0:00:07.700,0:00:11.471 We are now ready to have a closer look [br]at the element of agreement 0:00:11.471,0:00:14.466 as one of the key concepts [br]of contract law. 0:00:16.370,0:00:19.485 The existence of an agreement [br]is an essential basis 0:00:19.485,0:00:21.795 and precondition of a contract. 0:00:22.530,0:00:25.935 We could say that the exceptions [br]are promissory estoppel 0:00:25.935,0:00:27.937 and quasi-contracts, 0:00:28.264,0:00:30.615 where there is no agreement, [br]but technically 0:00:30.615,0:00:33.216 those are not actual contracts. 0:00:34.730,0:00:37.517 We have already seen that [br]whether there is agreement or not 0:00:37.517,0:00:41.358 will be determined based on [br]the objective theory of contracts. 0:00:42.030,0:00:44.226 But what we examine now in more detail 0:00:44.226,0:00:46.815 are the individual elements of agreement 0:00:46.815,0:00:49.635 namely, offer and acceptance. 0:00:51.390,0:00:54.672 There can only be an agreement,[br]and hence a contract, 0:00:54.672,0:00:58.582 if there has been a valid offer[br]and valid acceptance of the offer. 0:00:59.780,0:01:03.867 The party making the offer [br]can be referred to as the offeror, 0:01:03.867,0:01:08.500 while the party that receives the offer [br]and may or may not accept it 0:01:08.500,0:01:11.150 can be referred to as the offeree. 0:01:12.805,0:01:16.223 If there is in fact [br]an offer by the offeror 0:01:16.223,0:01:19.164 and an acceptance by the offeree, 0:01:19.164,0:01:23.155 then we have the meeting of the minds[br]that we already referred to earlier, 0:01:23.155,0:01:26.448 and which is necessary for [br]the formation of a contract. 0:01:26.930,0:01:30.769 Remember however, that whether or not [br]there is a meeting of the minds 0:01:30.769,0:01:33.847 is determined based on an objective basis. 0:01:35.060,0:01:39.870 The parties may subjectively not think[br]that there is a meeting of the minds, 0:01:39.870,0:01:45.143 but from the perspective of a reasonable[br]person or bystander, this is the case. 0:01:45.780,0:01:48.792 That's the reason why[br]there may be a contract 0:01:48.792,0:01:53.325 despite one of the parties'[br]unwillingness to enter into an agreement. 0:01:54.552,0:01:56.827 Every contract begins with an offer. 0:01:57.140,0:01:59.591 In order to be valid, [br]an offer must contain 0:01:59.591,0:02:01.311 the following elements: 0:02:03.182,0:02:05.441 an objective intent to make an offer 0:02:05.441,0:02:08.503 by the party that is attempting [br]to make the offer, 0:02:10.220,0:02:13.419 the offer must contain [br]definite material terms 0:02:13.419,0:02:15.407 that would govern the contract, 0:02:17.170,0:02:21.990 and the offer and its contents [br]must be communicated to the offeree. 0:02:22.636,0:02:25.101 Let's look at these elements in turn. 0:02:27.297,0:02:30.016 Whether there is an objective [br]intent to make an offer 0:02:30.016,0:02:33.764 is determined by the words [br]and actions of the offeror. 0:02:34.810,0:02:38.070 There is no objective intent [br]if the offeror 0:02:38.070,0:02:42.800 uses words that a reasonable person [br]would interpret as an opinion, joke, 0:02:42.800,0:02:48.177 future plan, a simple suggestion [br]to engage in preliminary negotiations, 0:02:48.177,0:02:51.777 or an invitation to the other party [br]to make an offer. 0:02:52.408,0:02:54.577 Let's look at some examples. 0:02:57.045,0:02:58.749 Let's assume a friend says to you, 0:02:58.749,0:03:02.632 "I really like your old car [br]and I would like to buy it for $15,000." 0:03:03.215,0:03:07.213 In reality, your friend hates your car, [br]but is just trying to be polite. 0:03:08.050,0:03:09.902 Looking at this statement objectively 0:03:09.902,0:03:12.675 suggests that this would be a valid offer. 0:03:13.340,0:03:16.578 Subjective intent or so-called [br]mental reservations 0:03:16.578,0:03:18.624 that are not shared with the other party 0:03:18.624,0:03:20.123 are immaterial. 0:03:23.030,0:03:25.517 Next, let's assume that[br]your friend says to you 0:03:25.517,0:03:28.102 she will pay you a million dollars [br]if you go to the store 0:03:28.102,0:03:30.510 and pick up a sandwich [br]and drink for her. 0:03:31.290,0:03:34.298 Would this be an objective intent [br]to make an offer? 