Mutual Assent - Offer and Exceptance

Question 1

Mutual Assent

Answer 1

For an agreement to be enforced as a contract, there must be mutual assent. In other words, one party must accept the other’s offer.

Whether MA is present will be determined by an objective standard; that is, did words or conduct manifest a present intention to enter into a contract?

Question 2

Was there a contract?

Answer 2

The court will ask:
* Was there mutual assent?
* Was there consideration (or some substitute for consideration)?
* Are there nay defenses to creation o fthe contract?

Question 3

The Offer

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 contract on the basis of the offered terms.

Question 4

The Offer

Did the communication create a reasonable expectation?

Answer 4

To determine if a reasonable expectation was created, ask:
* Was there an expression of a promise, undertaking, or commitment?
* Were there certainty and definiteness in teh essential terms?
* Was the communication of the above to the offeree?

Question 5

The Offer

Promise, Undertaking, or Commitment

Answer 5

For a communication to be an offer, it must contain a promise, undertaking, or commitment ot enter into a contract, rather than a mere invitation ot begin preliminary negotiations; that is, there must be an intent to enter into a contract.

ASK: Reasonable Person - Would an objectiv ereasonable person think it was an offer?

Question 6

The Offer

Language

Answer 6

The language used must show that an offer was or was not intended.

“i offer”
“I promise”

these phrases are helpful, but not definite

Question 7

The Offer

Surrounding Circumstances

Answer 7

The circumstances surroundign the language is considered by courts in determining whether an offer exists.

Question 8

The Offer

Prior Practices and Relationship of the Parties

Answer 8

In determining whether certain remarks constitute an offer rather than preliminary negotiations ,a court will look to the prior relationship and practice of the parties involved.

Question 9

The Offer

Method of Communication: Broad Communications Media

Answer 9

The broader the communicating media, the more likely it is tha tthe ocurts will view the communication as merely the solicitation of an offer.

Question 10

The Offer

Method of Communication: Advertisements

Answer 10

Advertisements, catalogs, circular letters, and the like containing price quotations are usually construed as mere invitations for offers.

Exception to Advertisements: if it is specific, i.e., - 3 coats for sale, first come/first serve, $1/coat

Question 11

The Offer

Definite and Certain Terms

Answer 11

An offer must be definite and certain in its terms. Teh basic inquiry is whether enough of hte essential terms have been provided so that a contract including them is capable of being enforced.

A statement must sufficiently identify the offeree or a class to which they belong to justify the inference that the offeror intended to create a power of acceptance.

The subject matter of the deal must be certain, because a court can enforce a promise only if it can tell with reasonable accuracy what the promise is.

Question 12

The Offer - Requirements for Specific Types of Contracts

Real Estate Transactions

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Answer 12

An offer involving realty must identify the land and the price terms. The land must be identified with some particularity but a deed description isn’t required.

Most courts will not supply a missing price term for realty.

Question 13

The Offer - Requirements for Specific Types of Contracts

Sale of Goods

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Answer 13

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

Question 14

The Offer - Requirements for Specific Types of Contracts

Requirements Contract
Output Contract

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Answer 14

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 form the seller.

For both contracts, it is assumed that the parties will act in good faith; so, there can’t be a tender of or a demand for a quantity unreasonably disproportionate to (1) any stated estimate, or (2) [in the absence of a stated estimate] any normal or otherwise comparable prior output or requirements.

Question 15

The Offer - Requirements for Specific Types of Contracts

Employment and Other Services

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Answer 15

In contracts for employment, if teh duration of the employment is not specified, the offer, if accepted, si 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 16

Definiteness of Subject Matter

Missing Terms

Answer 16

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

In such a case, the majority of jx’s and Art 2 hold that hte court can supply reasonable terms for those that are missing.

Question 17

Definiteness of Subject Matter

Price

Answer 17

Except in contracts for real property, the failure to state the price doesn’t prevent the formation of a contract if hte parties intended to form a contract without hte price being settled.

Note that if a contract for the sale of goods is missing a price term, Art 2 provides that ht eprice will be a reasonable price at the time of delivery.

Question 18

Definiteness of Subject Matter

Time

Answer 18

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

Question 19

Definiteness of Subject Matter

Vague Terms

Answer 19

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 contract too vague to be enforced.

However, uncertainty can be cured by part performance that clarifies the vague term or by acceptacne of full performance.

Question 20

The Offer

Communication to the Offeree

Answer 20

To have the power to accept, the offeree must have knowledge of the offer.

Therefore, the proposal must be communicated to them.

