Contracts 2 - Offer and Acceptance

Question 1

Offer - 2 Requirements

Answer 1

(1) Outward manifestation.

(2) A signal that acceptance will conclude the deal.

Question 2

Preliminary Negotiations

Answer 2

Not an offer. It’s the general give and take that occurs during bargaining.

Question 3

Invitation for an Offer

Answer 3

Not an offer. It’s when someone is closing in on a deal but wants the other party to commit first. “How much are you willing to pay me for these goods?”

Question 4

Commercial advertisements

Answer 4

Are not offers because responses may exceed supply. However, if language identifies who gets the limited supply of goods then it’s an offer. e.g. first come first served, first 10 customers only.

Question 5

Reward Offers

Answer 5

Generally treated as offers. Can have language in the offer that specifies a limitation on how many can accept.

Question 6

Self-Limiting Reward offers

Answer 6

Offers that indicate the task to be rewarded can only be performed once.

Question 7

Open-Field Reward Offers

Answer 7

Reward offers that indicate the task to be performed can potentially be performed by multiple parties.

Question 8

Auctions

Answer 8

The auctioneer is inviting offers and the responsive bids are the offers. But if auction is held ‘without reserve’, auctioneer is making an offer to sell to the highest bidder.

Question 9

Legal Effect of an Offer

Answer 9

Creates the power of acceptance in the offeree.

Question 10

4 Ways to Terminate Power of Acceptance

Answer 10

(1) Lapse.
(2) Death or incapacity.
(3) Revocation by offeror.
(4) Rejection by offeree.

Question 11

Termination by Lapse of Time

Answer 11

The time stated in the offer or if no time is stated then after a reasonable time. reasonable factors include (1) looking at subject matter and market conditions, and (2) degree of urgency and means of transmission.

Question 12

Face-to-Face Conversation Rule

Answer 12

An offer made in a face-to-face conversation generally lapses at the end of the conversation, unless the offer specifies otherwise.

Question 13

Termination by Death or Incapacity of Either Party

Answer 13

Death terminates power of acceptance and so does either party becoming mentally incompetent.

Question 14

Termination by Offeror’s Revocation

Answer 14

Offeror may revoke at any time and for any reason so long as: (1) revoked before offer is accepted and (2) revocation is communicated to the offeree.

Question 15

Indirect Revocation

Answer 15

(1) Offeror takes some action that is inconsistent with the intention to go through with the offer and (2) The offeree learns about such action from a reliable source.

Question 16

Functional Equivalents Rule

Answer 16

With an offer made to multiple people, offeror revokes by communicating the revocation in a functionally equivalent manner as the offer was made. But if there’s a better means of communicating that is reasonably available, those means must be used to revoke. Terminates power of acceptance even if offeree is unaware.

Question 17

Preventing Revocation - Common Law

Answer 17

The offeror could revoke even if he expressly promised the offeree that he would hold the offer open.

Question 18

Common Law Option Contract

Answer 18

(1) Offer
(2) Subsidiary promise to keep that offer open. Sell by/lapse date doesn’t count.
(3) Consideration for subsidiary promise.

Question 19

Option Contract - False Recital

Answer 19

Majority, recital of consideration is rebuttable. Minority, it’s ok to be false.

Question 20

Option Contract - Promissory Estoppel

Answer 20

Courts will sometimes, not often, enforce a subsidiary promise to keep an offer open if there has been a detrimental reliance.

Question 21

Construction Contracts

Answer 21

Promissory estoppel applies when a general contractor relies on bid of subcontract to formulate his own bid.

Question 22

Firm Offer (UCC) - Requirements

Answer 22

(1) Offer is made by merchant.
(2) Offer is made in writing signed by merchant.
(3) Offer expressly states by its terms that it will be held open.

Question 23

Firm Offer - Time

Answer 23

Will remain irrevocable for period of time specified, if not specified then for reasonable time. Can’t be more than 3 months, if more than 3 months is stated it’s only irrevocable for first 3 months. If you want to keep it open longer than 3 gotta have an option contract.

Question 24

Rejection via Counteroffer

Answer 24

Is a rejection, while also creating a new offer. However a mere inquiry is not a counteroffer.

Question 25

Mirror Image Rule (Common Law)

Answer 25

Acceptance must mirror the terms of the offer. Any variation results in a counteroffer and thus rejection of the initial offer.

Question 26

Revival of an offer after rejection or lapse

Answer 26

Offeror can revive a terminated offer by language or conduct restating the offer or giving more time to decide.

