Offer & Acceptance Flashcards

1
Q

Offer

A

Requires:

  • an outward manifestation (oral, written, conduct); and
  • the signal that acceptance will conclude the deal (power of acceptance)
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2
Q

Offer: Signal

A

An offer must signal to the would-be offeree that the latter’s agreement will conclude the deal. The k inquiry is whether the party making the communication expressed a willingness to commit without further assent.

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3
Q

Multiple Offeree Situations (CAR)

A
  • (Commercial advertisements)- offers in catalogs, price lists, and circulars
  • (Auctions)- situations where an item is sold to the highest bidder
  • (Reward Offers)- general offers that name a price for a service but do not specify an offeree
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4
Q

Commercial Advertisements: American Advertising Rule

A

Advertisements addressed to multiple recipients are treated as invitations for offers rather than offers.

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5
Q

Exception to the American Advertising Rule

A

Language such as “first-come, first-served,” or “first 10 customers only,” constitutes an offer.

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6
Q

Power of Acceptance

A

When an offer is made, the offeree has the power of acceptance before that power is terminated, at which point in time a legally binding K is formed.

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7
Q

4 Ways to Terminate the Power of Acceptance

A
  • Lapse of time
  • Death or incapacity of either party
  • Revocation by offeror
  • Rejection by the offeree
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8
Q

Lapse of Time

A

An offeree’s power of acceptance terminates at the time stated in the offer. If no time is stated, the power of acceptance will terminate after a reasonable time.

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9
Q

Lapse of Time: Face-to-Face Conversation Rule

A

An offer made by one person to another in a face-to-face conversation is ordinarily deemed to remain open until the close of the conversation.

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10
Q

Revocation by Offeror: Rule of Free Revocability

A

An offeror can revoke an offer so long as:

  • it occurs prior to acceptance; and
  • is effectively communicated
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11
Q

Revocation by Offeror: Effective Communication

A

Include:

  • Direct Revocation
  • Indirect Revocation
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12
Q

Direct Revocation

A

Where the offeror communicates the revocation directly with the offeree

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13
Q

Indirect Revocation

A

When the offeree learns of the offeror’s intention to abandon the deal from a third-party source, the offer will terminate if:

  • the offeror has taken definite action inconsistent with the intention to enter the proposed K; and
  • the offeree acquires reliable information of the offeror’s inconsistent action.
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14
Q

Revocation to Multiple Offerees: Functional Equivalents Rule

A

The power of acceptance is terminated when the notice of revocation is communicated by advertisement or other general notification equivalent to that used for the offer and no better means of notification is reasonably available.

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15
Q

Exception to the Revocability of Offers

A

Include:

  • A CL option K
  • Firm Offer Under the UCC
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16
Q

Enforceable Option K

A

Includes:

  • An offer
  • A subsidiary promise to keep the offer open
  • A valid mechanism for securing enforcement of the subsidiary promise (often accomplished with consideration)
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17
Q

Special Rule for Construction Ks

A

The majority rule is that where a general contractor uses a particular subcontractor’s bid to formulate his own, an implied option K is created via promissory estoppel.

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18
Q

UCC Firm Offer Rule

A

A merchant can make a firm offer (an irrevocable offer) to either buy or sell goods without consideration so long as:

  • the offer is made by a merchant
  • the offer is made in a writing signed by the merchant
  • the offer expressly states by its terms that it will be held open
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19
Q

Time Period of Firm Offers

A

A firm offer that meets all of the conditions becomes irrevocable either for the period of time stated in the firm offer or for a reasonable time if no time is specified.

-but the period is limited to 3 months unless a merchant creates a valid CL option K.

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20
Q

Rejection by the Offeree

A

Can occur in three ways:

  • outright rejection
  • rejection via a counteroffer; and
  • rejection via nonconforming acceptance
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21
Q

Mirror Image Rule

A

Requires that acceptance must mirror the terms of the offer, and any variation results in a counteroffer and rejection of the initial offer.

22
Q

Exception to the Mirror Image Rule

A

The UCC rejects the rule in two situations:

  • the shipment of nonconforming goods
  • battle of the forms
23
Q

Seller’s Shipment of Conforming and Nonconforming Goods

A

A seller can accept a buyer’s offer to purchase goods for prompt or current shipment in one of three ways:

  • 1) a promise to ship goods in conformity with the terms of the offer, such as an acknowledgement of order form sent to the buyer
  • 2) a prompt or current shipment of the goods in conformity with the terms of the offer; or
  • 3) the seller can also accept the buyer’s offer by shipping nonconforming goods
24
Q

Exception to Seller’s Shipment of Conforming and Nonconforming Goods

A
  • The shipment of non-conforming goods will not constitute acceptance if the seller notifies the buyer that the shipment is offered only as an “accommodation” to the buyer
  • In such circumstances, this is considered a counteroffer
25
Q

Battle of the Forms

A

When a buyer places an order (the offer) and the seller’s acceptance form contains additional terms or different terms (this creates a nonconforming acceptance)

26
Q

Nonconforming Acceptance v. Conditional Acceptance

A

Unless acceptance is expressly made conditional on assent to the additional or different terms (e.g. a conditional acceptance) the nonconforming acceptance will operate as an effective acceptance of the offer, forming a valid and enforceable K.