0:03:34.760,0:03:36.341 Normally not because 0:03:36.341,0:03:39.595 unless perhaps your friend [br]is a somewhat reckless billionaire, 0:03:39.595,0:03:42.721 it's very clearly a joke [br]and not a serious offer 0:03:42.721,0:03:44.324 that you could accept. 0:03:46.970,0:03:50.675 There is a famous German case,[br]or perhaps just a hypothetical, 0:03:50.675,0:03:53.374 that nicely illustrates [br]the concept of an offer 0:03:53.374,0:03:55.146 under the objective theory. 0:03:55.893,0:04:00.897 Mr. X, a visitor from out of town,[br]enters the town hall of a small village. 0:04:01.270,0:04:04.474 He doesn't know that [br]a wine auction is going on. 0:04:06.475,0:04:09.563 Under the applicable local law, [br]during an auction, 0:04:09.563,0:04:13.692 the participants can raise their offers [br]by lifting their hand. 0:04:15.931,0:04:19.361 Mr. X spots an acquaintance [br]who is sitting in the town hall. 0:04:19.680,0:04:22.518 He raises his hand [br]to greet the acquaintance. 0:04:24.340,0:04:28.187 Unbeknownst to Mr. X, [br]this means that he is making an offer, 0:04:28.187,0:04:31.648 and it is interpreted as such [br]by the auctioneer. 0:04:32.120,0:04:34.722 As a result, Mr. X wins the auction 0:04:34.722,0:04:38.584 and is obliged to pay [br]for 12 cases of rare wine. 0:04:39.480,0:04:43.050 In this scenario, would there be [br]a contract under the law? 0:04:43.726,0:04:46.498 Under the objective theory, [br]the answer is yes, 0:04:46.498,0:04:48.869 since a reasonable person would interpret 0:04:48.869,0:04:53.649 his actions at the auction [br]as constituting the making of an offer. 0:04:56.310,0:04:59.253 The second element is that [br]the offer needs to include 0:04:59.253,0:05:01.462 definite material terms. 0:05:02.071,0:05:04.014 This means that the terms of the offer 0:05:04.014,0:05:07.937 must be sufficiently clear and unambiguous 0:05:07.937,0:05:11.618 so that the essential terms [br]of the offer can be determined, 0:05:12.110,0:05:15.177 and if the need for [br]enforcement would arise, 0:05:15.177,0:05:18.348 that a court would be able [br]to fashion a remedy. 0:05:20.390,0:05:22.370 For instance, saying to a car dealer, 0:05:22.370,0:05:26.592 "I would like to purchase [br]this blue Ford Fiesta for $15,000," 0:05:27.050,0:05:29.776 contains definite material terms. 0:05:30.250,0:05:33.297 The essential terms are clear, [br]and if necessary, 0:05:33.297,0:05:37.169 a court wouldn't have no problems[br]enforcing this contract 0:05:37.169,0:05:39.531 or fashioning a suitable remedy. 0:05:40.510,0:05:43.506 Conversely, mentioning to a car dealer, 0:05:43.506,0:05:46.696 "I would like to purchase[br]one of your cars for a good price," 0:05:46.696,0:05:49.042 would not meet that requirement. 0:05:51.160,0:05:55.690 The third element is that the offer[br]needs to be communicated to the offeree, 0:05:55.690,0:05:59.338 that is, the person to whom[br]the offer is being extended. 0:05:59.818,0:06:02.735 An uncommunicated offer is not an offer. 0:06:03.245,0:06:07.005 Also the offer must be[br]communicated by the offeror 0:06:07.005,0:06:11.296 to the offeree in the manner[br]chosen by the offeror. 0:06:13.706,0:06:17.216 For example, let's say that Joel[br]writes on a piece of paper: 0:06:17.216,0:06:21.208 "George, I want to buy your car [br]for $15,000." 0:06:21.800,0:06:24.699 He then puts that paper[br]in his own desk drawer 0:06:24.699,0:06:26.761 as he is not yet sure 0:06:26.761,0:06:28.574 whether he's ready to make the offer. 0:06:29.460,0:06:31.758 Two days later, George finds the note. 0:06:32.032,0:06:33.199 Is there an offer? 0:06:33.590,0:06:36.881 No, there would be no offer in this case. 0:06:37.240,0:06:39.838 While it was communicated to the offeror, 0:06:39.838,0:06:43.996 it was not willingly communicated [br]by the offeror, Joel. 0:06:44.596,0:06:48.296 However, if Joel would have instructed [br]George to go into his study, 0:06:48.296,0:06:50.414 open his drawer and read the note, 0:06:50.414,0:06:52.986 there would have been a valid offer.