Mutual Assent - Offer and Acceptance

Question 1

What is an offer?

Answer 1

An offer creates a power of acceptance in the offeree and a corresponding liability on the part of the offeror

Question 2

Under what condition is a communication an offer?

Answer 2

If the communication creates a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms

Question 3

For a communication to be an offer it must: (3 things)

Answer 3

(1) Contain an expression of a promise, undertaking, or commitment to enter into a contract;
(2) Be certain and definite in essential terms; AND
(3) Be communicated to the offeree

Question 4

True or false: The broader the communicating media (e.g., publications), the more likely it is that the courts will view the communication as merely the solicitation of an offer.

Answer 4

True. For example, advertisements, catalogs, circular letters, and the like containing price quotations are usually construed as mere invitations for offers.

Question 5

The basic inquiry as to whether an offer is sufficiently definite and certain in its terms is:

Answer 5

Whether enough of the essential terms have been provided so that a contract including them is capable of being enforced. Essential terms include the offeree’s name, the offer’s subject matter, and the price to be paid.

Question 6

The be considered an offer, a statement must sufficiently identify _______ or _______ to justify the inference that the offeror intended to create a power of acceptance.

Answer 6

(1) the offeree

(2) a class to which the offeree belongs

Question 7

An offer involving realty must identify _______ and _______.

Answer 7

(1) the land

(2) the price terms

Question 8

True or false: Courts will supply a missing price term for realty.

Answer 8

False

Question 9

In a contract for the sale of goods, the _______ must be certain or capable of being made certain.

Answer 9

quantity being offered

Question 10

What is the difference between a “requirements” contract and an “output” contract?

Answer 10

In a requirements contract, a 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 contract, 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.

Question 11

Because it is assumed that parties will act in good faith, in requirement and output contracts, there cannot be a tender of or a demand for a quantity unreasonably disproportionate to: (2 things)

Answer 11

(1) Any state estimate, or

(2) (In the absence of a state estimate) any normal or otherwise comparable prior output or requirements.

Question 12

In contracts for employment, if the duration of the employment is not specified and the offer is accepted, what is the legal effect?

Answer 12

A contract is created that is terminable at the will of either party

Question 13

In contracts for services other than employment, what must be included in the offer?

Answer 13

The nature of the work to be performed

Question 14

The fact that one or more terms are left open does not prevent the formation of a contract if: (2 things)

Answer 14

(1) It appears that the parties intended to make a contract AND
(2) There is a reasonably certain basis for giving a remedy

Question 15

In a case where one or more terms are left open, the majority of jurisdictions and the UCC hold that:

Answer 15

The court can supply reasonable terms for those that are missing

Question 16

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

Answer 16

performed within a reasonable time

Question 17

The presumption that the parties’ intent was to include a reasonable term CANNOT be made if _______.

Answer 17

The parties have included a term that makes the contract too vague to be enforced (e.g., an agreement to split profits on a “liberal basis”)

Question 18

If an offer states that some term is to be agreed on at a future date, and the term is a material term, what is the legal effect?

Answer 18

The offer is too uncertain to have created a contract

Question 19

What are the 4 primary methods of termination for an offer?

Answer 19

(1) Lapse of time
(2) Rejection
(3) Revocation
(4) Termination by operation of law

Question 20

Under what conditions is an offer terminated due to a lapse of time? (2 things)

Answer 20

(1) If the offeree fails to accept within the time specified by the offer, or
(2) If no deadline is specified, within a reasonable period

Question 21

What is an express rejection?

Answer 21

A statement by the offeree that they do not intend to accept the offer

Question 22

What is a counteroffer? What is the legal effect of a counteroffer?

Answer 22

A counteroffer is made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in its terms.

A counteroffer functions as a rejection of the initial offer.

Question 23

Distinguish between a counteroffer and a mere inquiry (or bargaining). What is the legal test?

Answer 23

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 (e.g. “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 24

When an acceptance is made expressly condition on the acceptance of new terms, it is _______.

Answer 24

A rejection of the offer

Question 25

If the parties ship or accept goods after a conditional acceptance, a contract is formed _______, and the new terms are not included.

Answer 25

By their conduct

The offer that results from a conditional acceptance cannot be accepted by performance.

