Contracts II--Offer & Acceptance

Question 1

What is mutual assent?

Answer 1

Mutual assent is an agreement on the same bargain at the same time– a meeting of the minds. Generally, the process by which parties reach a meeting of the minds is negotiation, where one party makes an offer and the other accepts it. An actual ive meeting of the minds is not necessary– courts use and objective measure, by which each party is bound to the apparent intention that they manifested to the other.

Contracts II–Offer & Acceptance
Contracts > Mutual Assent– Offer and Acceptance > In General (II. A.)

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Question 2

What is an offer?

Answer 2

An offer creates a power of acceptance in the offeree and a corresponding liability on the part of the offeror. A communication is an offer if it creates a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.

Contracts II–Offer & Acceptance
Contracts > Mutual Assent– Offer and Acceptance > The Offer (II. B.)

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Question 3

What three questions should you ask when evaluating if a communication is an offer?

Answer 3

1. Was there an expression of a promise, undertaking, or commitment to enter into a contract? 2. Were there certainty and definiteness in the essential terms? 3. Was there communication of the above to the offeree?

Contracts II–Offer & Acceptance
Contracts > Mutual Assent– Offer and Acceptance > The Offer (II. B.)

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Question 4

What makes an offer an offer, rather than a mere invitation to begin preliminary negotiations?

Answer 4

A promise, undertaking, or commitment– that is, an intent to enter into a contract.

Contracts II–Offer & Acceptance
Contracts > Mutual Assent– Offer and Acceptance > The Offer > Promise, Undertaking, or Commitment (II. B. 1.)

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Question 5

Why is the prior practice and relationship of the parties relevant when determining whether an offer was made?

Answer 5

The prior practice and relationship of the parties can help a court distignuish between a communication being an offer or a preliminary negotiation.

Contracts II–Offer & Acceptance
Contracts > Mutual Assent– Offer and Acceptance > The Offer > Promise, Undertaking, or Commitment > Prior Practice and Relationship of the Parties (II. B. 1. c.)

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Question 6

How do courts look at the circumstances surrounding the language of a communication to determine whether an offer exists?

Answer 6

Courts look at whether the language was reasonably understood in the context it was given. For example, where the statement is made in jest, anger, or by way of bragging, and the statement is reasonably understood in this context, it will have no legal effect. However, where the statement is ively intended to be in jest but reasonably understood by the hearer to have been made seriously, the statement is an offer because it is interpreted objectively (i.e., according to a reasonable person’s expectations).

Contracts II–Offer & Acceptance
Contracts > Mutual Assent– Offer and Acceptance > The Offer > Promise, Undertaking, or Commitment > Surrounding Circumstances (II. B. 1. b.)

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Question 7

How is language relevant in determining whether a communication is an offer?

Answer 7

Technical language, such as ‘I promise’ or ‘I offer’ is useful, but not required to show that an offer was made. In contrast, certain language such as ‘I quote,’ ‘I am asking $30 for,’ or ‘I would consider selling for’ indicates a mere invitation to deal. (NOTE: there is no mechanical formula to assessing the language used in an offer. For example, price quotes are typically considered an invitation to deal, but they can be offers if made in response to an inquiry that contains a quantity term. Context matters.)

Contracts II–Offer & Acceptance
Contracts > Mutual Assent– Offer and Acceptance > The Offer > Promise, Undertaking, or Commitment > Language (II. B. 1. a.)

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Question 8

Method of Communication

Use of Broad Communications Media of an Offer

Answer 8

The broader the communicating media (e.g. publications), the more likely a court will view the communication as merely a solicitation of an offer. (Note: There is an exception as to reward offers)

Contracts II–Offer & Acceptance
Contracts>Mutual Assent>The Offer

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Question 9

Advertisements, Catalogs, Circular Letters as a Method of Communication for an Invitation for an Offer

Answer 9

Advertisements, catalogs, circular letters, etc. that contain price quotations are usually mere invitations for offers. They are considered announcements of prices at which the seller is willing to receive offers. Typically, these are not considered offers because they are indefinite as to quantity and other express terms, and they are addressed to the general public.

Contracts II–Offer & Acceptance
Contracts>Mutual Assent>The Offer

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Question 10

When are Advertisements Offers?

Answer 10

In certain situations, courts will consider advertisements as offers if:

• the language of the advertisement can be construed as containing a promise;
• the terms are certain and definite; and
• the offeree(s) is clearly identified.

Note: price quotations also may be considered offers if given in response to an inquiry.

Contracts II–Offer & Acceptance
Contracts>Mutual Assent>The Offer

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Question 11

How does a court determine whether a proposal qualifies as an offer in a specific industry?

Answer 11

The courts will also look to generally accepted custom in the industry in determining whether the proposal qualifies as an offer.

Contracts II–Offer & Acceptance
Contracts>Mutual Assent>The Offer

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Question 12

Definite and Certain Terms Required for an Offer

Answer 12

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 would be capable of being enforced.

Typically, the following are important:

• the identity of the offeree;
• the matter; and
• the price to be paid.

However, a promise generally will be enforceable even if it does not spell out every material term, as long as it contains some objective standard for the court to use to supply the missing terms.

