Contract Formation: Mutual Assent - Offer; Acceptance

Question 1

Who may accept offer?

Answer 1

• person to whom addressed
• person who is member of class to whom offer is made
• generally, can’t be assigned (exception –> option)

Question 2

What is the rule re: knowledge of offer?

Answer 2

• In order to accept, offeree must know of offer.
• Thus, if A and B send each other identical offers, but there’s no knowledge, there is no K

NOTE –> for unilateral K, there still must be knowledge. So for example, if owner offers reward for missing watch, and finder bring watch without knowing about award, he is not legally entitled to the award.

Question 3

What is the rule re: acceptance of unilateral K by performance?

Answer 3

1. Offer is not accepted until performance is completed

2. Beginning of performance may create an option so that offer is not revocable

Question 4

What is the rule re: notice of acceptance and unilateral K?

Answer 4

• Offereee is NOT required to give offeror notice that he has begun performance, but IS required to give notice within reasonable time after performance is complete.

Exception:

1. offeror waived notice;
2. performance would normally come to offeror’s attention within reasonable time

Question 5

What is the rule re: acceptance of bilateral K by performance?

Answer 5

may be accepted by promise to perform, or beginning performance

Question 6

What is the rule re: notice of acceptance and bilateral K?

Answer 6

Generally - acceptance must be communicated, unless offer provides that it does not.

HOWEVER –> if due to prior dealings or trade practices, it would be commercially reasonable for silence to be treated as acceptance, the court may so find.

Also, if recipient of services knows or should have known that services were being rendered with the expectation of compensation, and could have prevented the mistake, she may be held to have accepted if she fails to speak.

Question 7

What is the rule with regards to method of acceptance?

Answer 7

Unless otherwise provided, an offer is construed as inviting acceptance in “any reasonable manner” and by any medium reasonable under the circumstances.

Question 8

What is the rule with regards to method of acceptance and “offers to buy goods for current or prompt shipment”?

Answer 8

Under UCC Art 2, offer to buy goods for current or prompt shipment may be accepted by:

1. promise to ship; or
2. current or prompt shipment of conforming or non-conforming goods

Question 9

What is the special rule re: shipment of non-conforming goods?

Answer 9

Under UCC, shipment of non-conforming goods is:

1. an acceptance, creating a bilateral K; and
2. a breach of K UNLESS seller notifies buyer that shipment of non-conforming goods is offered only as an ACCOMMODATION

NOTE: Buyer is NOT required to accept accommodation goods, and may reject them. If he does, shipper is not in breach and may reclaim the accommodation goods, bc her tender does not constitute an acceptance of buyer’s original order

EXAM TIP –> note that if contract is made by promise to ship, there can be no accommodation

Question 10

What is the rule with regards to acceptance in sale of goods if there are additional or different terms?

Answer 10

• proposing additional or different terms by offeree in a definite and timely acceptance is EFFECTIVE as an acceptance UNLESS:
• acceptance is expressly made conditional on acceptance of additional or different terms

Question 11

If there are additional terms in an acceptance to a sale of goods, what terms govern?

Answer 11

If EITHER party is non-merchant –> terms of offer govern

If BOTH parties are merchants –> ADDITIONAL terms included unless:

(i) they materially alter terms; OR
(ii) offer expressly limits acceptance to terms of offer; OR
(iii) Offeror objects within a reasonable time

Question 12

What happens if there are different terms in an acceptance to a sale of goods?

Answer 12

• some courts follow same rule as for additional terms
• some courts follow “knockout rule” –> conflicting terms in offer and acceptance are knocked out of K. Terms may be substituted by UCC

NOTE: there still must be meeting of the minds.

Question 13

What is the special rule re: “merchant’s confirmatory memo”?

Answer 13

Situation –> there was an oral agreement btwn merchants, and then a written confirmatory memo was sent with additional or different terms

Result –> battle of the forms rules will apply. Will have the same outcome as if it was an acceptance with different/additional terms

Question 14

What is the rule re: “conditional acceptance” under UCC art 2?

Answer 14

• it is a rejection, and new offer.
• original offeror may form new contract by expressly assenting to new terms, however it CANNOT be accepted by performance.
• if parties ship/accept terms after conditional acceptance, a K is formed by their conduct NOT including new terms

Question 15

When is “acceptance” effective? (Mailbox rule)

Answer 15

Acceptance by mail/similar means creates a K at moment of dispatch, unless:

1. offer stipulates that not effective until receipt;
2. option contract is involved (here, only effective upon receipt)
3. if offeree send rejection THEN acceptance, whichever arrives first is effective
4. If offeree sends acceptance THEN rejection, acceptance is effective UNLESS:
   - rejection arrived first; and
   - offeror detrimentally relied on it

Question 16

What is the rule re: acceptance by unauthorized means?

Answer 16

May still be effective if actually received by offeror while offer is still in existence

Question 17

When is sale in auction complete? (UCC)

Answer 17

• fall of hammer or other customary manner

Question 18

What is rule re: auction sales and reserve?

Answer 18

• auction sale is “with reserve” unless goods are explicitly put up without reserve
• “with reserve” means auctioneer may withdraw at any time until he announces completion of sale