Question 26

When is a rejection effective?

Answer 26

When it is received by the offeror

Question 27

What is a revocation?

Answer 27

The retraction of an offer by the offeror

Question 28

How many an offer be directly revoked?

Answer 28

(1) By directly communicating the revocation to the offeree

(2) If made by publication, by publication through comparable means

Question 29

How many an offer be indirectly revoked?

Answer 29

If the offeree receives (1) correct information, (2) from a reliable source, (3) of actions of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer.

Question 30

When is a revocation effective?

Answer 30

When received by the offeree, or if the offer was made by publication, when the revocation is published.

Question 31

Offers can be revoked at will by the offeror, even if he has promised not to revoke for a certain period, except where: (5 things)

Answer 31

(1) The offer is for an option contract
(2) It is a merchant’s firm offer under the UCC
(3) The offeror could reasonably expect detrimental reliance by the offeree
(4) Performance has begun in response to a true unilateral contract offer
(5) The offer is indifferent as to the manner of acceptance

Question 32

What is an option contract?

Answer 32

A distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer (e.g., a woman offers to sell her farm to a man for $1 million and promises the keep the offer open for 90 days if the man pays $1,000 to keep the offer open).

Question 33

Explain the merchant’s firm offer rule under the UCC.

Answer 33

If a (1) merchant, (2) offers to buy or 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.

In neither situation may the offer be held open for longer than 3 months unless consideration is given by the offeree (in which case it becomes an option contract).

Question 34

What is the legal effect of detrimental reliance in the context of revocation?

Answer 34

When the offeror could reasonably expect that the offeree would rely to their detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time.

Question 35

When does an offer for a true unilateral contract become irrevocable by the offeror?

Answer 35

Once performance has begun

Question 36

What must an offeror in a unilateral contract do to revoke the contract once performance has begun by the offeree?

Answer 36

The offeror must give the offeree a reasonable time to complete performance

Question 37

True or false: An offeree in a unilateral contract who has begun performance is bound to complete performance.

Answer 37

False. 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.

Question 38

If an offer is indifferent as to the manner of acceptance, when may the offeror revoke the offer? (2 things)

Answer 38

(1) Before the offer is accepted

2) Before the offeree begins performance (since this may be construed as an acceptance in this situation

Question 39

In what ways may an offer be terminated by operation of law?

Answer 39

(1) Death or insanity of either party (unless the offer is of a kind the offeror could not revoke)
(2) Destruction of the proposed contract’s subject matter
(3) Supervening illegality (i.e., some term of the contract can no longer be legally performed due to a change in law)

Question 40

If an offeree begins making preparations to perform, does the offer become irrevocable? Explain.

Answer 40

No. Substantial preparations to perform will not make the offer irrevocable without more—only beginning of actual performance under the contract will make an offer irrevocable. However, substantial preparations to perform may constitute detrimental reliance sufficient to make the offeror’s promise binding to the extent of detrimental reliance (i.e., within reason).

Question 41

What is an acceptance?

Answer 41

A manifestation of assent to the terms of an offer

Question 42

Who may accept an offer?

Answer 42

Generally, only the person to whom an offer is addressed has the power of acceptance. A member of a class to which an offer has been directed also has the power to accept.

Question 43

Can an offeree’s power of acceptance be assigned?

Answer 43

Only if the offeree paid consideration to keep the offer open (i.e., an option contract)

Question 44

How may an offer be accepted?

Answer 44

The language of the offer controls (e.g., if the offer says acceptance can only be made by letter via FedEx, then the offeree may not accept by letter via US mail).

If no specific method is provided, an offer is construed as inviting acceptance in any reasonable manner and by any medium reasonable under the circumstances.

Question 45

Under what circumstances may silence be construed as acceptance?

Answer 45

Only if:
(1) Because of prior dealings or trade practices, it would be commercially reasonable for the offeror to consider silence an acceptance; OR

(2) The recipient of services knows or should have known that the services were being rendered with the expectation of compensation and could have prevented the mistake

Question 46

Under the UCC, when is an offer to buy goods for current or prompt shipment construed as inviting acceptance either by:

Answer 46

(1) A promise to ship, OR

(2) Current or prompt shipment of conforming or nonconforming goods

Question 47

True or false: Traditional contract law insists on an absolute and unequivocal acceptance of each and every term of the offer.