Contracts II–Offer & Acceptance
Contracts>Mutual Assent>The Offer

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Question 13

Definite and Certain Terms Required for an Offer: Identification of the Offeree

Answer 13

To be considered an offer, a statement must sufficiently identify the offeree or a class to which the offeree belongs to justify the inference that the offeror intended to create a power of acceptance.

Contracts II–Offer & Acceptance
Contracts>Mutual Assent>The Offer

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Question 14

What terms are required for the sale of land contracts? What are the requirements for the sale of goods?

Answer 14

a) Real Estate Transactions - Land and Price Terms Required
An offer involving realty must identify the land and price terms. The land must be identified with some particularity but a deed description is not required (E.G. ‘my house in Ereworm’ is sufficient if the seller has only one house in Erewhon). Must courts will not supply a missing price term.

b) Sale of Goods - Quantity Term Required
In a contract for the sale of goods, the Quantity being offered must be certain or capable of being of being made certain.

Contracts II–Offer & Acceptance
Contracts>Mutual Assent - Offer and Acceptance (B.2.b.1.)

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Question 15

Quantity Cannot Be Unreasonably Disproportionate

Answer 15

It is assumed that the parties will act in good faith; hence, there may not be a tender of or a demand for a quantity unreasonably disproportionate to (i) any stated estimate, or in the absence of a stated estimate (ii) any normal or otherwise comparable prior output or requirements.

Contracts II–Offer & Acceptance
Contracts>Mutual Assent - Offer and Acceptance (B.2.b.1.b.1.a)

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Question 16

Requirements’ and ‘Output’ Contracts

Answer 16

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 the4 buyer. In an output contract, a seller promises to sell to a certain buyer all of the goods the seller produces, and the buyer agrees to buy that amount from the seller. Although no specific quantity is mentioned in offers to make these contracts, the offers are sufficiently definite because the quantity is capable of being made certain by reference to objective, intrinsic, facts (i.e., the buyer’s actual requirements or the seller’s actual output).

Contracts II–Offer & Acceptance
Contracts>Mutual Assent - Offer and Acceptance (B.2.b.1.b.1)

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Question 17

Definiteness of Matter

Answer 17

The of the deal must be certain, because a court can enforce a promise only if it can tell with reasonable accuracy what a promise is.

Contracts II–Offer & Acceptance
Contracts>Mutual Assent - Offer and Acceptance (B.2.b)

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Question 18

Are requirements and output contracts enforceable if the promisor is a new business?

Answer 18

Yes, to avoid courts saying the agreement is illusory or the damages are too speculative, Article 2 of the UCC avoids this problem by reading a ‘good faith’ agreement into the contract.

i.e., the promisor must operate his plant or conduct his business in good faith and according to commercial standards of fair dealing in the trade so that his output or requirements will approximate a reasonably foreseeable figure.

Contracts II–Offer & Acceptance
Contracts>Terms of Offers (II.B.2.b.1.b.1.b)

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Question 19

Are requirements and output contracts enforceable if the offer allows choice of items?

Answer 19

Yes, an offer allowing a person to specify an item within a reasonable range of choices may be sufficiently definite to result in a contract if accepted.

Example: Seller states to Buyer: ‘I will sell you any of these motorcycles for $1,000. Pick one.’ These words will result in a contract when Buyer’s choice is made and manifested.

Contracts II–Offer & Acceptance
Contracts>Terms of Offers (II.B.2.b.1.b.2)

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Question 20

What are the requirements for offers involving employment and other services?

Answer 20

In contracts for employment, if the duration of the employment 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.

Contracts II–Offer & Acceptance
Contracts>Terms of Offers (II.B.2.b.1.c)

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Question 21

Does failure to state the price in a contract prevent formation?

Answer 21

Except in contracts for real property, the failure to state the price does not prevent the formation of a contract if the parties intended to form a contract without the price being settled. For example, if parties enter into a contract for services and the price is not included in the offer, a court might imply the service provider’s usual price for the services, the normal price for such services in the area, etc.

Contracts II–Offer & Acceptance
Contracts>Terms of Offers (II.B.2.b.2.a)

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Question 22

Can contracts be formed if some terms are missing?

Answer 22

The fact that one or more terms are left open does not prevent the formation of a contract if it appears 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 jurisdictions and Article 2 hold that the court can supply reasonable terms for those that are missing. [See UCC §§2-204, 2-305] These terms will be supplied, however, only where they are consistent with the parties’ intent as otherwise expressed. Note that the more terms the parties leave open, the less likely it is that they intended to enter into a binding agreement.

Contracts II–Offer & Acceptance
Contracts>Terms of Offers (II.B.2.b.2)

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Question 23

When will price be considered reasonable at the time of delivery?

Answer 23

(i) Nothing is said as to price;
(ii) The price is left to be agreed by the parties and they fail to agree; or
(iii) The price is to be fixed by some external factor or third party and it is not so set.

[UCC §2-305(1)]

Contracts II–Offer & Acceptance
Contracts>Terms of Offers(II.B.2.b.2.a.1)

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Question 24

How To Reject An Installment contract?

