Mutual Assent--Offer and Acceptance, and Consideration

Question 1

Is mutual assent determined by an objective or subjective standard?

Answer 1

Mutual assent is determined by an objective standard; that is, did words or conduct manifest a present intention to enter into a contract?

Question 2

What is required for a communication to be an offer?

Answer 2

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 contract on the basis of the offered terms.

Question 3

Promise, Undertaking, or Commitment

Answer 3

For a communication to be an offer, it must contain a promise, undertaking, or commitment to enter into a K (cannot be a mere invitation to negotiate); there must be intent to enter a contract. The court will look at the language used, surrounding circumstances, prior practice and relationship of the parties, and the method of communication.

Question 4

Are advertisements offers?

Answer 4

Generally, advertisements are not offers, and are construed as mere invitations for offers. There is an exception when the advertisement is intended for a specific person/group and there are clear and definite terms.

Question 5

Definite and Clear Terms

Answer 5

An offer must be definite and certain in its terms. The basic inquiry is whether enough of the essential terms have been provided so that a contract including them is capable of being enforced. (Must sufficiently identify the offeree, and the subject matter of the deal must be certain).

Question 6

Requirements for an offer involving real estate

Answer 6

An offer involving realty must identify the land (with some particularity) and the price terms.

Question 7

Requirements for an offer for the sale of goods

Answer 7

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

Question 8

Requirements for offers for employment

Answer 8

For a contract for employment, if the duration of the employment is not specified, the offer, if accepted, is construed as creating a contract 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 9

Missing terms

Answer 9

The fact that one or more terms are left open does not prevent the formation of a K if it appears that the parties intended to make a K and there is a reasonably certain basis for giving a remedy.

When this happens, majority of jxs and Art. 2 hold that the court can supply reasonable terms for those that are missing

Question 10

Price terms

Answer 10

In Ks for real property, the failure to state the price prevents the formation of the K. But in all other Ks, this will not prevent the formation of the K if the parties intended to form a K without the price being settled.

Question 11

Price term missing in a K for the sale of goods

Answer 11

In this situation, Art. 2 provides that the price will be a reasonable price at the time of delivery.

Question 12

Agreement missing time requirement term

Answer 12

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 13

Vague Terms

Answer 13

Presumption that the parties’ intent was to include a reasonable term goes to supplying missing terms. BUT the presumption cannot be made if the parties have incldued a term that makes the K too vague to be enforced.

Uncertainty can be cured by part performance that clarifies the vague term or by acceptance of full performance.

Question 14

Terms o be agreed on later

Answer 14

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 15

Communication to the Offeree is required

Answer 15

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

Question 16

Termination of offer

Answer 16

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

Question 17

Ways that an offer can be terminated by offeree

Answer 17

Through lapse of time, or rejection (which can be through either express rejection or counteroffer as rejection)

Question 18

Lapse of time

Answer 18

An offer may by 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 19

Express rejection

Answer 19

An express rejection is a statement bu the offeree that they do not intend to accept the offer. Such a rejection will terminate the offer.

Question 20

Counteroffer as rejection

Answer 20

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

Question 21

Mere Inquiry is not rejection

Answer 21

A mere inquiry is not a counteroffer, and does not terminate the offer. The test is whether a reasonable person would believe that the original offer had been rejected.

Question 22

Conditional Acceptance as Rejection

Answer 22

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 contract by expressly assenting to the new terms.

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

Question 23

When is rejection by the offeree effective?

Answer 23

It is effective when received by the offeror.

Question 24

Rejection of an option does not constitute a termination of the offer

Answer 24

Because an option is a K to keep an offer open, a rejection of or a counteroffer 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 25

Termination of the Offer by the Offeror = Revocation

Answer 25

A revocation is the retraction of an offer by the offeror.

Question 26

How can an offeror revoke an offer?

Answer 26

By directly communicating the revocation to the offeree. Or, the offer may 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.

Question 27

When is a revocation effective?

Answer 27

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

Question 28

Limitations on an Offeror’s Power to Revoke

Answer 28

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: in option ks, when a merchant has made a firm offer under Art. 2, detrimental relieance, and once performance has begun on a unilateral K.

Question 29

Option k’s limit offeror’s power to revoke

Answer 29

An option is a distinct K in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer

Question 30

Merchant’s Firm Offer under Art. 2

Answer 30

Under Art. 2: (1) if a 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 (but in no event may such period exceed 3 months).

Question 31

Detrimental Reliance

Answer 31

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 K for a reasonable length of time.

Question 32

Beginning Performance in Response to true unilateral contract offer

Answer 32

An offer for a unilateral K becomes irrevocable once performance has begun. The offeror must give the offeree a reasonable time to complete performance. (This does not bind the offeree to complete performance, they may withdraw at any time prior to completion because acceptance only happens upon complete performance).

Question 33

Preparations to perform does not count as beginning performance for unilateral K

Answer 33

Substantial preparations to perform 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 34

Beginning performance when the offer is indifferent as to the manner of acceptance

Answer 34

If the offer is indifferent to the manner of acceptance, that is a bilateral K. A bilateral K may be formed upon the start of performance of the offeree. Therefore, once the offeree begins performance, the K is complete and revocation becomes impossible. (However, noficiation of the start of performance may be necessary).

