Contracts Offer & Acceptance

Question 1

What constitutes an offer?

Answer 1

A party’s communication must be:

1. An outward manifestation AND
   
   • oral, written or or via conduct
   • inward thoughts or subjective thoughts are irrelevant
2. That signals accapetance will conclude the deal

Question 2

What communications are not offers?

Answer 2

Preliminary Negotiations

Invitations for an Offers

Question 3

When does a sitiuation of multiple offerees occur?

Answer 3

• CAR
  
  • Commercial Advertisements
  • Auctioons
  • Reward Offers

Question 4

How are commercial advertisments treated?

Answer 4

Under the American Advertising Rule, ads, catalogs & price lists are treated as invitations to offers

EXCEPTION - Language that identifies who gets the limited supply of goods even if there is an excess of demand

• i.e. - “first come, first served”
• “first 10 customers only”

Question 5

How are auctions treated?

Answer 5

They are generally treated as invitation for an offer:

• the auctioneer is inviting offers
• the resoonding bids are the offers

EXCEPTION - When the auction is w/o reserve then the auctioneer is making an offer to sell to the highest bidder

Question 6

How are rewards treated?

Answer 6

Generally treated as offers b/c they’re communications that promise a bounty in exchange for the performance of a specialized task

Question 7

What are the different types of reward offers?

Answer 7

1. Self-limiting rewards
   
   • offers that indicate the task to be performed can only be performed once
   • i.e. - “Will pay $1K for find my dog.”
2. Open-field rewards
   
   • offers that indicate the tasks to be performed can potentially be performed by multiple parties
   • EXCEPTION - Languagein the offer that specifies a limitation on how many can accept the offer.

Question 8

What is the legal effect of an offer?

Answer 8

It creates the power of acceptance in the offeree

Question 9

How can an offer be terminated?

Answer 9

1. Lapse of Time
2. Death or Incapacity of either party
3. Revocation by the offeror
4. Rejection by the Offeree

Question 10

How is an offer terminated by lapse of time?

Answer 10

An offer terminates after:

• the time indicated in the offer
• if no indication then at a reasonable time

Question 11

What is the reasonable time determination for a lapsed offer?

Answer 11

Factors to consider:

• subject matter & market conditions
• degree of urgency & means of transmission

Question 12

What is the Face-to-Face Conversation Rule?

Answer 12

An offer generally lapses at the end of the conversation unless specified otherwise

Question 13

How is an offer terminated by the death or incapacity of either party?

Answer 13

Death:

• Dead men cannot make contracts
• it terminates the power of acceptance

Incapacity:

• if either becomes mentally incompetent & power of acceptance is terminated

Question 14

What is the American Rule to revoke an offer?

Answer 14

An offeror may revoke an offer at any time and for any reason so long as two requirements are met:

1. Must be revoked before the offer is accepted AND
2. The revocation must be effectively communicated to the offeree

Question 15

How is a revocation of an offer effectively communicated?

Answer 15

Directly

• When the offeror directly communicate his intent to the offeree to withdraw the offer

Indirectly

1. Offeror takes some action inconsistent w/the intent to go through with the offer AND
2. Offereelearns of such action from a reliable source

Question 16

How do you revoke an offer made to multiple offerees?

Answer 16

Apply the functional equivalent rule in which the offeror revokes by communicating the revocation in a functionally equivalent manner in which the offer was made

This terminates the power of acceptance even if the offeree is unaware of the revocation

Question 17

In what way can you prevent revocation of an offer?

Answer 17

1. Under the common law option contract
2. Under the UCC firm offer

Question 18

What is an option contract?

Question 19

What elements are neede to prevent revocation of an offer under the common law option contract?

Answer 19

1. An underlying offer
2. A subsidary promise to keep the offer open
   
   • “sell by” date may not a subsidary promise to keep offer open but just a sell by date
3. Some valid mechanism for enforcing the subsidary promise
   
   • i.e. - consideration

Question 20

What are some issues with option contracts?