Answer 24

The right to reject when a contract is an installment contract (i.e., when there is to be more than one delivery)
is much more limited than in a single delivery contract situa- tion.
Installment contracts follow a rule akin to the common law substantial perfor- mance doctrine.
In an installment contract situation, an installment can be rejected only if the nonconformity
substantially impairs the value of that installment and cannot be cured (see below).
In addition, the whole contract is breached only if the nonconformity substantially impairs the value of the entire contract.

Contracts II–Offer & Acceptance
Contracts: Exceptions to the Perfect Tender Rule (Installment Contracts)

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Question 25

What other requirements to revoke acceptance?

Answer 25

Revocation of acceptance must occur:
1) Within a reasonable time after the buyer discovers or should have discovered the defects; and

2) Before any substantial change in the goods occurs that is not caused by a defect present at
the time the seller relinquished possession. [UCC §2-608(2)]

Contracts II–Offer & Acceptance
Contracts: Other Requirements for Revocation of Acceptance

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Question 26

When can acceptance be revoked?

Answer 26

The buyer may revoke her acceptance of goods if the goods have a defect that
substantially impairs their value to her and:
(i) She accepted them on the reasonable belief that the defect
would be cured and it has not been; or
(ii) She accepted them because of the difficulty of discovering defects
or because of the seller’s assurance that the goods conformed to the contract.[UCC §2-608]

Contracts II–Offer & Acceptance
Contracts: When Acceptance May Be Revoked

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Question 27

What happens when a buyer resells goods?

Answer 27

If the buyer does resell rejected goods,
she is entitled to have her expenses of selling and any
commission ordinarily paid in the trade or, if there is none, a reasonable
commis- sion not exceeding 10%. [UCC §2-603(2)]

Contracts II–Offer & Acceptance
Contracts: When Buyer Resells Goods

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Question 28

When can buyer revoke?

Answer 28

Once goods are accepted, the buyer’s power to reject the goods generally
is terminated and the buyer is obligated to pay the price less any damages
resulting from the seller’s breach. However, under limited situations,
a buyer may revoke an acceptance already made.
A proper revocation of acceptance has the effect of a rejection.

Contracts II–Offer & Acceptance
Contracts: When Buyer Resells Goods

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Question 29

Under common law and the UCC, where a material term is vague or ambiguous it is not an offer, and the presumption that the parties’ intent was to include a reasonable term goes to supply missing terms. However, the presumption cannot be made if the parties have…..

Answer 29

The presumption cannot be made if the parties have included a term that makes the contract too vague to be enforced. The problem then created is that the parties have manifested an intent that cannot be determined. (e.g. an agreement to purchase a car for ‘$5,000 or less’ is too vague to be enforced.

Contracts II–Offer & Acceptance
Contracts > Distinguish–Vague Term (II.B.2.b.3))

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Question 30

Under Article 2, a contract will be formed even if the parties agree that one of the parties will fix the price in the future, so long as the party to whom the contract gives the right to fix the price _______?

Answer 30

The party to whom the contract gives the right to fix the price must act in good faith.

Contracts II–Offer & Acceptance
Contracts > missing terms&raquo_space; price fixed by party under Article 2 (II.B.2.b.2).a.2)

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Question 31

If an agreement (i.e. underlying contract) does not specify the time in which an act is to be performed, then the law implied that it is to be performed….?

Answer 31

The law implies that it is to be performed within a reasonable time.

Contracts II–Offer & Acceptance
Contracts > missing terms&raquo_space;time (II.B.2.b.2).b)

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Question 32

Even if an offer lacks certainty, this problem can be cured if there is some way in which the offer is being made certain, by looking primarily at which aspect of the transaction?

Answer 32

The contract, as distinguished from the offer itself, must be definite and certain it its term. Even if the offer lacks certainty, the problem can be cured if there is some way in which the offer is capable of being made certain–e.g. by part performance or acceptance.

Contracts II–Offer & Acceptance
Contracts&raquo_space; focus on contract (II.B.2.b.3).c))

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Question 33

Certain circumstances can exist so that an offer which allows the offeree to specify an item within a range of choices may be sufficiently definite to result in a contract. When such uncertainty results because the offeree is given a choice of alternative performances, when does the offer become definite?

Answer 33

If uncertainty results because the offeree is given a choice of alternative performances, the offer becomes definite when the offeree communicates his or her choice. (e.g. Seller says to Buyer: ‘I will sell you any of these boats for $20,000. Pick one.’ These words will result in a contract when the Buyer chooses a boat and manifests that choice.)

Contracts II–Offer & Acceptance
Contracts&raquo_space; uncertainty cured by acceptance (II.B.2.b.3).b))

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Question 34

Where the parties have included a term that makes the contract too vague to be enforced on its face, what is one way this vagueness can be cured by the parties?

Answer 34

Where part performance supplies the needed clarification of the terms of the contract, it can be used to cure vagueness.

Contracts II–Offer & Acceptance
Contracts&raquo_space; vagueness cured by part performance (II.B.2.b.3).a))

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Question 35

What is required in order for the power to accept to exist?

