Mutual Assent: Offer and Acceptance Flashcards
What happens if a period of acceptance is stated in an offer?
If a period of acceptance is stated in an offer, the offeree must accept within that period to create a contract. Failure to timely accept terminates the power of acceptance of the offeree (i.e., a late acceptance will not be effective and will not create a contract).
Mailbox rule
Under the mailbox rule, an acceptance is generally effective upon dispatch (i.e., the acceptance creates a contract at the moment it is mailed or given to the delivery company). However, the mailbox rule does not apply where the offer states that acceptance will not be effective until received. Further, the mailbox rule does not apply if an offeree sends a rejection and then sends an acceptance - in that case, whichever is received first is effective.
Contract Formation - general rules
A contract requires mutual assent (usually in the form of an offer and acceptance) and consideration on both sides of the bargain and the absence of any formation or enforcement defenses. An offer is an expression of willingness to enter into a bargain, made with definite terms so that the other party could reasonably believe that he could conclude the bargain by accepting. An acceptance is an assent to the terms of the offer. Acceptance of an offer must be unequivocal and communicated to the offeror. Consideration is bargained-for exchange, and that which is bargained for must have legal value.
Effect of a counteroffer
When an offeree makes a counteroffer, it terminates the original offer. A counteroffer is a rejection of the original offer, the offeree’s power of acceptance is destroyed. A counteroffer serves as a rejection of the original offer as well as a new offer. However, a mere inquiry about additional terms or matters is not a counteroffer. The test of whether the reply is a counteroffer or inquiry is whether a reasonable person would believe that the offer was being rejected.
Unilateral contract
A unilateral contract is made when an offer is made and acceptance can only be done by performance. Once performance begins, the offeror cannot cancel the offer. However, mere preparation is not enough for the offer to become irrevocable. A unilateral contract does not terminate just because the offeror dies.
Revocation of an offer
An offeror generally is entitled to revoke an offer at will any time before acceptance. A revocation is generally effective when it is received by the offeree. A written communication is considered to have been received when (i) it comes to a person’s attention, or (ii) it is delivered at a place of business through which the contract was made. The communication need not be read by the recipient to be effective.
Option contract
An option is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer. The offer cannot be terminated before the time stated by either the offeror or the offeree. When an offeror could reasonably expect that the offeree would rely to her detriment on an offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time.
Requirements contract
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. Although no specific quantity is mentioned in offers to make these contracts, the offers are sufficiently definite because the quantity is capable of being made certain by reference to objective, extrinsic facts. Consideration also is present, as the promisor is suffering a legal detriment; it has parted with the legal right to buy the goods from another source.
Rejection of an offer
Rejection of an offer may be made expressly or by making a counteroffer.
