Contract Formation Part 3 Flashcards
The Acceptance
Definition: An acceptance is a manifestation of assent to the terms of the offer. The offeree exercises the power given to him by the offeror to create a K.
Who may accept?
1) The party to whom the offer is addressed
2) Offeree’s power of acceptance cannot be assigned. EXCEPTION: Option contracts. An exception exists for the right to accept under an option contract, because the power to accept is itself a K right in that case
Offeree must know of offer!
Acceptance of Unilateral Contract
If offer provides that it may be accepted only by performance (“first person to clean my windshield gets $5”) it’s a Unilateral K
a) Completion of Performance = most courts hold an offer to form a unilateral K is not accepted until performance completed. Beginning of performance creates an option that makes the offer irrevocable. But the offeree is not obliged to finish performance after starting. Only completion creates acceptance.
b) Notice = The offeree is generally NOT required to give offeror notice of beginning performance, but is required to notify the offeror within a reasonable time after performance has been completed. Notice isn’t needed if the offeree’s performance would normally come to the offeror’s attention within a reasonable time.
c) Art 2 UCC Notice = When a unilateral K is accepted by beginning performance, if the offeree fails to notify the offeror of the acceptance within a reasonable time, the offeror may treat the offer as having lapsed before acceptance
Acceptance of Bilateral Contract
Most offers by default are for bilateral K and can be accepted without performance.
Generally, acceptance must be communicated. EXCEPTIONS:
1) Waiver in offer
2) Silence as acceptance = if offeree silently takes benefits, that’s acceptance. Especially in prior dealings. Sitting down at regular barber and receiving haircut. If services are offered and by a word the offeree could have prevented a mistaken inference of acceptance, must do so otherwise that silence is treated as acceptance.
Method of Acceptance: an offer invites acceptance in any reasonable manner and medium unless otherwise specified. “The offeror is the master of the offer”
1) Action as acceptance
2) Offer to buy goods for current or prompt shipment = under Art 2, an offer to buy goods for current or prompt shipment is construed as inviting acceptance either by a promise to ship or by current or prompt shipment of conforming or nonconforming goods
Mirror Image Rule
Common law (land, services)requires that the acceptance match all terms of the offer. Any additional or different terms would make the response a REJECTION and COUNTEROFFER. Note: something like “I accept provided you convey marketable title” is not a rejection/counteroffer because it’s just tacking on something that was already implicit in a land K
Acceptance under Art 2
Offers to Buy Goods for Current or Prompt Shipment: may be accepted by either a promise to ship or by a shipment of conforming or nonconforming goods
1) Shipments of NONconforming goods = an ACCEPTANCE and BREACH unless the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an ACCOMMODATION. The buyer is not required to accept accommodation goods and may reject them. If he does, the shipper is not in breach and may reclaim the accommodation goods, because her tender does not constitute an acceptance of the buyer’s original offer.
2) Battle of the Forms
a) Mirror Image not required
Additional or different terms provided by offeree in definite and timely acceptance act as acceptance unless the acceptance is made expressly conditional on assent to the additional or different terms.
Example: Sally’s e-mail says, “I accept, but only if you agree
to deliver the car to my house by noon tomorrow.” No contract is formed
here because Sally’s acceptance was expressly conditioned on assent to
the new terms.
Terms Included via Battle of the Forms:
1) Contracts with a Nonmerchant: the terms of the offer govern unless the offeror expressly agrees
2) Contracts Between Merchants: additional terms are usually included UNLESS:
a) they materially alter the original terms
b) the offer expressly limits acceptance to its original terms
c) the offeror has already objected to the particular terms or objects within a reasonable time after notice of them is received
DIFFERENT terms in K between merchants may or may not be included depending on court. Many courts follow the KNOCKOUT RULE meaning that conflicting terms (different, not new) in the acceptance and offer delete each other and a reasonable term is put in place. Sufficient differences between offer and acceptance as to price, quantity, etc would just be rejection and counteroffer. Merchants’ confirmatory memos are subject to the battle of the forms.
Effect of Conditional Acceptance
When acceptance is made expressly conditional on the acceptance of new terms, it is a rejection of the offer. The conditional acceptance is essentially a counteroffer.
Mailbox Rule
Acceptance by mail or email is effective at the moment of dispatch, provided that the mail is properly addressed and stamped, unless:
1) the offer stipulates that acceptance is not effective until received; or
2) an option K is involved (an acceptance under an option K is effective only upon receipt
If an offeree sends ACCEPTANCE BEFORE RECEIVING REVOCATION from the offeror, the acceptance is effective and a CONTRACT FORMS.
Effect of Offeree Sending Both Acceptance and Rejection = Remember, rejection is effective only when received.
1) Offeree Sends Rejection, then Acceptance = Mailbox Rule Does NOT Apply and whichever one was RECEIVED FIRST wins.
2) Offeree Sends Acceptance, then Rejection = Mailbox Rule Generally Applies. The acceptance is effective upon dispatch. However, if the offeror received the rejection first and detrimentally relied, the offeree will be estopped from enforcing.
Caveat: Acceptance by Unauthorized Means = an acceptance transmitted by unauthorized means or improperly transmitted by unauthorized means may still be effective if it is actually received by the offeror while the offer is still in existence. Example: Bailey makes offer to Janet specifying that acceptance should be by email. Janet mails Bailey her acceptance. The acceptance won’t be effective upon dispatch but only upon receipt by Bailey if the offer is still open.