Answer 35

The offeree must have knowledge of the offer in order to be able to accept, so the offer must have been communicated to them.

Contracts II–Offer & Acceptance
contracts > communication to offeree (II. B. 3)

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Question 36

What are the methods of revocation?

Answer 36

Revocation can occur via direct communication (publication) and indirect communication.

EXAMPLE: seller publishes an offer in the Dallas Telegram. Seller may revoke that offer by publication in the Dallas Telegram (or comparable means), but not through an attempted revocation on the local news station [direct revocation by publication].

EXAMPLE: Before trying to accept seller’s offer to sell their farm, buyer hears from a reliable 3rd party that seller has sold the farm to their cousin. Seller has revoked their offer. [revocation by indirect communication]

Contracts II–Offer & Acceptance
contracts > methods of communication (II. C. 1. a. 1)

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Question 37

What is ‘revocation’?

Answer 37

Revocation is the retraction of an offer by the offeror (person making the offer) and it terminates the offeree’s power of acceptance if it’s communicated to them before they accept.

Contracts II–Offer & Acceptance
contracts > termination by offeror - revocation (II. C. 1. a)

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Question 38

What is the effect of termination?

Answer 38

Termination ends the power to accept an offer. Mutual assent, necessary for contract formation, cannot be met when termination occurs before effective acceptance.

In an analysis, you must establish whether and by what method an offer has been terminated.

Contracts II–Offer & Acceptance
contracts > termination of offer (II. C)

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Question 39

When can/cannot the court supply a reasonable term that was to be agreed on at a later date?

Answer 39

UCC Article 2 allows a court to supply a reasonable price term if other evidence shows that the parties intended to contract. If an undefined term is a material term, the offer is too uncertain. Courts will not supply a reasonable term because the parties have provided otherwise.

Contracts II–Offer & Acceptance
contracts > terms to be agreed on later (II. B. 2. b. 4)

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Question 40

What is a revocation by direct communication?

Answer 40

revocation directly communicated to the offeree by the offeror terminates the offer

Contracts II–Offer & Acceptance
Contracts > Termination of Offer

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Question 41

What is revocation by publication?

Answer 41

offers made by publication may be terminated by publication of revocation through comparable means

Contracts II–Offer & Acceptance
Contracts > Termination of Offer

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Question 42

What is revocation by indirect communication?

Answer 42

the offer may be effectively terminated if the offeree indirectly receives: (i) correct information, (ii) from a reliable source, (iii) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer

Contracts II–Offer & Acceptance
Contracts > Termination of Offer

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Question 43

When is a revocation of an offer effective?

Answer 43

Generally, a revocation of an offer is effective when received by the offeree. Where the revocation is by publication, it is effective when published

Contracts II–Offer & Acceptance
Contracts > Termination of Offer

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Question 44

When is a revocation to an offer communication considered received?

Answer 44

Common law: a written communication is considered received when it comes into the possession of the person addressed (or of someone authorized by him to receive it) or when it is deposited in Somme place authorized as the police for this or similar communications be deposited; the communication need not be read by the recipient to be effective; Under the UCC, a person receives notice when (i) it comes to his attention, or (ii) it is delivered to at a place of business through which the contract was made or another ovation held out by that person as the place for receipt of such communications. An organization receives a communication at the time it is brought or should have been brought to the attention of the individual conduct in the transaction.

Contracts II–Offer & Acceptance
Contracts > Termination of Offer

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Question 45

What are limitations on an offeror’ s power to revoke?

Answer 45

Offers can be revoked at will by the offeror even if he has promised not to revoke for a certain period, except under certain situations where the offeror’s power to terminate the offer is limited

Contracts II–Offer & Acceptance
Contracts > Termination of Offer

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Question 46

When is Acceptance Timely under option contracts?

Answer 46

An offer must be accepted within the time specified or, if no time is specified, within a reasonable time.
Often, an option contract specifies that the offer must be accepted within the option period; i.e., the offer terminates when the option expires.
In the absence of specific language stating when the offer terminates, the power of acceptance arguably survives the option period, but courts often treat the option period as the offer period so that at the end of that time, the optiion expires and the offer lapses.

Contracts II–Offer & Acceptance
Contracts>Limitations on Offeror’s Power to Revoke (3.a.1)

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Question 47

What is an option contract?

Answer 47

An option is a distinct contract in which the offeroree gives consideration for a promise by the offeror not to revoke an outstanding offer.

Contracts II–Offer & Acceptance
Contracts>Limitations on Offeror’s Power to Revoke (3.a)

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Question 48

What are the terms of a form supplied by the offeree?

Answer 48

If the term assuring that the offer will be held open is on a form supplied by the offeree, it must be separately signed by the offeror. [UCC 2-205]

Contracts II–Offer & Acceptance
Contracts>Limitations on Offeror’s Power to Revoke (3.b.1)

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Question 49

Under Article 2, what are the circumstances in which a promise to keep an offer open is enforceable even if no consideration has been paid to keep the offer open?

