Mutual Assent: Offer

Question 1

Mutual Assent

Answer 1

• For an agreement to be enforced as a K, there must be mutual assent.
• One party must accept the other’s offer
• Words/conduct must manifest a present intent to enter into a K
• Mutual assent, consideration, and no defenses must exist

Question 2

Tip

Answer 2

K formation is a major topic on the exam.
For any K question, be sure that there
really is an enforceable K; that is, you must have all 3 of the above elements. Fact patterns sometimes greatly emphasize some elements (ex. offer and acceptance) to try to fool you into thinking that a K has been formed, but on a closer look, you might find that another element (such as consideration) is missing. Remember to check carefully for all 3 elements. (Of course, if the facts state that one or more of the elements is present—or that a valid K has been formed—don’t waste your time analyzing elements already given to you.)

Question 3

Offer

Answer 3

• For a communication to be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a K on the basis of the offered terms.

Question 4

Offer: Language

Answer 4

• The language used may show that an offer was/was not intended.
• Technical language such as “I offer” or “I promise” is useful, but it isn’t necessary.
• Phrases such as “I quote,” “I am asking $30 for,” and “I would consider selling for” tend to be construed merely as invitations to deal rather than offers.

Question 5

Tip:

Answer 5

Although price quotations generally are not offers, they can be if given in response to an inquiry that contains a quantity term.

Question 6

Offer: Surrounding Circumstances

Answer 6

• The circumstances surrounding the language is considered by cts in determining whether an offer exists.
• Ex: if a statement is made in jest, anger, or by way of bragging, and it is reasonably understood in this context, it will have no legal effect

Question 7

Prior Practice & Relationship of Parties

Answer 7

• In determining whether certain remarks constitute an offer rather than prelim negotiations, cts will look to the prior relationship & practice of the parties

Question 8

Method of Communication

Answer 8

• The broader the communicating media (ex. publications), the more likely it is that cts will view the communication as merely the solicitation of an offer
• Ads, catalogs, circular letters, and the like
  containing price quotations are usually construed as mere invitations for offers.

Question 9

Tip:

Answer 9

• Most offers are fairly easy to spot, but watch out for language that sounds like an offer but really is an invitation to deal. Ex., ads often sound like offers but usually are just invitations for people to come in and deal. The more definite the language (ex: “I’ll sell for . . .” or “I’ll pay you $10 for . . .”), the more likely the statement is an offer. However, you need to examine the other factors (surrounding circumstances, prior relationship of parties, etc.). Don’t be too hasty in your determination

Question 10

Tip:

Answer 10

If there has been a series of communications between the parties, pay attention to the legal significance, if any, of each statement. Ex., if you determine that A’s first statement to B isn’t an offer but rather is merely an invitation to deal, then B’s response cannot be an acceptance (because there was nothing to accept). You must then consider whether B’s response is another invitation to deal or an offer. Keep checking until you find an offer and an acceptance.

Question 11

Definite & Certain Terms

Answer 11

• An offer must be definite and certain in its terms.
• A statement must sufficiently identify
  the offeree/class to which they belong
• The subject matter of the deal must be certain, b/c a ct can enforce a promise only if it can tell what the promise is

Question 12

Requirements: Real Estate Transactions - Land & Price Terms

Answer 12

• An offer involving realty must identify the land & price terms.
• Land must be identified with some particularity
• Deed description isn’t required (ex. “my house in Erewhon” is sufficient if the seller has only one house in Erewhon).
• Most cts will not supply a missing price term for realty.

Question 13

Requirements: SOG - Quantity Term

Answer 13

• In a SOGK, the quantity being offered must be certain/capable of being made certain.

Question 14

Requirements & Output Ks

Answer 14

• In a requirements K, buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agrees to sell that amount to the buyer.
• In an output K, a seller promises to sell to a certain buyer all of the goods that the seller produces, and the buyer agrees to buy that amount from the seller.
• It is assumed that the parties will act in good faith; so, there can’t be a tender/demand for a quantity unreasonably disproportionate to (1) any stated estimate, or (2) (in the absence of a stated estimate) any normal/otherwise comparable prior output/requirements.

