Offer & Acceptance

Question 1

Offer

(Second Restatement § 24)

Answer 1

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.

Question 2

Requirements of a Bargain

(Second Restatement § 17)

Answer 2

The formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.

Question 3

Manifestation of Mutual Assent

(Second Restatement § 18)

Answer 3

Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance.

Question 4

Offer and Acceptance Flow Chart

Answer 4

Question 5

Conduct as Manifestation of Assent

(Second Restatement § 19)

Answer 5

(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.

Question 6

Option Contracts

Answer 6

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.

Question 7

Preliminary Negotiations

Answer 7

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.

Question 8

Certainty

Answer 8

(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.

Question 9

Acceptance

Answer 9

A manifestation of assent to the terms of the offer in the manner invited or required by the offeror.

Question 10

The Four Terminators before Acceptance:

Answer 10

1. Lapse of Time (Mailbox Rule)
2. Death of the Offeror
3. Rejection by the Offeree
4. Valid Revocation

Question 11

Rejection

Answer 11

(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.

Question 12

Counter-Offers

Answer 12

(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.

Question 13

Qualified acceptance, inquiry, or separate offer

Answer 13

A qualified or conditional acceptance, which purports to accept the original offer but makes acceptance expressly conditional on assent to additional or different terms.

Question 14

Time when Rejection or Counter-Offer Terminates the Power of Acceptance

Answer 14

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.

Question 15

Lapse of Time

Answer 15

(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.

Question 16

Direct Negotiations

Answer 16

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.

Question 17

Speculative Transactions

Answer 17

The more significant the risk, the greater is the need for limitation, and hence the shorter is the time which is reasonable.

Question 18

Mirror Image Rule

Answer 18

Under Common Law, acceptance must mirror offer, any change in acceptance equals a counteroffer.

Question 19

Advertisement is an offer when…

Answer 19

the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract.

Question 20

Solicitation for an Offer (Elements)

Answer 20

1. Not directed to a specific party;
2. Assent by the offeree won’t conclude the bargain;
3. There is no history of communication between the bargaining parties.

Question 21

Mailbox Rule

Answer 21

A. Effective when received:

1. offers
2. revocations
3. rejections

B. Effective when sent:

1. Acceptances

Question 22

Counter-Offer

Answer 22

A. A counteroffer is a rejection.

B. A qualified acceptance is considered to be a rejection and a counteroffer.

Question 23

True Option Contract

Answer 23

1. A subsidiary promise to keep offer open
2. supported by consideration.

Question 24

When is a Unilateral Contract irrevocable?

Answer 24

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

Question 25

When is a Bilateral Contract irrevocable?

Answer 25

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.

Question 26

UCC Gap-Filler Terms

Answer 26

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

Question 27

Methods of revocation

Answer 27

1. Offeror makes an unambiguous statement of revocation to the offeree, or
2. Offeree becomes aware of unambiguous conduct by offeror indicating an unwillingness or inability to contract

Question 28

Irrevocable offers

Answer 28

• 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

Question 29

Option Contract

Answer 29

• 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

Question 30

Merchant’s firm offer (UCC)

Answer 30

• 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)

Question 31

Methods of Rejection

Answer 31

1. Express rejection
   
   • Offeree expressly rejects the offer
2. Counteroffer
   
   • Terminates the original offer
   • New offer concerning the same subject matter but with different terms
3. 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
4. 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

Question 32

Three steps of Offer Analysis

Answer 32

1. Intention / commitment to make an offer;
2. Certainty of the terms of the offer; and
3. Communication of the offer to the offeree.

Question 33

Clauses that do not materially alter a contract

Answer 33

• Clauses setting forth the seller’s exemption due to force majeure;
• Remedy limitations;
• A reasonable time for complaints and inspection;
• Interest on overdue invoices

Question 34

Time when the power of acceptance typically ends

Answer 34

1. Time specified in the offer; or
2. A reasonable time

Question 35

Examples of Unilateral Contracts

Answer 35

1. Employee Bonus Plan
2. Rebates
3. Rewards

Question 36

Advertisements are solicitations when:

Answer 36

1. They are not directed to a specific party;
2. Assent by the offeree won’t conclude the bargain; and
3. There is no history of communication between the bargaining parties.

Question 37

When an Offer is ambiguous, then:

Answer 37

Acceptance can be either by promise or performance.

Question 38

Dickered Terms

Answer 38

Essential Material Terms

Question 39

Battle of the Forms

UCC 2–207(1)

Answer 39

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.

Question 40

Battle of the Forms

UCC 2–207(2)

Answer 40

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.

Question 41

Battle of the Forms

Subsection 2: Three Approaches to “different” terms

Answer 41

1. One approach treats different terms the same as additional terms and applies subsection (2) to different terms;
2. 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
3. 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.

Question 42

Battle of the Forms

UCC 2–207(3)

Answer 42

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.

Question 43

Offer

Answer 43

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.

Question 44

Mutual Assent

Answer 44

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).

Question 45

Definiteness

Answer 45

An element of a contract where the terms are definite enough to determine performance obligations and remedies.