Answer 49

(i) If a merchant;
(ii) Offers to buy or sell goods in a signed writing; and
(iii) The writing gives assurances that it will be held open (e.g., ‘this offer will be held open for 10 days,’ ‘this offer is firm for 10 days,’ ‘I shall not revoke this offer for 10 days’);
(iv) The offer is not revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time (but in no event may such period exceed three months).

Contracts II–Offer & Acceptance
Contracts>Limitations on Offeror’s Power to Revoke (3.b)

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Question 50

What is detrimental reliance?

Answer 50

Where the offeror could reasonably expect that the offeree would rely to her detriment in the offer, and the offeree does so rely, the offer will be held irrevocable as a n option contract for a reasonable length of time.
The case law indicates that this may be limited to those situations in which the offeror would reasonably contemplate reliance by the offeree in using the offer before it is accepted.

Contracts 2–Offer & Acceptance
Contracts>Limitations on Offeror’s Power to Revoke (3.c)

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Question 51

When does an offer for a true unilateral contract become irrevocable?

Answer 51

Good faith is honesty in fact and the observance of reasonable commercial standards. The UCC imposes an obligation of good faith on every contract within the UCC.

Contracts 2–Offer & Acceptance
Contracts>Limitations on Offeror’s Power to Revoke (3.d)

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Question 52

Can an offer be revoked by the offeror when the offeree is preparing to perform, but has not actually begun performance?

Answer 52

Yes, as long as the offeree has not incurred detrimental reliance in the course of preparation. If the offeree’s preparations do constitute such a degree of reliance, the offeror will be bound to their promise. At this point, a bilateral contract has not yet been formed, but the offeree has a reasonable amount of time to complete performance, and the offer is irrevocable during this time. [R2K 45, 87, 90]

Contracts 2–Offer & Acceptance
Contracts>Termination of Offer (II.C)

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Question 53

Where cooperation is necessary for performance, can the offeror avoid being bound to their promise by refusing to cooperate when the offeree would otherwise commence performance?

Answer 53

No. When the cooperation of the offeror is required for performance in this manner (e.g. if the offeree must be let into a house in order to paint it), the withholding of such cooperation will be treated as the commencement of performance for the purposes of revocation. [R2K 45]

Contracts 2–Offer & Acceptance
Contracts>Termination of Offer (II.C)

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Question 54

When an offer is indifferent to manner of acceptance, can the offer be accepted by commencement of performance?

Answer 54

Generally speaking, yes. In these cases, a bilateral contract is formed and the offer can no longer be revoked. In some cases, the offeree must notify the offeror of the commencement of performance in order for the contract to be formed.

Contracts 2–Offer & Acceptance
Contracts>Termination of Offer (II.C)

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Question 55

What happens to an offer when the offeree explicitly states that they will not accept the offer?

Answer 55

This will constitute an express rejection, at which point the offer will terminate. [R2K 36]

Contracts 2–Offer & Acceptance
Contracts>Termination of Offer (II.C)

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Question 56

What does a Counteroffer serve as?

Answer 56

A counteroffer is an offer made by the offeree to the offeror that contains the same matter as the original offer but differs in its terms. A counteroffer serves as a rejection of the original offer as well as a new offer. [Restatement (Second) of Contracts §39]

Contracts 2–Offer & Acceptance
Contracts>Counteroffer as Rejection (II.C.1.b.1.b)

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Question 57

How does a mere inquiry differ from a counteroffer?

Answer 57

An inquiry will not terminate the offer when it is consistent with the idea that the offeree is still keeping the original proposal under consideration. The test is whether a reasonable person would believe that the original offer had been rejected.

Contracts 2–Offer & Acceptance
Contracts>Distinguish - Mere Inquiry (II.C.1.b.1.b.1)

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Question 58

When is a rejection effective?

Answer 58

A rejection is effective when received by the offeror.

Contracts 2–Offer & Acceptance
Contracts>Effective When Received (II.C.1.b.1.c)

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Question 59

In which situations does lapse in time risk the integrity of the contract?

Answer 59

Lapse of time matters when accepting within a reasonable time. Time is considered from the time the offer is received.

Contracts 2–Offer & Acceptance
Contracts>Lapse of Time (II.C.1.b.2)

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Question 60

Does a rejection of a counteroffer to an option terminate the offer?

Answer 60

Because an option is a contract to keep an offer open, a rejection 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. [Restatement (Second) of Contracts §37]

Contracts 2–Offer & Acceptance
Contracts>Rejection of Option (II.C.1.b.1.e)

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Question 61

Can an offer be revived after rejection?

Answer 61

If an offer is rejected, the offeror may restate the same offer and create a new power of acceptance. Some courts refer to this as the revival of the original offer. It is more precise to suggest that a new offer, although the same as the original offer, has been made.

Contracts 2–Offer & Acceptance
Contracts>Revival of Offer (II.C.1.b.1.d)

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Question 62

What happens if the offer provides

it will expire by a certain time?

Answer 62

That periof commences when the offer is received by the offeree. if the offer is delayed in
trasmission and this fact is or should have been apparent to the offeree, the offer
terminates at the time it would have expired had there been no delay.

Contracts 2–Offer & Acceptance
Contracts>look to when offer is received by offeree (II.C.b.2.b)

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Question 63

When must the offeree accept by?

