BAR FLASHCARDS - C2 Mutual Assent
MUTUAL ASSENT—OFFER AND ACCEPTANCE
For an agreement to be enforced as a contract, there must be mutual assent. In other words, one party must accept the other’s offer.
Whether mutual assent is present will be determined by an objective standard; that is, did words or conduct manifest a present intention to enter into a contract?
When a suit is brought in which one party seeks to enforce a contract or to obtain damages for breach of contract, a court must first decide whether there was in fact a contract. In making this determination, a court will ask the following three basic questions:
• Was there mutual assent?
• Was there consideration or some substitute for consideration?
• Are there any defenses to creation of the contract?
Whether mutual assent is present will be determined by an ___ standard
Whether mutual assent is present will be determined by an objective standard; that is, did words or conduct manifest a present intention to enter into a contract?
For any contract question, be sure that there really is an enforce- able contract; that is, you must have all these three elements:
• Was there mutual assent?
• Was there consideration or some substitute for consideration?
• Are there any defenses to creation of the contract?
- Mutual Assent
Offer (promise, undertaking, or commitment with definite and certain terms communicated to offeree)
AND
Acceptance before termination by revocation, rejection, or operation of law.
- Consideration
Bargained-for exchange of something of legal value
OR
Substitute for consideration, such as promissory estoppel, detrimental reliance, or good faith modification under the UCC
- No defenses
Mistake (mutual or, under certain conditions, unilateral)
OR
Lack of capacity (makes contract void or voidable)
OR
Illegality (usually renders contract void)
OR
Statute of Frauds
THE OFFER
An offer creates a power of acceptance in the offeree and a corresponding liability on the part of the offeror.
For a communication to be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.
In deciding whether a communication creates this reasonable expectation, ask:
• Was there an expression of a promise, undertaking, or commit- ment to enter into a contract?
• Were there certainty and definiteness in the essential terms?
• Was there communication of the above to the offeree?
An offer is a…
Manifestation of an intention to be bound
Promise, Undertaking, or Commitment
For a communication to be an offer, it must contain a promise, under- taking, or commitment to enter into a contract, rather than a mere invitation to begin preliminary negotiations; that is, there must be an intent to enter into a contract.
Language in offer
The language used may show that an offer was or was not intended. Technical language such as “I offer” or “I promise” is useful, but it isn’t necessary. Phrases such as “I quote,” “I am asking $30 for,” and “I would consider selling for” tend to be construed merely as invitations to deal rather than offers.
Surrounding Circumstances
The circumstances surrounding the language is considered by courts in determining whether an offer exists. For example, if a statement is made in jest, anger, or by way of bragging, and it is reasonably under- stood in this context, it will have no legal effect.
Prior Practice and Relationship of the Parties
In determining whether certain remarks constitute an offer rather than preliminary negotiations, a court will look to the prior relation- ship and practice of the parties involved.
Method of Communication
Use of Broad Communications Media: The broader the communicating media (for example, publications), the more likely it is that the courts will view the communication as merely the solicitation of an offer.
Advertisements, Etc.: Advertisements, catalogs, circular letters, and the like containing price quotations are usually construed as mere invitations for offers.
Advertisements, Etc.
Advertisements, catalogs, circular letters, and the like containing price quotations are usually construed as mere invitations for offers.
Ads are NOT generally offers! UNLESS you see QUANTITY AND other terms. look at whether ioffered to public.
Exception - When ads ARE offers
When they contain a PROMISe, the terms are certain and definnite, and the offeree is clearly identified.
Definite and Certain Terms
An offer must be definite and certain in its terms. The basic inquiry is whether enough of the essential terms have been provided so that a contract including them is capable of being enforced.
Offers usually must include:
- Offerees name
- Offers subject matter
- Price to be paid
Definite and Certain Terms - Identification of the Offeree
a. Identification of the Offeree
To be considered an offer, a statement must sufficiently identify the offeree or a class to which they belong to justify the inference that the offeror intended to create a power of acceptance.
Definite and Certain Terms - Definiteness of Subject Matter
b. Definiteness of Subject Matter
The subject matter of the deal must be certain, because a court can enforce a promise only if it can tell with reasonable accuracy what the promise is.
Requirements for Specific Types of Contracts
Real Estate Transactions—Land and Price Terms,
Sale of Goods—Quantity Term
Employment and Other Services
Real Estate Transactions—Land and Price Terms,
An offer involving realty must identify the land and the price terms.
The land must be identified with some particularity
but a deed description isn’t required (for example, “my house in Erewhon” is sufficient if the seller has only one house in Erewhon). Most courts will not supply a missing price term for realty.
Land Sale offers mUST include:
- Price
- Descrioption of LAND - with some particularly but deed not required.
Sale of Goods—Quantity Term
In a contract for the sale of goods, the quantity being offered must be certain or capable of being made certain.
PRICE NOT NECESSARY.
Sale of Goods—Quantity Term: “Requirements” and “Output” Contracts
In a requirements contract, a buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agrees to sell that amount to the buyer.
In an output contract, a seller promises to sell to a certain buyer all of the goods that the seller produces, and the buyer agrees to buy that amount from the seller.
