a contract. Accordingly, the acceptance must be communicated to the offerer and acceptance must match the terms contained in the offer. In addition, the agreement must be certain since silence does not amount to acceptance. According to the law of contracts, valid acceptance can only be either express acceptance through oral or in writing or implied acceptance that is demonstrated by the acts of the two parties (Farnsworth, 1991). Jonathan needs to see if the bicycle is in good condition and he can only get money in two day’s time. This is not a valid acceptance since it is made subject to conditions. Conditional acceptance acts as a counter offer. It is now the duty of Peter to accept the counter offer that has been made by Jonathan. Peter does not expressly accept the counter offer made by Jonathan within a reasonable time or by his conduct. In this case, there is no binding contract between Jonathan and Peter for the sale of the racing bicycle (Blum, 2007). Jonathan must be aware that the Uniform Commercial code, UCC 2- 207(1), requires a definite and seasonable expression of the acceptance or a written confirmation for the terms of offer than must be sent to offer within a reasonable time. § 2-207, provides that subject to Section 2-202, the conduct of the parties recognizes the existence of a contract even without formal records (White & Summers, 1995). At the same time, the section outlines that a contract is established by an offer and acceptance, and all contracts formed by any other manner must be confirmed by a record that contains additional terms to or different from those in the contract (Klass, 2010). In addition, if acceptance is expressly conditional, the additional terms proposed by Jonathan are reflective of a counter offer and it is the seller (Peter) who is expected to make an acceptance. Accordingly, if acceptance is not expressly conditional on the additional terms, the uniform commercial code regards such additional terms as counter offer (Klass, 2010). In this case, no contract has been formed since Peter does not agree expressly to the counter offer or does not through his acts signify the acceptance of the counter offer from Jonathan (Blum, 2007). It is the duty of Peter to agree with the additional conditions as per the counter offer in order for a binding contract to exist. For merchants, the additional terms are generally construed as proposals to the contract and the terms will become part of the contract unless they have the potential of materially altering the contract or a notification of objection to the terms is provided within a reasonable time and received by the other party (White & Summers, 1995). In the case of Neale v. Merret (1930), the court held that an acceptance that does not match the terms of the offer amounts to counter offer. Accordingly, the case of Felthouse v. Bindley (1862), held that acceptance must be communicated to the other party and silence does not amount to acceptance. Accordingly, the case of Eliason v. Henshaw (1819) demonstrated that acceptance must be provided according to the method stipulated by the offeror (Klass, 2010). Peter is free to continue with the sale of racing bicycle. Mary saw the advertisement, which is an invitation to treat and makes an offer to purchase the bicycle for $ 190. Accordingly, Peter accepts Mary’s offer unconditionally and proceeds to sell the bicycle to Mary. This is a valid contract and both parties execute their obligations according to the law since Mary has paid for while Peter has provided the bicycle to Mary (Blum, 2007). In conclusion, an advertisement is not an offer, but an invitation to treat that invites interested buyers to make offers for the purchase of a product. It is the duty of Jonathan to make an offer after seeing the advertisement and expect the Peter to accept the offer unconditionally in order for a binding contract to be established. Jonathan must be certain about the condition of the racing bicycle, which is the subject matter of the contract before making an offer. Peter has rejected Jonathan’s offer and makes a counter offer of selling the bicycle at $ 180. At this point, Jonathan makes a conditional acceptance of purchasing the bicycle at $ 180 but only after ascertaining its condition and settling the payment in two days. This is a conditional acceptance who effect is a counter offer that requires the acceptance of Peter. Peter has not made an express or implied acceptance to Jonathan’s counter offer thus no binding contract has been formed. Peter has the authority to sell the bicycle to Mary (Klass, 2010). Reference list: Blum, Brian. 2007. Contracts: examples & explanations. Austin: Kluwer Law & Business. Farnsworth, Allan. 1991. United States contract law. New York: Transnational Juris Publications. Klass, Gregory. 2010. Contract law in the USA. Austin: Wolters Kluwer Law & Business. Stone, Richard. 2005. Contract law. New York: Routledge. White, James & Summers, Robert. 1995. Uniform commercial code. New York: Routledge. Read More