Question 35

Termination by operations of law

Answer 35

These will terminate an offer by operation of law: (1) death or insanity of either party (unless the offer is an option K supported by consideration) (Death/insanity does not need to be communicated to the other party); (2) destruction of the proposed K’s subject matter; or (3) supervening illegality.

Question 36

Acceptance defined

Answer 36

An acceptance is a manifestation of assent to the terms of an offer.

Question 37

Who may accept?

Answer 37

The general rule is that only the person to whom an offer is addressed has the power of acceptance. Generally, the power of accept cannot be assigned, but if the offeree paid consideration to keep the offer open, the right to accept is transferable.

Question 38

Offeree must know of the offer

Answer 38

Must know of the offer in order to accept it, and this is true whether the offer is for a bilateral or unilateral K.

Question 39

Acceptance of a bilateral K

Answer 39

May be accepted either by a promise to perform or by the beginning of performance.

Question 40

Acceptance must be communicated

Answer 40

Unless the offer provides otherwise, acceptance of an offer to enter into a bilateral K must be communicated to the offeror.

Question 41

Silence as acceptance

Answer 41

Generally, an offeree can’t be forced to speak or have silence treated as acceptance. However, a court may find silence works as an acceptance, if, bc of prior dealing or trade practices, it would be commercially reasonably for the offeror to consider silence an acceptance.

Question 42

Method of acceptance

Answer 42

Unless otherwise provided, an offer is construed as inviting acceptance in any reasonable manner and by any medium reasonable under the circumstances.

Question 43

Offers to buy goods for current or prompt shipment

Answer 43

Under Art. 2, an offer to buy goods for current or prompt shipment is construed as inviting acceptance either by a promise to ship or by current or prompt shipment of conforming or nonconforming goods.

Question 44

Acceptance must be unequivocal

Answer 44

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

Question 45

Acceptance of offer for unilateral K

Answer 45

A unilateral K is not accepted until performance is completed.

Question 46

Notice of beginning performance for unilateral K

Answer 46

Generally, the offeree is not required to give the offeror notice that he has begun the requested performance but is required to notify the offeror within a reasonable time after performance has been completed. However, no notice is required if: (1) the offeror waived notce; or (2) the offeree’s performance would normally come to the offeror’s attention within a reasonable time.

Question 47

Shipment of nonconforming goods

Answer 47

The shipment of nonconforming goods is an acceptance creating a bilateral K as well as a breach of the K unless the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation.

The buyer is not required to accept accommodation goods and may reject them. If buyer does so, the seller can reclaim the accommodating goods.

Question 48

UCC does not require the mirror image rule

Answer 48

Under Art. 2, the inclusion of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and counteroffer, but rather is effective as an acceptance, unless the acceptance is expressly made conditional on assent to the additional or different terms. (whether these terms come in or not depends on whether both parties were merchants).

Question 49

Ks involving nonmerchant–terms of offer govern

Answer 49

If any party to the K is not a merchant, the additional or different terms are considered to be mere proposals to modify the K that do NOT become part of the K unless the offeror expressly agrees.

Question 50

Ks between Merchants–Additional terms usually are included

Answer 50

If both parties to the K are merchants, additional terms in the acceptance will be included in the K unless: (1) they materally alter the og terms of the offer, such as by changing a party’s risk or the remedies available; (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.

Question 51

Knockout Rule

Answer 51

Some courts follow this rule which states that conflicting terms in the offer and acceptance are knocked out of the K, because each party is assumed to object to the inclusion of such terms in the contract. Under this rule, gaps left by knocked out terms are filled by the UCC.

Question 52

Merchant’s confirmatory memo

Answer 52

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

Question 53

Mailbox Rule

Answer 53

Acceptance by mail or similar means is effective at the moment of dispatch, provided that the mail is properly addressed and stamped, unless one of these exceptions applies: (1) the offer stipulates that acceptance is not effective until received; (2) an option K is involved (an acceptance under an option K is effective only upon receipt); (3) the offeree sends a rejection and then sends an acceptance, in which case whichever arrives first is effective; or (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 54

Acceptance by unauthorized means

Answer 54

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.

Question 55

Consideration elements

Answer 55

Two elements are necessary to constitute consideration: (2) a bargained for exchange between the parties; and (2) legal value, meaning that which is bargained for must be considered of legal value.

Question 56

Does past or moral consideration count?

Answer 56

A promise given in exchange for something already done does not satisfy the bargain requirement.

Question 57

Preexisting legal duty not consideration

Answer 57

Traditionally, performing or promising to perform an existing legal duty is insufficient consideration. However there are many exceptions: (1) new or different consideration is promised; (2) the promise is to ratify a voidable obligation; (3) the preexisting duty is owed to a third person rather than to the promisor; (4) there is an honest dispute as to the duty; or (5) there are unforeseen circumstances sufficient to discharge a party, or under the modern view, if the modification is fair and equitable in view of circumstances not anticipated when the K was made.

Question 58

Modifications to a K made under the UCC

Answer 58

A good faith agreement modifying a K subject to the UCC needs no consideration to be binding

Question 59

Modification of Ks under the CL

Answer 59

Under the CL, modification without consideration is allowed if: (1) the modification is due to circumstances that were unanticipated by the parties when the K was made; and (2) it is fair and equitable.

Question 60

Illusory Promises

Answer 60

Consideration must exist on both sides of a K. If only one party is bound to perform, the promise is illusory and will not be enforced. (requirements and output Ks are valid and satisfy mutuality requirement)