27
Q

Confirmation of Nonconforming Terms: When at Least One Party is not a Merchant

A

-The additional or different terms are construed as proposals for addition to the K. Therefore, they are not a part of K unless offeror expressly agrees to the additional terms

28
Q

Confirmation of Nonconforming Terms: When Both Parties are Merchants (Additional Terms)

A

Additional terms become a part of the K unless:

  • the offer expressly limits acceptance to the terms of the offer;
  • the offeror objects to the additional terms within a reasonable time after receiving notice of them; or
  • the additional terms would materially alter the K (would result in surprise or hardship without express awareness)
29
Q

Types of Additional Terms that Often Materially Alter the K

A

Include arbitration clauses

30
Q

Confirmation of Nonconforming Terms: Both Parties are Merchants (Different Terms)

A

The majority of courts employ the knockout rule and omit both the offeror’s original provision and the offeree’s differing provision from the resulting K.

31
Q

Written Confirmations Following Personal/Telephonic Communications

A

When a party follows up with a written confirmation containing additional or different terms will depend on merchant status of the parties.

32
Q

Written Confirmations Following Personal/Telephonic Communications: When One Party is Not a Merchant

A

The additional or different terms are mere proposals for addition to the K which the receiving party is free to accept or reject.

33
Q

Written Confirmations Following Personal/Telephonic Communications: Between Merchants

A

Any additional terms are automatically part of the K unless:

  • they would materially alter the K; or
  • the receiving party objects to them within a reasonable time

Any different terms are proposals

Remember, if both merchants send written confirmations and those confirmations contain conflicting terms, then the knockout rule applies and neither party’s term is in the K.

34
Q

Counteroffers v. Inquiries

A

An offeree may test the waters by making a “mere inquiry” about the offeror’s willingness to negotiate without creating a counteroffer and terminating the power of acceptance

35
Q

Revival of the Offer

A

An offeror has the power to revive an offer that the offeree has rejected, and with it the offeree’s power of acceptance.

36
Q

Bilateral Ks & Unilateral Ks

A

An offer can require acceptance by either a promise or a performance

  • (bilateral K)- a promise being exchanged for a promise
  • (unilateral K)- an offer in exchange for a performance
37
Q

Types of Unilateral Ks

A

Unilateral Ks are quite rare in practice an typically fall into two categories:

  • reward offers
  • real estate brokerage agreements
38
Q

When there is a Unilateral K

A
  • The offeror is bound only when the offeree completes performance in accordance with the terms of the offer
  • The offeree is never bound to perform because he has never promised to perform
39
Q

Ambiguous Ks Regarding Bilateral v. Unilateral

A

The offeree is free to choose the means of acceptance (either promise or performance)

40
Q

Revocation of a Unilateral K: Modern Majority Rule

A
  • Once offeree begins performance, an option K is created and the offeror may not revoke unless:
  • the offeree is engaged in “mere preparations” to perform rather than the beginning of performance itself
41
Q

Revocation of a Unilateral K: CL Minority Rule

A

Under CL< the offeror was free to revoke the unilateral offer up until the moment that the offeree actually completed performance.

42
Q

Communicating Acceptance Under CL

A

There are only two general req. to constitute effective acceptance

  • under the mirror image rule, the acceptance must mirror the terms of the offer; and
  • the acceptance must be communicated to the offeror
43
Q

Means of Communicating Acceptance

A
  • If the offer stipulates a particular means of communicating acceptance, then the offeree must utilize those means in order to make an effective acceptance.
  • If the offer is silent, then the offeree is free to use any reasonable means of transmission.
44
Q

Reasonable Means of Transmission

A

A means of transmission is reasonable if it is:

  • the means used by the offeror
  • the means customarily used in similar transactions; or
  • the means of communication that is equivalent in expeditiousness and reliability to the means used by the offeror
45
Q

Mailbox Rule

A

Holds that acceptance takes effect when it is communicated (placed in mail) so long as it is properly posted (with correct address and postage amount), even if it is lost in transmission and offeror has no knowledge of acceptance.

  • Only applies to bilateral Ks.
  • Only applies to acceptance.
46
Q

K Around the Mailbox Rule

A

The maker is the master of the offer (therefore, they can create specific requirements for effective acceptance).

47
Q

Mailbox Rule: When Offeree Sends a Rejection and an Acceptance

A

The mailbox rule does not apply (receipt is required):

  • if the acceptance reaches the offeror first –> the acceptance is effective and parties are bound to K
  • if the rejection reaches the offeror first –> the offeree’s power of acceptance is terminated and the subsequently arriving acceptance becomes a counteroffer
48
Q

Three Instances Where the Requirement that Acceptance Be Communicated to the Offeror May Not Apply

A
  • Acceptance by silence
  • Acceptance by performance
  • Acceptance by mail or other correspondence
49
Q

Acceptance by Silence

A

Is only permissible in three circumstances:

  • when offeree takes benefit of offeror’s services with a resonable opp to reject them and reason to know the offeror’s intention
  • where the offeror has given the offeree reason to understand that acceptance may be communicated by silence and the offeree intends to accept
  • because of previous dealings of other circumstances, it is reasonable that the offeree should notify the offeror if he does not intend to accept
50
Q

Acceptance by Performance

A

The maker of an offer to enter unilateral K is free to make communication of acceptance a part of the required perfomance.