It is assumed that the parties will act in good faith; so, there can’t be a tender of or a demand for a quantity unreasonably disproportionate to (1) any stated estimate, or (2) (in the absence of a stated estimate) any normal or otherwise comparable prior output or requirements.
In addition to the words “require,” “need,” and “produce,” certain other terms are clues that the contract is a require- ments or outputs contract. On the exam, watch for the following words: “all,” “only,” “exclusively,” and “solely.”
requirements contract - incrrasing
In a requirements contract, a buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agrees to sell that amount to the buyer.
Buyer can increase as long as increase is in line with PRIOR demands.
Employment and Other Services
In contracts for employment, if the duration of the employ- ment is not specified, the offer, if accepted, is construed as creating a contract terminable at the will of either party. For other services, the nature of the work to be performed must be included in the offer.
Missing Terms
The fact that one or more terms are left open does not prevent the formation of a contract if it appears that the parties intended to make a contract and there is a reasonably certain basis for giving a remedy. In such a case, the majority of juris- dictions and Article 2 hold that the court can supply reasonable terms for those that are missing.
Missing Terms: Price
Except in contracts for real property, the failure to state the price doesn’t prevent the formation of a contract if the parties intended to form a contract without the price being settled. Note that if a contract for the sale of goods is missing a price term, Article 2 provides that the price will be a reasonable price at the time of delivery.
Missing Terms: Time
If an agreement doesn’t specify the time in which an act is to be performed, the law implies that it is to be performed within a reasonable time.
Vague Terms
The presumption that the parties’ intent was to include a reason- able term goes to supplying missing terms. The presumption cannot be made if the parties have included a term that makes the contract too vague to be enforced (for example, an agree- ment to split profits on a “liberal basis”). However, uncertainty can be cured by part performance that clarifies the vague term or by acceptance of full performance.
Terms to Be Agreed on Later
Often, an offer will state that some term is to be agreed on at a future date. If the term is a material term, the offer is too uncer- tain.
Communication to Offeree
To have the power to accept, the offeree must have knowledge of the offer. Therefore, the proposal must be communicated to them
TERMINATION OF OFFER
An offer can’t be accepted after it has been terminated. An offer may be terminated by an act of either party or by operation of law.
Termination by Offeree: - Lapse of Time
Lapse of Time
An offer may be terminated by the offeree’s failure to accept within the time specified by the offer or, if no deadline was specified, within a reasonable period.
Termination by Offeree: - Rejection
— Express Rejection: An express rejection is a statement by the offeree that they do not intend to accept the offer. Such a rejection will terminate the offer.
— Counteroffer as Rejection: A counteroffer is an offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in its terms (for example, “I’ll take the house at that price, but only if you paint it first”).
Counteroffer v mere bargaining
Counteroffer = rejection
Mere bargainging does NOT equal rejection.
If offeree response has question mark , it is MERE bargaining and does not kill offer.
Distinguish—Mere Inquiry
Distinguish between a counteroffer (which constitutes a rejection) and a mere inquiry. An inquiry won’t terminate the offer when it is consistent with the idea that the offeree is still keeping the original proposal under consideration (for example, “Would you consider lowering your price by $5,000?”). The test is whether a reasonable person would believe that the original offer had been rejected.
Conditional Acceptance as Rejection
When an acceptance is made expressly conditional on the acceptance of new terms, it is a rejection of the offer. The conditional acceptance is essentially a new offer, and the original offeror may form a contract by expressly assenting to the new terms.
However, the offer that results from a conditional accep- tance cannot be accepted by performance. If the parties ship or accept goods after a conditional acceptance, a contract is formed by their conduct, and the new terms are not included.
Conditional acceptance =
REJECTION + NEW OFFER
Effective When Received
A rejection is effective when received by the offeror.
Rejection of Option
Because an option is a contract to keep an offer open, a rejec- tion of or a counteroffer to an option does not constitute a termination of the offer. The offeree is still free to accept the original offer within the option period unless the offeror has detrimentally relied on the offeree’s rejection.
Termination by Offeror—Revocation
A revocation is the retraction of an offer by the offeror.
Revocation
OFFERor’s retraction of OFFER.
Can be Anytime before acceptance
Only offerors can ___, only offerees can ___
Only offerors can revoke, only offerees can reject
Direct revokation
Offeror conveys to the offeree that they change their mind “I revoke”
An offeror may revoke by directly communicating the revocation to the offeree (for example, “I revoke my offer of May 25”).
An offer made by publication can be directly revoked only by publication through comparable means (for example, an offer placed in the Wall Street Journal cannot be revoked by publishing in Better Homes and Gardens).
An offer made by publication can be directly revoked only by…
An offer made by publication can be directly revoked only by publication through comparable means (for example, an offer placed in the Wall Street Journal cannot be revoked by publishing in Better Homes and Gardens).
INdirect revokation
An offer may also be revoked indirectly if the offeree receives:
(1) correct information,
(2) from a reliable source,
(3) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer
But offerree must be aware of the Offeror’s CONDUCT.
(for example, after the offeror offers to sell their car to the offeree, the offeree is told by a reliable third party that the offeror just sold the car to someone else).
Offeree must be ___ of the revokation
AWARE