Answer 20

• Signed writing with false recital of consideration
  
  • Majority rule is that it is rebuttal
  • Minority rule will enforce the option contract even if recital for (consideration) the option is false
• Promissory Estoppel
  
  • courts will sometimes enforce a subsidary promise to keep the offer open if there is detrimental reliance

Question 21

What is the special rule for construction contracts?

Question 22

What is a firm offer?

Question 23

In what way do you prevent revocation of an offer under the UCC firm offer?

Answer 23

An irrevocable offer made by a merchant to buy/sell goods that meets the following conditions:

1. The offer to buy/sell is made by a merchant
2. the offer is made in writing signed by the merchant AND
3. The offer expressly by its terms state that it will be held open

Question 24

How long does a firm offer stay open?

Answer 24

For the time stated in the offer or for a reasonable time

The UCC shelf life is no more than 3 months

Question 25

What is the 3 Month Ruel for Firm Offers?

Answer 25

If an offer is more than 3 months, it is only irrevocable for those first 3 months If longer than 3 months, need consideration to be binding as an option contract under common law

Question 26

How does an offeree reject an offer?

Answer 26

1. Outright rejection 2. Counteroffer * this in essences rejects the current offer and the offeree now becomes the offeror making a new offer * NOTE - mere inquires do not constitute a counteroffer and does not terminate the offer 3. Rejection via non-conforming acceptance

Question 27

How can an offer be revived?

Answer 27

After Rejection or Lapse, an offer c-an be revived by: 1. offeror can via language or conduct restating the offer OR 2. giving more time to decide

Question 28

What is a unilateral contract?

Answer 28

A promise in exchange for performance

Question 29

When is an offeror bound in a unilateral contract?

Answer 29

The offeror is bound once the offeree's performance is completed. (the offeree is never bound)

Question 30

What is a bilateral contract?

Answer 30

It is a promise for in exchange for a promise (Once a promise is exchanged, both are bound)

Question 31

What are examples of unilateral contracts?

Answer 31

* reward offers * REBA - real estate brokage agreements

Question 32

How to revoke an offer under a unilateral contract?

Answer 32

Common law - revoke up until the moment the before the offereee actually completes performance Modern rule - once the offeree begins performance, an option contract is created thus cannot revoke, give time to finish

Question 33

What is the difference between beginning performance & mere preparation?

Question 34

How is an offer accepted under the common law?

Answer 34

Effective acceptance requires: 1. Mirror Image Rule AND 2. Acceptance must be communicated to the offeror

Question 35

How is acceptance communicated to the offeror?

Answer 35

by the means stipulated or by any reasonable means of transmission if not stipulated

Question 36

What means of transmission are reasonable for acceptance?

Answer 36

Unless otherwise indicated: 1. the same means udes by the offeror 2. means customarily used in similar transactions 3. means that is equivalent to the speed & reliability to the means used by the offeror

Question 37

What are the exceptions that acceptance be communicated?

Answer 37

1. Silence 2. Unilateral contract 3. Mailbox Rule

Question 38

What is the rule for acceptance by silence?

Answer 38

Default - silene does not constitute acceptance EXCEPT: 1. When offeree takes the benefit of the offeror's services with * resaonable opportunity to reject * reason to know compensation was expected 2. When the offeror have given the offeree reason to believe that acceptance may be communicated by silence * the offeree's silence will constitute acceptance if they intend as such 3. When b/c of previous dealings/circumstances it is reasonable to believe that the offeree should notify the offeror if he does not intend to accept

Question 39

What is the Mailbox Rule for acceptance?

Answer 39

Common Law - acceptance is made upon dispatch so long as properly posted * applies only to acceptance * offeror cannot revoke once acceptance has been dispatched * dispatch creates binding contract * rule applies unless the offer states otherwise

Question 40

What happens when parties simultaneously dispatch offers?

Answer 40

Meeting of the minds does not count. Offers have to be received in order to create power of acceptance

Question 41

Does the Milbox Rule apply to option contracts?

Answer 41

Majority rule - No does not apply & acceptance is only effective upon receipt