Answer 63

The offeree must accept the offer with the time period specified or if no time period is specified, within a reasonable time. If she does not do so, then she will have allowed the offer to terminate.

Contracts 2–Offer & Acceptance
Contracts>must accept within specified or reasonable time (II.C.b.2.a)

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Question 64

What happens if either party dies
or is adjudicated insance prior to
acceptance?

Answer 64

The offer is terminated. It is not necessary that the death or insanity be communicated to
the other party. The offer will not terminate in this fashion if the rules limiting an offeror’s
power to terminate are applicable (e.g., an option contract).

Contracts 2–Offer & Acceptance
Contracts>termination by death or insanity of parties (II.C.2.a)

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Question 65

What happens when the

matter of the contract is destroyed?

Answer 65

Destruction of the matter terminates the offeree’s power of acceptance

Contracts 2–Offer & Acceptance
Contracts>termination by destruction of matter (II.C.2.b)

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Question 66

What happens when the
matter of the contract becomes
illegal?

Answer 66

If the subejct matter of the contract becomes illegal, the offer will terminate.

Contracts 2–Offer & Acceptance
Contracts>termination by supervening legal prohibition of proposed
contract (II.C.2.c)

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Question 67

Exception to assignment of offeree’s power of acceptance

Answer 67

There is an exception allowing an offeree to assign their power of acceptance under an option contract, because the pwoer to accept is itself a contract right in these contracts, and contract rights are generally assignable.

Contracts 2–Offer & Acceptance
Contracts> Exception- option contracts (D.1.b.1)

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Question 68

What is knowledge of the offer?

Answer 68

The offeree must know of the offer in order to accept and this is true whether the offer is for a bilateral or unilateral contract.

Contracts 2–Offer & Acceptance
Contracts> Offeree must know of offer (D.2)

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Question 69

Assignment of offeree’s power of acceptance

Answer 69

Unline rights under an existing contract, the offeree’s power of acceptance cannot be assigned

Contracts 2–Offer & Acceptance
Contracts> Offeree’s power of acceptance cannot be assigned (D.1.b)

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Question 70

Who is an offeree?

Answer 70

Generally, only the person to whom an offer is addressed has the power of acceptance. This is true even when the offer does not require specific performance or special financial responsibility on the part of the offeree. Power of acceptance still applies when one is a member of a class to whom the offer was extended- if the offer is made to the general public, anyone can qualify as an offeree. If the offer requests performance from an unlimited amount of people, performance by anone knowing of the offer will cut off the power of every other person to accept, provided that the offeror desires one performace and there is no indication that he is will ing to pay more than once.

Contracts 2–Offer & Acceptance
Contracts> Party to whom offer is addressed or directed (D.1.a)

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Question 71

What is acceptance?

Answer 71

The manifestation of assent to the terms of an offer- through this, the offeree exercises the power given to them by hte offeror to create a contract.

Contracts 2–Offer & Acceptance
Contracts> The Acceptance (D)

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Question 72

What is proper acceptance for a Unitlateral Contract?

Answer 72

An offer to form a unilateral contract is not accepted until performance is completed. The beginning of performance may create an option so that the
offer is irrevocable. However, the offeree is not obligated to complete performance merely because he has begun performance, as only complete
performance constitutes an acceptance of the offer

Contracts 2–Offer & Acceptance
Contracts>Acceptacnce

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Question 73

Is notice required for a Unitlateral Contract?

Answer 73

Generally, the offeree is not required to give the offeror notice that he has begun the requested performance, but is required to notify the offeror within a reasonable time after performance has been completed.

Contracts 2–Offer & Acceptance
Contracts>Acceptacnce

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Question 74

What is proper acceptance for a Bilateral Contract?

Answer 74

unless an offer specifically provides that it may be accepted only through performance, it will be construed as an offer to enter into a bilateral contract and may be accepted either by a promise to perform or by the beginning of performance

Contracts 2–Offer & Acceptance
Contracts>Acceptacnce

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Question 75

Does the UCC require notice of acceptance?

Answer 75

when a contract is accepted by the beginning
of performance, if the offeree fails to notify the offeror of the acceptance (i.e., the beginning of performance rather than the completion of performance) within a reasonable time, the offeror may treat the offer as having lapsed before acceptance

Contracts 2–Offer & Acceptance
Contracts>Acceptacnce

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Question 76

Generally, acceptance of an offer to enter into a bilateral contract must be communicated to the offeror. What is the exception to this rule?

Answer 76

If an offer provides that acceptance need not be communicated, then no communication of the acceptance is required.

Contracts 2–Offer & Acceptance
Contracts > Acceptance > Bilateral Contracts (II.D.4.a.1)

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Question 77

When is silence considered an acceptance in a bilateral contract?

Answer 77

If the offeree silently takes the benefits, the court will usually find an acceptance. This is especially true if there are prior dealings between the parties, or trade practices known to both, create a commercially reasonable expectation by the offeror that silence represents an acceptance. In that case, the offeree is under a duty to notify the offeror if she does not intend to accept. (Restatement 2nd § 69)

Contracts 2–Offer & Acceptance
Contracts > Acceptance > Bilateral Contracts (II.D.4.a.2.a)

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Question 78

How can a bilateral contract be accepted?

