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Offer, Acceptance and Contract Formation

Help with this problem:

1. Analysis and applicable rules as applied to the seller/advertiser.
2. Analysis and applicable rules as they apply to the purchaser.


A store ran a sales promotion to boost sales of a product. The promotion included both free gifts for purchases and low interest financing. It was supported by a print advertising campaign in several states.

The advertisements ran in major daily newspapers, and stated as follows:

Buy this product at a low price of $14,599.00. We will finance it an incredible 7.5% interest rate** and let you pick the term of the loan: 6, 12, or 18 months. No monthly payments. At the end of the term you pay:

6 months: $14, 781.49
12 months: $14, 963.98
18 months: $15, 146.46 ** Annual Percentage Rate: Subject to credit qualification.

Plus we will help you get started with a gift certificate that can be redeemed for products worth $300.00.

The promotion was successful, with 68 of the products sold in 2 weeks. All 68 gift certificates were issued and have been fully redeemed by all the customers. Unfortunately the advertisements contained a serious error. A financial analyst calculated the financing figures for the ad using a 2.5% interest rate, not a 7.7% interest rate. The numbers is the advertisements were incorrect. The correct numbers based on a 7.5% interest rate are:

6 months: $15,146.46
12 months: $15,693,93
18 months: $16,241.39

Total Loss on all Contracts: $65,695.50

Customers who bought the product during the promotion signed standard plain language promissory notes that clearly stated the 7.5% interest rate. Only one person selected the 6 month term, 22 selected the 12 month term , and 45 selected the 18 month term. The customer with the 6 month term came forward and a dispute arose over the correct amount due. The seller believes they are entitled to the higher amount, but the customer refused to pay more than the advertised amount. To resolve the matter, the smaller amount was accepted for this one case with a six month term, but do not wish to accept the advertised amount on the remaining 67 contracts with 12 or 18 month contracts.

Help determining if the seller is contractually bound by the terms of the advertisement, or whether they can enforce the contract terms of the promissory notes for the higher amount.

Help with all legal arguments for the seller and purchaser. This does not involve the law of mistakes.


Solution Summary

Analyzes the problem on various aspects of contract law e.g. offer, acceptance and contract formation, regarding the seller/advertiser and purchaser.