Mutual Assent, I.E. Offer And Acceptance

Question 1

What must an offeror do to form a valid contract?

Answer 1

To form a valid offer, the offeror must

Manifest in objective willingness to enter into an agreement.
And
Create a power of acceptance in the OFFEREE i.e. the offeree can simply say I accept and know that he has concluded the deal

Question 2

What is the objective test for an offer?

Answer 2

The offer is a governed by an objective test, which means that outward appearances of words and actions are determinative, not subjective, hidden intentions for example, if a person makes an offer as a practical joke with his fingers crossed behind his back, but his outward words and actions demonstrate willingness to enter the agreement. It is a valid offer. The offeror’s subjective intent is irrelevant. 

Question 3

Specific OFFEREE

Answer 3

Generally, an offer must be directed to a specific OFFEREE. However, there is a limited exception for contest offers and reward offers that promised some thing to anyone who accomplishes a certain task
EG, a posted sign that offers a cash reward for finding lost puppy is a valid offer.

Question 4

Advertisements

Answer 4

An advertisement is usually considered to be an invitation to deal rather than an offer, because advertisements usually fail to confer a power of acceptance to the other side, however, advertisements that are very specific and leave nothing open to negotiation may constitute offers

Question 5

What are the essential terms that must be specified in the offer under the common law?

Answer 5

Generally, under the common law, the essential terms are as follows.
1 parties
2 subject.
3 quantity.
AND
4 Price

Question 6

Under the UC the law is more willing to what as to the essential terms of an offer

Answer 6

Plug the gaps.
Unlike the common law price is not required in the offer. Generally only three terms are required under the UCC
1 parties.
2 subject.
AN D.
3 quantity.
Note that As to quantity, requirements and output contracts are valid under the UCC even though they do not specify an exact quantity. in a requirement contract, the seller agrees to sell as much as the buyer would require. in an output contract The seller agrees to sell his entire production to the buyer.

Question 7

If a valid offer is terminated at any time before acceptance

Answer 7

The offer is invalidated

And it cannot be accepted or revived, unless the new offer is made

Question 8

An offer is terminated, if any of the following occur at any time before acceptance

Answer 8

1 the offeror revokes the offer by express communication to the OFFEREE unless the offer is irrevocable

2 the ofFEREE learns that the OFFEROR has taken an action that is absolutely inconsistent with a continuing ability to contract i.e. constructive revocation

3 ofFEREE rejects the offer by express communication to the OFFEROR

4 The OFFEREE, expressly communicates a counter offer to the OFFEROR

5 the OFFOR dies or otherwise becomes incapacitated. This only terminates the offer not a previous valid contract.

6 A reasonable amount of time passes usually requires weeks not days.

OR

7 the subject matter of the offer becomes illegal or is destroyed

Question 9

What are the four types of irrevocable offers?

Answer 9

Option contracts.

Firm offers.

OFFEREE has started performance

Detrimental reliance

Question 10

Option contracts

Answer 10

In agreement where consideration is given an exchange for a promise to keep an offer open for example, I promise not to revoke this offer for one week if you pay me an additional $100 to keep the offer open

Question 11

Firm offers

Answer 11

Under the UCC, a merchant, which is someone who regularly deals in the type of good at issue like a business person, can make a firm offer to buy or sell goods. A firm offer will either last as long as stated in the offer or for a reasonable time not to exceed 90 days.

Question 12

A firm offer must

Answer 12

Be in writing.

Contain an explicit promise not to revoke.

AND

Be signed by the merchant

Question 13

Can an offer be revoked when offeree has started performance?

Answer 13

If a unilateral offer, NO. A unilateral offer to contract cannot be revoked by the offeror if the offeree has started performance.

Question 14

unilateral offer

Answer 14

arises from a promise that requests acceptance by an action of the promisee (versus a return promise, which is called a bilateral contract).

Question 15

Detrimental Reliance.

Answer 15

An offer cannot be revoked if the offeree reasonably and detrimentally relies on the offer in a foreseeable manner.

Question 16

The mailbox rule

Answer 16

establishes the moment in time that an acceptance becomes effective.