Answer 47

True. This is the “mirror image rule.”

Question 48

At common law, any different or additional terms in the acceptance make the response a _______.

Answer 48

Rejection and counteroffer

Question 49

A unilateral contract is not accepted until performance is _______.

Answer 49

Completed

Question 50

In a unilateral contract, the offeree [is/is not] required to give the offeror notice that he has begun the requested performance.

Answer 50

Is not

Question 51

In a unilateral contract, the offeree [is/is not] required to notify the offeror within a reasonable time after performance has been completed.

Answer 51

Is

Question 52

In a unilateral contract, no notice of completion of performance is required if: (2 things)

Answer 52

(1) The offeror waived notice; OR

(2) The offeree’s performance would normally come to the offeror’s attention within a reasonable time

Question 53

Under the UCC, shipment of nonconforming goods is an acceptance creating a bilateral contract as well as well as a b reach of the contract unless:

Answer 53

The seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation.

Question 54

If a seller sends nonconforming goods as an accommodation, what may the buyer do?

Answer 54

(1) Accept the entire shipment
(2) Reject the entire shipment
(3) Reject only the nonconforming goods

Question 55

HYPO: Buyer offers to buy 500 blue widgets from a seller. Seller only has 450 blue widgets, so Seller sends the 450 blue widgets and includes 50 red widgets, along with a note explaining the shortage and explaining that the 50 red widgets are included as an accommodation. What may Buyer do?

Answer 55

Buyer may either reject the entire shipment, accept the entire shipment for the same price as his initial offer, or accept only the blue widgets and reject the red widgets, paying only cost of the accepted blue widgets.

Question 56

The UCC provides that the inclusion of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and counteroffer (as in the common law mirror image rule), but rather is _______ unless _______.

Answer 56

(1) effective as an acceptance

(2) the acceptance is expressly made conditional on assent to the additional or different terms

Question 57

If any party to a contract governed by the UCC is not a merchant, additional or different terms in an acceptance are considered:

Answer 57

To be mere proposals to modify the contract that DO NOT become part of the contract unless the offeror EXPRESSLY agrees

Question 58

If both parties to a contract governed by the UCC are merchants, additional terms in the acceptance will be included in the contract unless: (3 things)

Answer 58

(1) They materially alter the original terms of the offer (e.g., by changing a party’s risk or available remedies)
(2) The offer expressly limits acceptance to the terms of the offer, OR
(3) The offeror has already objected to the particular terms, or objects within a reasonable time after notice of them is received

(BATTLE OF THE FORMS)

Question 59

What is the “knockout rule” under the UCC?

Answer 59

In some jurisdictions, if terms in an acceptance are different from (as opposed to in addition to) the terms in the offer, the conflicting terms in the offer AND acceptance ware knocked out of the contract, because each party is assumed to object to the inclusion of such terms in the contract. Under the knockout rule, gaps left by knocked out terms are filled by the UCC’s defaults.

Question 60

True or false: A merchant’s memo confirming an oral agreement that contains different or additional terms is subject to the battle of the forms provisions.

Answer 60

True

Question 61

When is acceptance by mail effective?

Answer 61

At the moment of dispatch, provided that the mail is properly addressed and stamped

Question 62

When is acceptance by mail, even when properly addressed and stamped, ineffective? (4 things)

Answer 62

(1) The offer stipulates that acceptance is not effective until received.
(2) An option contract is involved (an acceptance under an option contract is effective only upon receipt).
(3) The offeree sends a rejection and then sends an acceptance, in which case whichever arrives first is effective.
(4) The offeree sends an acceptance and then a rejection, in which case the acceptance is effective UNLESS the rejection arrives first AND the offeror detrimentally relies on it.

Question 63

True or false: An acceptance transmitted by unauthorized means or improperly transmitted by authorized means may still be effective if it is actually received by the offeror while the offer is still in existence.

Answer 63

True

Question 64

When a sale by auction complete?

Answer 64

When the auctioneer announces the completion of the sale by the fall of the hammer or in another customary manner.