Contracts: The Process of Agreement Flashcards
How do we evaluate assent?
Assent is based on objectivity. i.e. To ask whether a party A agreed is really to ask whether the other party would reasonably have concluded that A agreed.
Rule: Regardless of parties intentions, if objectively it seems like they had intent to contract there will be a contract.
Lucy v. Zehmer
Facts: Plaintiff offered to buy land from defendant. Defendant responded, “You can’t come up with the $50,000.” Plaintiff said he could and they subsequently wrote and signed the agreement on a napkin. Defendant then refused to sell the land claiming he was only joking.
Why is objective intent the preferred way to evaluate assent? Shouldn’t intent which is the parties inner thoughts be measured subjectively?
Objective intent is preferred to avoid parties having to specify their intent at the time of formation because it comes at greater transaction costs.
Can a contract been formed with implied acceptance?
Wrench, LLC v. Taco Bell Corp.
Facts: Plaintiff gave defendants a marketing idea. Defendant then used that idea and didn’t pay plaintiffs claiming it was someone else who gave them the idea. Court says that when you pitch a marketing idea to a company it is implied that if they use it they intend to contract
Rule: Contract can be implied without intent when the actions of the parties imply intent.
Who has the power after an offer was made?
The offeror is “master of her offer.” She may specify the mode of acceptance. However, once the offer is made the offer creates a power of acceptance for the offeree.
How do we distinguish offers from invitations to offer?
It will depend on the circumstances surrounding the offer. Advertisements are ordinarily treated as invitations to offer. However, there will be times when they will be treated as offers.
Lonergan v. Scolnick
Facts: Plaintiff inquires about Defendant’s land. Defendant sends a form letter stating his lowest price. Plaintiff suggested an escrow bank. Defendant approved the bank but told the plaintiff to hurry because he has other buyers. Court ruled no offer.
Rule: Context clues may distinguish offers (which can be accepted) and invitations to offer (which cannot).
An offer is only valid if…
if the terms of the proposed contract are sufficiently definite such that the person to whom it is directed may reasonably conclude that an offer is intended.
Lefkowitz v. Great Minneapolis Surplus Store
Facts: Plaintiff responds to an ad offering to sell a womens coat worth “up to $100” for $1. Defendant refused to sell claiming the ad was only for women. Court rules that the first offer was not specific enough either way, so no offer. New ad offers to sell a new coat worth $139 for $1, first come first serve. Plaintiff comes to buy and defendant refuses to sell because the ad was meant only for women. Court rules there was an offer
Rule (1): An advertisement with definite terms will be considered an offer.
Rule (2): When one has personal knowledge that a store believed to be qualifying its offer in some way that a reasonable person would not realize, will not preclude one from accepting the offer without the qualifications.
Can an offer be revoked once it has been offered?
Yes, so long as there has not been acceptance. in the absence of consideration or invited reliance on the part of the offeree, offers are usually revocable by the offeror
Will an offer made in jest constitute a valid offer?
If objectively perceived as a joke, it will not be considered an offer.
Leonard v. Pepsico, Inc.
Facts: Defendant put an advertisement that was clearly intended to be humorous offering to sell a military jet for 7,500,000 pepsi points. The ad directed the viewer to a catalog in which the jet was not present. Plaintiff got the points and sued when Defendant refused to give him a jet.
Rule (1): An offer that objectively was made in jest is not an offer. But see Lucy v. Zehmer
Rule (2): An advertisement not limiting the amount of product available, or that directs the viewer to a catalog is not sufficiently definite to qualify as an offer
If one party suggests a counter offer, who is the offeror and offeree?
A counteroffer, like rejection of an offer, terminates the outstanding offer, i.e., offeree no longer has power of acceptance. A counteroffer is a new offer and is pending acceptance from the other party.
Minneapolis & St. Louis Railway Co. v. Columbus Rolling-Mill Co.
Facts: Plaintiff requested a quote from defendant. Defendant gave a quote and plaintiff made a counter offer for fewer items than the quote. Defendant rejected and the plaintiff wished to accept the first offer but defendant rejected it.
Rule: Offers are automatically revoked once a counter offer is made.
If A made an offer to B and B accepted on condition it is gold and not silver, has B accepted the contract?
No.
Mirror Image Rule: You can accept only the offer that was made. Changing material terms and/or insisting on new terms in your acceptance may amount to a counteroffer, which will terminate your right of acceptance with respect to the last offer.
What is the difference between a unilateral and bilateral contract?
Most offers are “bilateral” meaning the are accepted by either promise or performance. “Unilateral contracts” are offers which invite acceptance by performance and not promise. In rare cases, silence or other conduct may be treated as acceptance.
Where an offer invites acceptance only through promise (and not through some act), acceptance is usually not effective until offeror receives notice.
Hendricks v. Behee
Facts: Plaintiff told agent to accept defendants offer. Agent did not yet give notice to the defendant when he terminated the offer
Rule: An offeror can terminate the offer so long as he did not receive notice of acceptance.
Where an offer invites acceptance through performance, the offer will be construed as open for a reasonable time.
Ever-Tite Roofing Corp. v. Green
Facts: Defendant contracted for the plaintiff to fix his roof stipulating acceptance by performance. Several days later, defendant came to plaintiff’s house to find the work done. Court found the defendant breached a contract.
Rule (1): Where an offer invites acceptance through performance, the offer will be construed as open for a reasonable time unless the offeror revokes.
Rule (2): Where an offer invites acceptance through performance notice is not generally necessary.
When is a bilateral offer accepted?
Where acceptance may be through either performance or promise, the beginning of performance constitutes acceptance or notice of acceptance.
Can an automated message serve as an acceptance?
Corinthian Pharmaceutical Sys. v. Lederle Laboratories
Facts: Plaintiff heard that defendant was about to raise their prices and put in a large order just before the price was going to go up. Defendants automated machine sent a receipt to plaintiff. Defendant then said no acceptance but as a courtesy they would give the plaintiff a small percentage of their order at the old price but if they’d need to pay to new price to get the rest. The court ruled no acceptance of the old price offer.
Rule 1: Generally, automated machines cannot accept an offer when acceptance requires judgement. But see Cairo, Inc. v. Crossmedia Services, Inc.
Rule 2: Shipment of non-conforming goods can be acceptance (See UCC §2-206) unless it is specified otherwise (as a courtesy).