Question 17

Mailbox Rule. An ACCEPTANCE that is sent by mail, email, or fax is valid

Answer 17

at the moment of dispatch (not when the letter is received), UNLESS:

The offeree-sender uses the wrong address or has improper postage (e.g., the offeree-sender forgets to put a stamp on the envelope);

The offeror expressly stipulates that the acceptance is valid upon receipt;
An option contract is involved;

The offeree-sender sends a termination letter BEFORE the acceptance letter;
NOTE: If the offeree-sender places a counteroffer/rejection letter in the mailbox and a moment later, places an acceptance letter in the mailbox, whichever letter the offeror receives and opens first controls. Notably, if the offeree-sender places an acceptance letter in the mailbox first, then the acceptance becomes effective at the moment of dispatch (unless another exception applies).

OR

The offeror detrimentally relies on a termination BEFORE he receives the acceptance letter.

Question 18

A counteroffer operates as both

Answer 18

a rejection that terminates the original offer AND as a formation of a new offer.

Question 19

Mirror Image Rule.

Answer 19

Under the common law, the terms in the acceptance MUST match the terms of the offer exactly – otherwise it is not an acceptance, it is a counteroffer (i.e., the terms of the offer and acceptance must mirror each other exactly).

Question 20

An acceptance is

Answer 20

a manifestation of a willingness to enter into the agreement by the offeree (usually must be communicated to the other party – silence generally does not manifest willingness unless there is a past history of silence serving as acceptance).

Question 21

The offeror is the master of

Answer 21

the offer, which means that the offeree MUST accept the offer according to the rules of the offer (e.g., whether the offer is bilateral or unilateral).

For bilateral contracts, the start of performance manifests acceptance.

For unilateral contracts, the start of performance only makes the offer irrevocable – the offer is only accepted once performance is complete.

Question 22

Acceptance is governed by

Answer 22

an objective test, which means that outward appearances of words and actions are determinative – not hidden intentions (e.g., a person accepts an offer with his fingers crossed behind his back).

Question 23

The offer must be specifically

Answer 23

directed to the person trying to accept it – cannot accept an offer directed elsewhere (for open-to-all contests and reward offers, the person must know about the contest or reward offer in order to accept it.).

Question 24

UCC § 2-207 (“Battle of the Forms”). Under the UCC, the acceptance does NOT have to

Answer 24

mirror the offer (i.e., the acceptance can include different or additional terms from those in the offer).

Question 25

UCC § 2-207(1) determines whether the purported acceptance (containing new terms) will operate as an acceptance or as a counteroffer. It states:

Answer 25

A definite and seasonable expression of acceptance or written confirmation;

Which is sent within a reasonable amount of time;

Operates as an ACCEPTANCE even though it states terms additional to or different from those offered or agreed upon;

UNLESS acceptance is expressly made conditional upon assent to the additional or different terms.

Question 26

UCC § 2-207(2). If the purported acceptance is a valid acceptance under UCC § 2-207(1), the next issue is

Answer 26

whether the additional or different terms in the acceptance will govern the contract or whether UCC gap fillers will be implemented. Under UCC § 2-207(2), the ADDITIONAL terms (see distinction between “additional” and “different” terms below) will govern the contract if BOTH parties are merchants UNLESS:

The initial offer expressly limited acceptance to its terms;

The additional terms materially alter the deal;

OR

The offeror objects to the additional terms within a reasonable amount of time.

Question 27

The Knockout Rule.

Answer 27

Most courts apply the knockout rule with UCC § 2-207(2) to determine whether the new terms control or whether UCC gap fillers must be implemented. Under the knockout rule, a distinction is made between “different” and “additional” terms.

Question 28

A different term is

Answer 28

a term that was not included in the original offer that conflicts with the terms of the original offer (e.g., offeree changes the price term from $5,000 to $4,000 and sends it back to the offeror).

Question 29

An additional term is

Answer 29

a term that was not included in the original offer that does NOT conflict with the original offer (e.g., offeree adds a choice of law provision that was not included in the original offer and sends it back to the offeror).

Question 30

Under the knockout rule, different terms in the original offer and acceptance

Answer 30

knock each other out creating a gap in the contract.

UCC gap fillers are then used to plug this gap (regardless of whether the parties are merchants). The knockout rule does not apply to additional terms added by the offeree. UCC § 2-207(2) will determine whether the additional terms control or whether UCC gap fillers must be implemented.