Answer 78

A bilateral contract may be accepted through either (a) promise of performance or (b) beginning performance

Contracts 2–Offer & Acceptance
Contracts > Acceptance > Bilateral Contracts (II.D.4.a)

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Question 79

What’s the difference between unilateral and bilateral contracts when it comes to acceptance?

Answer 79

A unilateral contract may only be accepted by full performance

Contracts 2–Offer & Acceptance
Contracts > Acceptance > Bilateral Contracts (II.D.4.a)

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Question 80

True or false - the offeror is the master of her offer and may require an act to signify acceptance

Answer 80

True

Contracts 2–Offer & Acceptance
Contracts > Acceptance > Bilateral Contracts (II.D.4.b.1)

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Question 81

When is an offer to buy goods for current or prompt shipment construed as inviting acceptance?

Answer 81

Either by (a) a promise to ship or by (b) current or prompt shipment of conforming or nonconforming goods

Contracts 2–Offer & Acceptance
Contracts > Acceptance > Bilateral Contracts (II.D.4.b.2)

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Question 82

What is the method of acceptance for a bilateral contract?

Answer 82

An offer is construed as inviting acceptance in any reasonable manner and by any medium reasonable under the circumstances.

Contracts 2–Offer & Acceptance
Contracts > Acceptance > Bilateral Contracts (II.D.4.b)

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Question 83

Traditional contract law insisted on an absolute and unequivocal acceptance of each and every term of the offer (the “mirror image rule”).

Answer 83

Contracts - Section D(4)(d) p. 18

The Mirror Image Rule

Question 84

At common law, any different or additional terms in the acceptance make the response a rejection and counteroffer.

Answer 84

Contracts - Section D(4)(d) p. 18

Common Law Rejection and Counteroffer

Question 85

Statements by the offeree that make implicit terms explicit do not prevent acceptance. Example: The statement by an offeree, “I accept provided you convey market-
able title,” is a valid acceptance because the obligation to convey marketable title is implicit in the offer to sell.

Answer 85

Contracts - Section D(4)(d)(1) p. 18

Statements that Make Implicit Terms Explicit

Question 86

A “grumbling acceptance” is an acceptance accompanied by an expression of dissatisfaction and is an effective acceptance as long as it stops short of actual dissent.

Answer 86

Contracts - Section D(4)(d)(2) p. 18

“Grumbling Acceptance”

Question 87

A request for clarification does not necessarily amount to a rejection and counter-offer. Example: “The $1,000 price—that includes shipping, doesn’t it?” is not a
counteroffer.

Answer 87

Contracts - Section D(4)(d)(3) p. 18

Request for Clarification

Question 88

An offer 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.

Answer 88

Contracts - Section D(5) - p. 19

Offers to Buy Goods for Current or Prompt Shipment

Question 89

What is acceptance by shipment of nonconforming goods?

Answer 89

The shipment of nonconforming goods is both an acceptance creating a bilateral contract and a breach of the contract 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 accomodation goods and may reject them. If he does, the shipper is not in breach and may reclaim the accomodation goods, because her tender does not constitute an acceptance of the buyer’s original offer.

Contracts 2–Offer & Acceptance
Contracts>Acceptance Under Article 2 (II.D.5.a)

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Question 90

What is the effect of additional or different terms by an offeree in a definite and timely acceptance under Article 2?

Answer 90

Mirror image is not required under Article 2. Instead, the proposal of additional of different terms by the offeree in a definite and timely acceptance does not constitute a rejection and a counteroffer, bur rather is effective as an acceptance, unless the acceptance is expressly made conditional on assent to the additional or different terms.

Contracts 2–Offer & Acceptance
Contracts>Acceptance Under Article 2 (II.D.5.b.1)

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Question 91

In contracts involving a nonmerchant, what are additional or different terms considered to be?

Answer 91

In contracts involving a nonmerchant, terms of offer govern. If any party to the contract is not a merchant, additional or different terms are considered to be mere proposals to modify the contract that do not become part of the contract unless the offeror expressly agrees.

Contracts 2–Offer & Acceptance
Contracts>Acceptance Under Article 2 (II.D.5.b.2.a)

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Question 92

In contracts between merchants, what are additional terms considered to be?

Answer 92

If both parties to a contract are merchants, additional terms in the acceptance will be included in the contract unless:

i) They materially alter the original terms of the offer (e.g. change a party’s risk or the remedies available);*This is a fact question.
ii) The offer expressly limits acceptance to the terms of the offer; or
iii) The offeror has already objected to the particular terms, or objects within a reasonable time after notice of them is received

Contracts 2–Offer & Acceptance
Contracts>Acceptance Under Article 2 (II.D.5.b.2.b)

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Question 93

What Happens When the vMoment of Mutual Assent Uncertain?

Answer 93

In situations in which it cannot be determined with certainty which specific commu- nication was the offer and which the acceptance but the parties act as though there is a contract, the UCC considers this a binding contract even though the moment of its making is uncertain. [UCC §2-204(2)]

Contracts 2–Offer & Acceptance
Contracts → Acceptance Under Article 2 → (II.D.5.c)

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Question 94

Battle of the forms - Terms included.

