Offer & Acceptance Flashcards
Offer
(Second Restatement § 24)
An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
Requirements of a Bargain
(Second Restatement § 17)
The formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
Manifestation of Mutual Assent
(Second Restatement § 18)
Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance.
Offer and Acceptance Flow Chart
Conduct as Manifestation of Assent
(Second Restatement § 19)
(1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.
(2) The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
(3) The conduct of a party may manifest assent even though he does not in fact assent. In such cases, a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause.
Option Contracts
An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer.
Preliminary Negotiations
A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.
Certainty
(1) Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.
(2) The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.
(3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.
Acceptance
A manifestation of assent to the terms of the offer in the manner invited or required by the offeror.
The Four Terminators before Acceptance:
- Lapse of Time (Mailbox Rule)
- Death of the Offeror
- Rejection by the Offeree
- Valid Revocation
Rejection
(1) An offeree’s power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention.
(2) A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement.
Counter-Offers
(1) A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.
(2) An offeree’s power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree.
Qualified acceptance, inquiry, or separate offer
A qualified or conditional acceptance, which purports to accept the original offer but makes acceptance expressly conditional on assent to additional or different terms.
Time when Rejection or Counter-Offer Terminates the Power of Acceptance
Rejection or counter-offer by mail or telegram does not terminate the power of acceptance until received by the offeror, but limits the power so that a letter or telegram of acceptance started after the sending of an otherwise effective rejection or counter-offer is only a counter-offer unless the acceptance is received by the offeror before he receives the rejection or counter-offer.
Lapse of Time
(1) An offeree’s power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time.
(2) What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made.
(3) Unless otherwise indicated by the language or the circumstances, and subject to the rule stated in § 49, an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which the offer is received.
Direct Negotiations
Where the parties bargain face to face or over the telephone, the time for acceptance does not ordinarily extend beyond the end of the conversation unless a contrary intention is indicated.
Speculative Transactions
The more significant the risk, the greater is the need for limitation, and hence the shorter is the time which is reasonable.
Mirror Image Rule
Under Common Law, acceptance must mirror offer, any change in acceptance equals a counteroffer.
Advertisement is an offer when…
the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract.
Solicitation for an Offer (Elements)
- Not directed to a specific party;
- Assent by the offeree won’t conclude the bargain;
- There is no history of communication between the bargaining parties.
Mailbox Rule
A. Effective when received:
- offers
- revocations
- rejections
B. Effective when sent:
- Acceptances
Counter-Offer
A. A counteroffer is a rejection.
B. A qualified acceptance is considered to be a rejection and a counteroffer.
True Option Contract
- A subsidiary promise to keep offer open
- supported by consideration.
When is a Unilateral Contract irrevocable?
The offeror is bound if one of three things is true (a, b, or c).
a. The offeree begins performance.
b. The offeree tenders performance. A tender is:
i. The unconditional offer of X,
ii. present willingness to give X, and
iii. manifested ability to give X, usually by presenting X.
iv. Example: payment of loan, payment for goods
c. The offeree tenders the beginning of a performance.
Example: mortgage
When is a Bilateral Contract irrevocable?
The offeree relies on the offer before accepting it.
a. The offer induces action or forbearance of substantial nature on the part of offeree before acceptance, and
b. the offeror should have reasonably expected action or forbearance of the offeree.