Question 15

Tip:

Answer 15

In addition to the words “require,” “need,” and
“produce,” certain other terms are clues that the K is a requirements or outputs K. On the exam, watch for the following words: “all,” “only,” “exclusively,” and “solely.

Question 16

Employment & Other Services

Answer 16

• In Ks for employment, if the duration of the employment is not specified, the offer, if accepted, is construed as creating a K terminable at the will of either party.
• For other services, the nature of the work to be performed must be included in the offer.

Question 17

Missing Terms

Answer 17

• TFT one or more terms are left open does not prevent K formation if it appears that the parties intended to make a K and there is a reasonably certain basis for giving a remedy.
• Ct can supply reasonable terms for those that are missing.

Question 18

Price

Answer 18

• Except in Ks for real property, the failure to state the price doesn’t prevent the formation of a K if the parties intended to form a K w/o the price being settled.
• Note that if a SOGK is missing a price term, Article 2 provides that the price will be a reasonable price at the time of delivery

Question 19

Time

Answer 19

• If an agreement doesn’t specify the time in which an act is to be performed, the law implies that it is to be
  performed within a reasonable time.

Question 20

Vague Terms

Answer 20

• The presumption that the parties’ intent was to include a reasonable term goes to supplying missing terms.
• The presumption cannot be made if the parties have included a term that makes the K too vague to be enforced (ex: an agreement to split profits on a “liberal basis”).
• However, uncertainty can be cured by part performance that clarifies the vague term/by acceptance of full performance.

Question 21

Tip:

Answer 21

If a material term is vague or ambiguous, it is not an offer at CL/UCC. Watch for terms such as “appropriate,” “fair,” and “reasonable,” which signal a possible vagueness problem.

Question 22

Terms to be Agreed on Later

Answer 22

• Often, an offer will state that some term is to be agreed on at a future date.
• If the term is a material term, the offer is too uncertain.

Question 23

Communication to Offeree

Answer 23

• To have the power to accept, the offeree must have knowledge of the offer.
• Therefore, the proposal must be communicated to them.

Question 24

Tip:

Answer 24

• An offer may be a continuing offer; that is, an offer to form a series of Ks.
• Watch for facts in which a seller offers to sell to a buyer certain goods for a stated price over a specified time period.
• Suppose S agrees to sell widgets to B for one year at $1 per widget up to 100,000 widgets. B orders 10,000 widgets in June. A K for 10,000 widgets is formed, but the offer remains open. B can accept it multiple times during the year until he reaches 100,000 widgets.

Question 25

Termination of Offer

Answer 25

• An offer can’t be accepted after it has been terminated.
• An offer may be terminated by an act of either party/by operation of law.

Question 26

Termination by Offeree: Lapse of Time

Answer 26

• An offer may be terminated by the offeree’s failure to accept within the time specified by the offer or, if no deadline was specified, within a reasonable period.

Question 27

Termination by Offeree: Rejection

Answer 27

• Express rejection: A a statement by the offeree that they do not intend to accept the offer. Such a rejection will terminate the offer.
• Counteroffer as rejection: an offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in its terms (ex: “I’ll take the house at that price, but only if you paint it first”).

Question 28

Tip:

Answer 28

Remember that a counteroffer is both a rejection and a new offer. It terminates the original offer and reverses the roles of the parties: The offeree giving a counteroffer becomes the offeror of a new offer, which the other party may accept or reject. Thus, if A offers to sell his property, Blackacre, to B for $100,000, and B says, “I’ll buy it for $90,000,” what has happened? A’s offer has been rejected and B has made an offer for $90,000, which A may accept or reject. If A rejects it, B cannot later say to A,
“All right, I’ll take Blackacre for $100,000,” and accept A’s offer. It no longer exists because it was rejected. (Of course, A could accept B’s new offer to buy it for $100,000.)

Question 29

Mere Inquiry

Answer 29

• Distinguish between a counteroffer (which constitutes a rejection) and a mere inquiry.
• An inquiry won’t terminate the offer when it is consistent with the idea that the offeree is still keeping the original proposal under consideration (ex: “Would you consider lowering your price by $5,000?”).
• The test is whether a reasonable person would believe that the original offer had been rejected.

Question 30

Conditional Acceptance as Rejection

Answer 30

• 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 K 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/accept goods after a conditional acceptance, a K is formed by their conduct, and the new terms are not included.