May different terms included? What is the knockout rule?

Answer 94

There is a split of authority over whether terms in the acceptance that are different from (as opposed to in addition to) the terms in the offer will become part of the contract.

Many courts follow the ‘knockout rule,’ under which conflicting terms in the offer and acceptance are knocked out of the contract because each party is assumed to object to the inclusion of such terms in the contract.

• Under the knockout rule, gaps left by knocked-out terms are filled by the UCC (e.g., when the date of delivery differs in the offer and the acceptance, the UCC provides that delivery must be made within a reasonable time).
• UCC provides that delivery must be made within a reasonable time).
• Even though it is possible for a contract to be formed despite the fact that the acceptance has different terms, there must still be a meeting of the minds.
• Differences between the offer and acceptance as to price, quantity, or quality indicate there is no meeting of the minds, and thus there is no contract.

Contracts 2–Offer & Acceptance
Contracts → Battle of the Forms → (II.D.5.b.2.b.1)

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Question 95

What is a Merchant’s Confirmatory Memo?

Answer 95

A merchant’s memo confirming an oral agreement that contains different or additional terms is also to the battle of the forms provisions. [UCC §2-207(1)]

Contracts 2–Offer & Acceptance
Contracts → Battle of the Forms → (II.D.5.b.2.c)

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Question 96

Battle of the Forms.

What is the effect of Conditional Acceptance?

Answer 96

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 acceptance 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. The contract consists of all terms on which their writings agree, plus supplementary terms supplied by the UCC. [UCC §2-207(1), (3)].

Contracts 2–Offer & Acceptance
Contracts → Battle of the Forms → (II.D.5.b.3)

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Question 97

When is Acceptance Effective Under the Mailbox Rule?

Answer 97

Acceptance by mail or similar means creates a contract at the moment of dispatch, provided that the mail is properly addressed and stamped, unless:
(i) The offer stipulates that acceptance is not effective until received;
or (ii) An option contract is involved (an acceptance under an option contract is effective only upon receipt [Restatement (Second) of Contracts §63]).

Note: Because in most states a revocation is effective only upon receipt (see C.1.a.2), supra), under the mailbox rule if the offeree dispatches an acceptance before he receives a revoca- tion sent by the offeror, a contract is formed. This is true even though the acceptance is dispatched after the revocation is dispatched and received after the revocation is received.

Contracts 2–Offer & Acceptance
Contracts → Mutual Assent → Acceptance → Mailbox Rule(II.D.7)

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Question 98

What and When are Bilateral Contracts Formed by Performance?

Answer 98

Sometimes in business, a contract is not formed by the parties’ communications, either because: (i) the mirror image rule has not been satisfied; or (ii) in a contract for the sale of goods, the original offeror’s form contains a clause objecting in advance to any new or inconsistent term and the offeree sends a response with new or different terms that states it is not an acceptance unless the original offeror agrees to these terms. Clearly, no contract is formed at this point. But, as is sometimes the case, if the parties begin to perform as if they formed a contract, a contract is formed.

Rationale: At common law, the last communication sent to the party who performed is considered a counteroffer and the performance is considered acceptance of the counteroffer. In contracts for the sale of goods, Article 2 specifically provides that conduct by both parties that recognizes the existence of a contract is sufficient to establish the contract. [UCC §2-207(3)]

Contracts 2–Offer & Acceptance
Contracts → Mutual Assent → Bilateral Contracts (II.D.6)

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Question 99

What happens when an offeree sends a rejection, then an acceptance?

Answer 99

If the offeree sends a rejection and then sends an acceptance, the mailbox rule does not apply. Whichever one is received first is effective.

Contracts 2–Offer & Acceptance
Contracts> II Mutual Assent-Offer and Acceptance 7(a)(1)

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Question 100

When would a an acceptance transmitted by unauthorized means or improperly transmitted by authorized means still be effective?

Answer 100

When the acceptance is actually received by the offeror while the offer
is still in existence.

Contracts 2–Offer & Acceptance
Contracts> II Mutual Assent-Offer and Acceptance 7(b)

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Question 101

What happens when an offeree sends acceptance, then a rejection?

Answer 101

If the offeree sends the acceptance first, the mailbox rule applies; i.e., a contract is created upon dispatch of the acceptance. However, if the offeror received the rejection first and changed his position in reliance on it, the offeree will be estopped from enforcing the contract.

Contracts 2–Offer & Acceptance
Contracts> II Mutual Assent-Offer and Acceptance 7(a)(2)

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Question 102

What effect would an offeree sending both an acceptance and rejection have?

Answer 102

Because a rejection is effective only when received, an offeree sending both an acceptance and rejection could create problems for the offeror if the mailbox rule were applicable; e.g., a contract would be created when the acceptance was dispatched even if the offeror received the rejection and relied on it before receiving the acceptance.

Contracts 2–Offer & Acceptance
Contracts> II Mutual Assent-Offer and Acceptance 7(a)

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