K Formation: Offer and Acceptance

Question 1

Offer - what are the 2 requirements for a valid offer

Answer 1

1. an outward manifestation; and

2. the signal that acceptance will conclude the deal

Question 2

Multiple Offerees

Answer 2

when a question involves a party’s communication proposing a deal to two or more persons at the same time, a multiple offeree issue arises

Question 3

Three situations where multiple offerees can exist

Answer 3

Commercial ads, reward offers, auctions

Question 4

Commercial Ads - American advertising rule

Answer 4

ads addressed to mult recipients are generally treated as invitation for offers rather than offers

Question 5

reward offers

Answer 5

these name a price for a service, but do not specify and offeree. Generally, reward offers are treated as offers

Question 6

auctions

Answer 6

general rule is that the auctioneer is inviting offers, and the responsive bids are the offers. Exception: “without reserve”, then the auctioneer is making an offer to sell to the highest bidder.

Question 7

Legal effect of an offer

Answer 7

creates the power of acceptance in the offeree, which upon exercise created a binding k (assuming it is exercised before it is revoked)

Question 8

Four ways to reject an offer

Answer 8

lapse of time, death or incapacity of either party, revocation by offeror, rejection by offeree

Question 9

Lapse of time

Answer 9

power to accept lapses at time stated in the offer, otherwise after a reasonable time

Question 10

Lapse of Time - Face to Face Convo Rule

Answer 10

offer made by one person to another in a face to face convo is ordinarily deemed to remain open until the close of the convo

Question 11

Death or Incapacity of Either Party

Answer 11

Death of either party before acceptance destroy the power of acceptance. The same goes for an adjudication of incapacity.

Question 12

Revocation by offeror - Generally

Answer 12

free to revoke before actual acceptance so long the revocation:

1) occurs prior to acceptance and
2) is effectively communicated

Question 13

two methods of communicating revocation

Answer 13

1. Direct Revocation - offeror directly communicates it to offeree
2. Indirect Revocation - where offeree hears of inconsistent action taken by offeror from a 3rd party, revocation is valid if:
   a. offeror has taken definition action inconsistent with the intention to enter the proposed k
   b. offeree acquires reliable info of the offeror’s inconsistent action

Question 14

Revocation of an offer made to mult offerees

Answer 14

where offer is made in an ad in a newspaper or something like that, power to accept will be terminated when revocation is communicated in a way equivalent to the way the offer was first communicated

Question 15

Option Ks - three elements for it to be enforceable

Answer 15

1. offer
2. subsidiary promise to keep the offer open; and
3. some valid mechanism for securing enforcement of the subsidiary promise. (i.e. consideration)

Question 16

Subsidiary promise and promissory estoppel

Answer 16

courts will sometimes enforce a subsidiary promise to keep an doffer open where offeree has foreseeably and reasonably relied on the option, and injustice can only be avoided by enforcing the promise

Question 17

Special Rule for Construction Ks

Answer 17

Majority RUle: where a general contractor uses a particular subcontractor’s bid to formulate his own, an implied option k is created via promissory estoppel. It prevents the subcontractor from revoking despite the lack of both consideration and a subsidiary promise to keep it open.

Question 18

UCC Firm Offer Rule

Answer 18

Merchant can make a firm offer (an irrevocable offer) to either buy or sell goods without consideration so long as:

1. offer is made by a merchant
2. the offer is made in a writing signed by the merchant; and
3. the offer expressly states by its terms that it will be held open

Question 19

UCC Firm Offer Rule - Shelf Life of Irrevocability

Answer 19

under UCC, firm offers will only be irrevocable for three months, unless you opt to make a common law options contract.

Question 20

Rejection - three way to reject an offer

Answer 20

1. outright rejection
2. rejection via counteroffer
3. rejection via non-conforming acceptance

Question 21

Counteroffer

Answer 21

serves as both a rejection and an offer (thus giving the original offeror the power of acceptance as offeree). note, mere inquiry re willing to negotiate is not a counteroffer

Question 22

rejection via nonconforming acceptance (CL and UCC)

Answer 22

1. CL - mirror image rule requires acceptance to mirror the terms of the offer. Any variation results in a counteroffer and rejection of the initial offer.
2. UCC - rejects the CL and recognizes a binding K despite nonconforming acceptance in two sets of circumstances (shipment of nonconforming goods and battle of the forms…discussed later)

Question 23

Unilateral Ks

Answer 23

This is an offer that seeks performance in return. Under CL, offeror was free to revoke this k up until completion of performance. However, the modern rule says that once the offeree begins performance, an option k is created and the offeror may not revoke.