Question 31

Rejection of Option

Answer 31

• Because an option is a K to keep an offer open, a rejection of/CO 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.

Question 32

Termination by Offeror: Revocation

Answer 32

• A revocation is the retraction of an offer by the offeror.
• An offeror may revoke by directly communicating the revocation to the offeree (ex: “I revoke my offer of May 25”).
• An offer made by publication can be directly revoked only by publication through comparable means (ex: an
  offer placed in the Wall Street Journal cannot be revoked by publishing in Better Homes and Gardens).
• An offer may also be revoked indirectly if the offeree receives:
  (1) correct information,
  (2) from a reliable source,
  (3) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer (ex: after the offeror offers to sell their car to the offeree, the offeree is told by a reliable third party that the offeror just sold the car to someone else).

Question 33

Revocation: Effective When Received

Answer 33

• A revocation is generally effective when received by the offeree.
• Where revocation is by publication, it is effective when published.

Question 34

Tip:

Answer 34

• Remember that generally a written communication is “received” when it is delivered to a place of business through which the contract was made or
  another location authorized to receive this type of communication. It does not matter whether the recipient actually reads the communication. Courts will likely apply the same rules to phone messages.

Question 35

Limitations on Offeror’s Power to Revoke

Answer 35

Offers can be revoked at will by the offeror, even if he has promised not to revoke for a certain period, except in the following circumstances:
(1) Options
(2) Merchant’s Firm Offer under article 2
(3) Detrmental reliance
(4) Beginning performance in response to uni K offer
(5) Beginning performance - Offer indifferent as to manner of acceptance

Question 36

Power to Revoke: Options

Answer 36

• An option is a K where offeree gives consideration for a promise by offeror not to revoke offer
• (ex: an offeror offers to sell her farm to an offeree for $1 million and promises to keep the offer open for 90 days if the offeree pays the offeror $1,000 to keep the offer open).

Question 37

Power to Revoke: MFO

Answer 37

• Merchant’s Firm Offer Under Article 2:
  (1) A merchant,
  (2) offers to buy/sell goods in a signed writing, and
  (3) the writing gives assurances that it will be held open
• 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 3 months).
• (ex: “this offer will be held open for 10 days,” “this offer is firm for10 days,” or “I shall not revoke this offer for 10 days”),

Question 38

Tip:

Answer 38

If a merchant-offeror states that an offer will stay open for a period beyond the UCC’s 3-month limit on irrevocability, they will be bound only for 3 months. Remember that the 3-month limitation applies only to offers not supported by consideration. Watch for an offer that looks like a merchant’s firm offer but includes some consideration. This is an option K, and the offer can be held open for as long as the parties specify.

Question 39

Power to Revoke: Detrimental Reliance

Answer 39

• When the offeror could reasonably expect that the offeree would detrimentally rely on the offer, & offeree does rely, the offer will be held irrevocable as an option K for a reasonable length of time.

Question 40

Power to Revoke: Beginning Performance in Response to Unilateral Contract Offer

Answer 40

• An offer for a true uni-K becomes irrevocable once performance has begun.
• Offeror must give the offeree a reasonable time to complete performance.
• Note that the offeree is not bound to complete performance—they may withdraw at any time prior to completion of performance, and there is no acceptance until performance is complete.

Distinguish—Preparations to Perform
- Substantial preparations to perform (as opposed to the beginning of performance) do not make the offer irrevocable but may constitute detrimental reliance sufficient to make the offeror’s promise binding to the extent of the detrimental reliance.

Question 41

Power to Revoke: Beginning Performance - Offer Indifferent as to Manner of Acceptance

Answer 41

• Most offers are indifferent as to the manner of acceptance, and thus, a bi-K may be formed upon the start of performance by the offeree.
• Therefore, once the offeree begins performance, the K is complete and revocation becomes impossible.
• But note: Notification of the start of performance may be necessary

Question 42

Termination by Operation of Law

Answer 42

• The following events will terminate an offer by operation of law:
  a. Death/insanity of either party (unless the offer is of a kind the offeror could not terminate, such as, an option supported by consideration). Death/insanity need not be communicated to the other party
  b. Destruction of the proposed K’s subject matter OR
  c. Supervening illegality