UCC Gap-Filler Terms
UCC Ks must contain a stated quantity; if other terms are missing, UCC Article 2 contains gap-filler provisions to fill in missing terms
- Price - reasonable price at time of delivery
- Place - seller’s place of business
- Time for shipment or delivery - reasonable time
- Time for payment - time and place at which buyer is to receive goods
- Assortment - buyer’s option
Methods of revocation
- Offeror makes an unambiguous statement of revocation to the offeree, or
- Offeree becomes aware of unambiguous conduct by offeror indicating an unwillingness or inability to contract
Irrevocable offers
-
Detrimental reliance - if an offeree detrimentally relies on an offer, it is irrevocable for a reasonable time
- Reliance must be reasonable
-
Unilateral Ks - start of performance makes the offer irrevocable for a reasonable time to complete performance
- Performance must go beyond mere preparation
- Option Ks and UCC firm Offers
Option Contract
- A promise by offeree to not revoke a standing offer
- A promise by offeror to keep the offer open for offeree
- Consideration required from the offeree, which in itself forms a separate K
- The offer is irrevocable for the given time period or an otherwise reasonable period
Merchant’s firm offer (UCC)
- Signed writing that provides assurances that the offer will be held open
- Offer is irrevocable for the time stated or a reasonable time not to exceed three months
- No consideration required (distinguished from option Ks)
Methods of Rejection
-
Express rejection
- Offeree expressly rejects the offer
-
Counteroffer
- Terminates the original offer
- New offer concerning the same subject matter but with different terms
-
Conditional acceptance
- An acceptance followed by terms such as “only if,” “so long as,” etc.
- Terminates the original offer and becomes a new offer and/or counteroffer
-
Acceptance with additional terms
- Acceptance must mirror the offer under common law
- Under UCC Article 2, acceptance that does not mirror the offer may be valid for K formation
Three steps of Offer Analysis
- Intention / commitment to make an offer;
- Certainty of the terms of the offer; and
- Communication of the offer to the offeree.
Clauses that do not materially alter a contract
- Clauses setting forth the seller’s exemption due to force majeure;
- Remedy limitations;
- A reasonable time for complaints and inspection;
- Interest on overdue invoices
Time when the power of acceptance typically ends
- Time specified in the offer; or
- A reasonable time
Examples of Unilateral Contracts
- Employee Bonus Plan
- Rebates
- Rewards
Advertisements are solicitations when:
- They are not directed to a specific party;
- Assent by the offeree won’t conclude the bargain; and
- There is no history of communication between the bargaining parties.
When an Offer is ambiguous, then:
Acceptance can be either by promise or performance.
Dickered Terms
Essential Material Terms
Battle of the Forms
UCC 2–207(1)
Varies the “mirror-image” rule by treating the seller’s confirmation as an acceptance of the offer rather than a counter-offer even though it contains terms that are “additional to or different from” those that appear in the buyer’s order form (or that were agreed to orally).
If the second form or document does not agree on the “dickered terms” or the essential material terms, then it does not constitute an “expression of acceptance” and the inquiry ends here.
Battle of the Forms
UCC 2–207(2)
Additional Terms:
First, the additional terms are considered mere “proposals for addition” to the contract and are excluded (unless accepted).
Second, if the parties are merchants, such terms become part of the contract unless:
- (1) the offer expressly limited acceptance to the terms of the offer;
- (2) they materially altered it; or
- (3) notification of objection was already given or given within a reasonable time after notification.
Battle of the Forms
Subsection 2: Three Approaches to “different” terms
- One approach treats different terms the same as additional terms and applies subsection (2) to different terms;
- A second approach simply disregards different terms contained in the acceptance since they are not mentioned in subsection (2) and therefore are not to be construed as proposals that can become part of the contract; and
- A third approach applies the “knockout rule” where the conflicting terms on the parties’ offer and acceptance “knock each other out” and neither term becomes part of the contract.
Battle of the Forms
UCC 2–207(3)
Applicable when the parties’ writings do not establish a contract but one is evidenced by their conduct.
Here, the goods may have been shipped, accepted, and paid for before a dispute arises and there is no question that a contract had been formed. In such cases, the terms of the contract consist of “those terms on which the writings of the parties agree” together with the UCC’s “supplementary terms.” The additional or different terms fall by the wayside.
Offer
An offer is a promise in exchange for performance or return promise by another party with an objective manifestation of an intent to enter into a contract.
Mutual Assent
Agreement by both parties to a contract.
Mutual assent must be proven objectively and is often established by showing an offer and acceptance (e.g., an offer to do X in exchange for Y, followed by an acceptance of that offer).
Definiteness
An element of a contract where the terms are definite enough to determine performance obligations and remedies.