Question 24

Acceptance - 2 general requirements

Answer 24

1. under mirror image rule, acceptance must mirror the terms of the offer; and
2. the acceptance must be communicated to the offeror

Question 25

Communicating Acceptance

Answer 25

The maker is the master of the offer, so acceptance must be done in accordance with the offer. If the offer is silent, then through a reasonable means of transmission:

1. means used by the offeror
2. the means customarily used in similar circumstances
3. means of communication equivalent to means used by offeror

Question 26

3 instances where the reqm’t that acceptance be communicated to offeror may not apply

Answer 26

1. Acceptance by silence
2. Acceptance by performance; and
3. acceptance by mail or other correspondence

Question 27

Acceptance by Silence

Answer 27

Generally, silence cannot = acceptance, EXCEPT:

1. where offeree takes the benefit of the offeror’s services (with opportunity to reject and knowing offeror’s intention)
2. where offeror gives reason to know that he can accept by silence
3. where b/c of previous dealing, an intent to reject should be done through actual rejection (think continued service - must reject)

Question 28

Acceptance by mail of other correspondence

Answer 28

acceptance by mail is effective upon dispatch so long as the acceptance is properly posted. This only applies if the offer is silent as to how to accept.

Question 29

When does mailbox rule not apply?

Answer 29

When there are two responses to an offer by an offeree, one rejecting it and one accepting it. If acceptance reaches offeror first, then IT is effective and a k is formed. If rejection reach offeror first, then the power of acceptance is TERMINATED (making the subsequent letter a counteroffer)

Question 30

Acceptance under the UCC

Answer 30

unless k language or circumstances indicate otherwise, you can accept in any manner and by any medium reasonable under the circumstances.

Question 31

Seller’s Shipment of Conforming and Nonconforming Goods

Answer 31

UCC - seller an accept buyer’s offer to buy goods by:

1. a promise to ship goods in conformity with the terms of the offer, such as an acknowledgement of order form sent to buyer
2. prompt or current shipment of the goods in conformity with the terms of the offer; or
3. shipping nonconforming goods - this constitutes both acceptance and breach of k under the perfect tender rule

Question 32

Battle of the forms - UCC and Nonconforming Acceptance

Answer 32

unless acceptance is expressly made conditional on assent to the additional or different terms, the nonconforming acceptance is a valid acceptance, forming a valid k. The next step is to determine what terms apply.

Question 33

Dickered v. Boilerplate terms

Answer 33

the form will typically be in agreement of dickered terms but vary as to the boilerplate terms.

Question 34

Nonconforming Acceptance or Confirmation

Answer 34

ks formed via nonconforming acceptance present a problem as to what terms apply. This will depend upon who the parties are.

Question 35

Nonconforming Acceptance - Transaction Involving a Consumer

Answer 35

the additional or different terms are construed as proposals for addition to the k. thus, they are not party of the k unless the offeror expressly agrees tot he additional terms.

Question 36

Nonconforming acceptance - both parties are merchants

Answer 36

There is a difference b/w “additional terms” and “different terms”:

1. nonconforming acceptance contains additional terms when provisions addres an issue or topic not addressed in the original offer
2. Different terms - when offer says one thing about a particular issue and the would be acceptance says something else

Question 37

Additional Terms

Answer 37

become part of the k unless:

1. offer expressly limits acceptance to its terms
2. offeror objects within a reasonable time of receiving notice of the additional terms; or
3. additional terms would materially alter the k (i.e., would result in surprise or hardship)

Question 38

Different Terms - Knockout Rule

Answer 38

the majority employs the knockout rule - omit both the offeror’s original provision and the offeree’s differing provision form the resulting k

Min Rule - different terms = proposal for acceptance

Question 39

Nonconforming Acceptance - Written Confirmations

Answer 39

This happens when parties talk and then cement a deal in a written confirmation, but they differ. For additional or different terms, you must determine who the parties are:

1. One consumer is party - addt’l and different terms = mere proposals for acceptance
2. B/w Merchants:
   a. Addt’l Terms - form part of the k unless materially alter the k or receiving party objects within a reasonable time
   b. When there is only one confirmation, different terms are mere proposals
   c. when both parties send conflicting confirmations, the knockout rule applies

Question 40

Conditional Acceptance under the UCC

Answer 40

definite and seasonable expression of acceptance will operate as an acceptance even though it states additional or different terms, unless acceptance is expressly made conditional on assent to the addt’l or different terms

Question 41

Battle of the Forms - K formed by conduct

Answer 41

Parties’ conduct in recognizing the existence of a k is sufficient to establish a k, even though their writings do not otherwise establish a k.