Question 21

The Offer - Termination

Termination by the Offeree
Lapse of Time

Answer 21

The offeree must accept the offer within the time specified or, if no time period is psecified, within a reasonable time.

A reasonable amount of time is a question of fact that depends on all the circumstances at the time the offer and attempted acceptance are made, such as the nature of hte contract, the parties’ purposes, or their course of dealing.

Ask: Is the offer still open or has it lapsed due to a reasonble time?

This can be a very short period or a very long period.

Question 22

The Offer - Termination

Termination by Offeree
Rejection

Answer 22

Express Rejection - an express rejection is a statement by the offeree that htey do not intend to accept the offer. Such a rejection with terminate the offer.

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

Mere Inquiry is not a rejection; a Counteroffer is a rejection.

Question 23

The Offer - Termination

Mere Inquiry v. Counteroffer

Answer 23

An inquiry won’t terminate the offer when it si consistent withthe idea that hte offeree is still keeping the original proposal under consideration (i.e., “would you consider . . .”)

The test is whether a reasonable person would believe that the original offer had been rejected.

Question 24

The Offer - Termination

Conditional Acceptance As Rejection

Answer 24

When an acceptance is made expressly conditional on teh acceptance of new terms, it is a rejection of hte offer.

If the parties ship or accept goods after a conditional acceptance, a contract is formed by their conduct and the new terms are nto included.

Conditional Acceptance = rejection + new offer

Question 25

The Offer - Termination

Termination by the Offeree
Rejection - When is it effective?

Answer 25

A rejection is effective when received by the offeror.

Question 26

The offer - termination

Termination by the Offeree
Rejection of Option

HIGHLY TESTED

Answer 26

Because an option is a contract to keep an offer open, a rejection of or a counteroffer to an option does not constitute a termiantion of the offer.

The offeree is still free to accep tthe original offer within teh option period unless the offereor has detrimentally relied on the offeree’s rejection.

Question 27

the offer - termination

Termination by Offeror
Revocation

Answer 27

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

An offeror may revoke by directly communicating the revocation to hte offeree.

An offer made by publication can be directlyrevoked only by publication through comparable menas.

An offer may also be revoked indirectly if the offeree recieves
1. correct information,
2. from a reliable source,
3. of acts of the offeror that would indicate to a reasonable person that hte offeror no longer wishes to make theoffer.

Question 28

Termination by the Offeror
When is Revocation Effective?

Answer 28

A recocation is generally effective when received by the offeree. Where as revocation by publication is effective when published.

Question 29

Termination by the Offeror
Limitations on Offeror’s Power to Revoke

Answer 29

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. Option Contract
2. Art. 2 Merchant Firm Offer Rule
3. Detrimental Reliance
4. Starting to Perform under unilateral contract

Question 30

Option Contract

Answer 30

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

Question 31

Merchant Firm Offer Under Art 2

Answer 31

Under Art 2:
1. if a merchant,
2. offers to buy or sell goods in a signed writing, and
3. the writing gives assuracnes that it will be held open,

the offer is not revocable for lack of consideration during the time state, or if no time is stated, for a reasonable time (but in no even may such period exceed 3 months).

Question 32

Detrimental Reliance

Answer 32

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

Question 33

Beginning Performance in Response to True Unilateral Contract Offer

Answer 33

An offer for a true unilateral contract becomes irrevocable one performance has begun. The 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.

Question 34

Beginning Performance v. Preparation to Perform

Answer 34

Substantial preparations to perform (as opposed to beginning 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 35

Beginning Performance - Offer indifferent as to manner of acceptance

Answer 35

Most offers are indifferent as to the manner of accepantance, and thus, a bilateral contract may be formed upon the start of performance by the offeree.

Therefore, once the offeree begins performance, the contract is complete and revocation beocmes impossible.

BUT NOTE: Notificaiton of the start of performance may be necessary.

Question 36

Termination by Operation of Law

Termination by Operation of Law

Answer 36

The following events will terminate an offer by operation of law:

1. Death or insanity of either party (Death or insantiy need not be communicated to the other party)
2. Destruction of the proposed contract’s subject matter, OR
3. Supervening illegality

Question 37

The Acceptance

Who May Accept

Answer 37

Generally, only the person to whom an offer is addressed has the power of acceptance

Question 38

The Acceptance

Know of the Offer

Answer 38

The offeree must know of hte offer in order to accept it, and this is true whether the offer is a bilateral or unilateral contract.