Question 27

Bilateral Contract

Answer 27

Exchange promise for a promise. Once promises are exchanged, both parties are bound.

Question 28

Unilateral Contract

Answer 28

A promise in exchange for performance. The offeror is bound only when performance is completed, offeree is never bound.

Question 29

Revocation of Unilateral Contract Offer - Common Law

Answer 29

The offeror was free to revoke the unilateral offer up until the moment the offeree actually completed performance.

Question 30

Revocation of Unilateral Contract Offer - Modern Law

Answer 30

Once the offeree begins performance, an option contract is created. Offeree is still free to abandon performance or not do it, acceptance is still effective only upon completion. Mere preparations do not create an option contract.

Question 31

Acceptance Under Common Law

Answer 31

(1) Must mirror the terms of the offer.
(2) Must be communicated to the offeror. If not stipulated, offeree is free to use any reasonable means of transmission. Reasonable can be (a) means used by offeror, (b) customary means in similar transactions, or (c) means equivalent in speed and reliability to that used by offeror.

Question 32

Acceptance By Silence

Answer 32

Generally doesn’t constitute acceptance except: (1) offeree takes the benefit of offeror’s service with a reasonable opportunity to reject it and with reason to know compensation was expected; (2) if offeror gives offeree reason to understand that silence may be acceptance and offeree then intends silence to be acceptance; and (3) previous dealings or circumstances make it reasonable the offeree should notify the offeror he not not intend to accept.

Question 33

Mailbox Rule

Answer 33

Acceptance by mail is effective upon dispatch if properly posted.

Question 34

Consequences of Mailbox Rule

Answer 34

(1) Offeror may not revoke once acceptance has been dispatched.
(2) Once dispatched there’s a binding K and offeree can’t withdraw acceptance.
(3) Offeror is bound even if acceptance is lost in transit.

Question 35

Mailbox Rule and Option Contracts

Answer 35

Mailbox rule doesn’t apply and acceptance is only effective upon receipt.

Question 36

UCC: 3 Ways Acceptance by Seller of Buyer’s Offer

Answer 36

(1) Promise to ship goods in conformity with terms of the offer.
(2) Prompt or current shipment of the goods in conformity with terms of the offer.
(3) Seller can also accept by shipping non-conforming goods. Unless they ship non-conforming goods as an ‘accommodation’, then its a counteroffer.

Question 37

Dickered Terms

Answer 37

Negotiated terms. Transaction specific terms that identify the particular goods to be sold, quantities, and price.

Question 38

Boilerplate Terms

Answer 38

Standard terms that appear in the parties respective forms and are much less likely to match.

Question 39

Battle of the Forms

Answer 39

Unless acceptance is expressly made conditional on the assent to additional or different terms, the nonconforming acceptance will operate as an effective acceptance of the offer.

Question 40

Battle of the Forms - Consumer as Party

Answer 40

The additional or different terms are mere proposals for addition and they are not part of the contract unless the offeror expressly agrees to them.

Question 41

“Additional” Terms

Answer 41

Are those terms that address a new topic not addressed by the offer.

Question 42

“Different” Terms

Answer 42

Are those terms that purport to change an existing term of the offer.

Question 43

Effect of “Additional” Terms

Answer 43

They automatically become part of the K except:

(1) The offer expressly limits acceptance to its own terms.
(2) If the offeror objects to them within a reasonable time.
(3) If the terms would materially alter the K.

Question 44

Battle of the Forms - Material Alteration

Answer 44

Terms that would result in surprise or hardship if incorporated without the express awareness of the other party. E.g. warranty disclaimers, clauses that materially shorten the deadline for raising complaints, clauses that change usages of trade or past courses of dealing.

Question 45

Effect of “Different” Terms

Answer 45

Knockout Rule - The different terms of each communication dealing with the same topic are knocked out and omitted from the contract. Minority: the different terms of the acceptance will be treated as mere proposals for addition.

Question 46

Written Confirmations - Transactions not between Merchants

Answer 46

The terms in the written confirmation that are additional or different are mere proposals for addition.

Question 47

Written Confirmations - Between Merchants

Answer 47

Additional terms are automatically part of K unless the materially alter K or object in reasonable time. Different terms are mere proposals. If both parties send written proposals then knockout rule applies.

Question 48

Conditional Acceptance

Answer 48

Will not be effective to form a contract. Majority: Accept is condition when clear and conspicuous language that tracks the language of 2-207. Minority: Response must clearly communicate that offeree is unwilling ot proceed unless and until the offeror agrees to additional terms.