Question 39

The Acceptance

Acceptance of Bilateral Contract

Answer 39

Unless an offer specifically provides that it may be accepted only through performance, it will be construed as an offer to enter into a bilateral contract and may be accepted either by a promise to perform or by the beginning of performance.

Question 40

The Acceptance

Communication

Answer 40

Unless the offer provieds otherwise, acceptacne of an offer to enter into a bilateral contract must be communicated to the offeror.

Question 41

The Acceptance

Silence as Acceptance

Answer 41

Generally, an offeree can’t be forced to speak or have their silence treated as acceptance.

However, a court may find silence works as an acceptacne if, because of prior dealings or trade practices, it would be commercially reasonable fo rthe offeror to consider silence an acceptance.

Also, if the recipient of services knows or should have known that hte services were being rendered with the expectation of compensation and, by a word, could have prevented the mistake, the recipient may be held to have accepted the offer if they fail to speak.

Question 42

The Acceptance

Mehtod of Acceptance

Answer 42

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

Question 43

The Acceptance

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 acceptacne either by a promise to ship or by current or prompt shipment of conforming or nonconforming goods.

Question 44

The Acceptance

Acceptance must be unequivocal
“Mirror Image Rule”

Answer 44

Traditional Contract law insists on an absolute and unequivocal acceptacne of each and every term of the offer (the mirror image rule). At CL, any different or additional terms in the acceptance make the response **a rejection and counteroffer. **

Question 45

The Acceptance

Acceptance of Offer for Unilateral Contract

Answer 45

If an offer provides that it may be accepted only by perofrmance (that is, an offer for a unilateral contract), there are particular rules to note:

1. Completion of performance - a unilateral contract is not accepted unil performance is completed. Offeree is not obligated to complete performance merely because the have begun performance.
2. Notice - The offeree is not required to give the offeror notice that he has begun the requested performacne 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 notice; or (2) the offeree’s performance would normally come to the offeror’s attention within a reasonable time.

Question 46

The Acceptance

Acceptance Under Art 2
Offers to Buy Goods for Current or Prompt Shipment

Answer 46

An offer to buy goods for current or prompt shipment may be accepted by either a promise to ship or by a shipment of conforming or nonconforming goods.

Question 47

The Acceptance

Acceptance Under Art 2
Shipment of Nonconforming Goods

Answer 47

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

The buyer is not required to accept accomodation goods and may reject them. If the buyer rejects, the shipper isn’t in breach and may reclaim the accommodation goods, becuase the tender does not constitute an acceptance of the buyer’s original offer.

Note: the accomodation shipment rule only applies when shipment is used as a form of acceptance.

Question 48

The Acceptance

Acceptance Under Acticle 2
Battle of the Forms Provision

Answer 48

Article 2 dispells the mirror image rule, providing instead that the inclusion of additional or different terms by the offeree in a definitite and timely acceptance does not constitute a rejection and counteroffer, but rather is effective as an acceptacne, unless the acceptance is expressly made conditional on assent to the additional or different terms.

Whether the additonal or different terms become part of the contract depends on whether or nto both parties are merchants.

Question 49

The Acceptance

Battle of the Forms Provision
Terms Included

Answer 49

Because Art 2 provides that a contract can be formed even though the terms of the acceptacne don’t match the terms of the offer, Article 2 also has specific rules for determining what terms are included int eh contract insuch a case. These rules are dependent on whether both parties to the transaction are merchants.

Question 50

The Acceptance

Battle of Forms Provision
Contracts Involving Nonmerchant

Answer 50

Terms of the Offer Govern

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

Question 51

The Acceptance

Battle of Forms Provision
Contracts Between Merchants

Answer 51

Additional Terms Usually Included

If both parties to the contract are merchants, additional terms in teh acceptance will be included int eh contract unless:

1. they materially alter the original terms of the offer, such as by changing a party’s risk of 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 52

The Acceptance

Battle of Forms Provision
Merchant’s Confimatory Memo

Answer 52

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

Question 53

The Acceptance

Moment of Mutual Assent Uncertain

Answer 53

In situations in which it cannot be determined with certainty which specific communication was the offer and which the acceptance but the parties act as though there is a contract, the UCC considers this a binding contract even though teh moment of its making is uncertain.

Question 54

The Acceptane

When Effective?
The Mailbox Rule

Answer 54

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 taht 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 whihc case whichever arrives first is effective.
4. The offeree sends an acceptance and then a rejection, in which case the acceptance is effective (that is, the mailbox rule applies) unless the rejection arrives first and the offeror detrimentally relies on it.

Question 55

The Acceptance

Acceptance by Unauthorized Means

Answer 55

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.