Offer & Acceptance [IN PROGRESS] Flashcards
Embry Test [Objective Theory of Contracts]
(1) Objective: A reasonable person lookinb at counterparty’s conduct would think that counterparty intended to make a K + (2) Subjective: the party asserting the K actually thought there was a K
If an offeree reasonably could conclude
that their assent to an offer would enter them into a legally binding contract
then there is an offer
An offer is defined as
the manifestation of intent to enter into a
bargain as to justify an offeree in that their acceptance will create legal obligations for both parties
offer creates in the offeree
power of acceptance
An offer has three components
- The offeror manifests the intention to enter into bargain,
- Which empowers the offeree to accept
- Clear and definite terms
Acceptance
manifestation of intent to enter into a
legally binding contract through the assent of given terms
A unilateral contract can only be accepted
with
performance
A bilateral contract can be accepted through
promise or performance
Restatement of Contracts § 45
Where an offeree intends to accept a unilateral
contract, failure to complete the terms does not result in a breach of contract action
Start of performance under a unilateral contract prevents
the offeror from revoking the offer. Carlill v. Carbolic Smokeball; Petterson v. Pattburg (holding that where the performance is cash tender, performance is the tendering of money).
Bilateral contracts ______ be revoked once begun
cannot
Restatement of Contracts
§ 62
An offer that purports to accept either promise or performance can constitute a breach if
the offeree fails to perform the terms.
Preliminary Negotiations are
invitations to offer NOT offers
Explain how advertisements are general category of Prelim Negotiations
“Shoes 50% off” lacks important characteristics of an offer to make it binding, such as quantity, who can accept, etc. Nebraska Seed v. Harsh.
BUT Where the offer is specific enough to convey the terms required of a contract, sometimes an advertisement can form a binding offer. Lefkowitz v. Minneapolis
Give examples of a reasonable joke that is not a valid offer
ridiculous price difference between the purchase price and what was offered. Leonard v. Pepsico.
An offeree cannot accept unilateral reward contracts if
they do not know about them. Generally, the offeree must know about the offer to accept.
An offer may only be accepted by
the person in whom the offeror
intended to create the power of acceptance.
The acceptance can only be in response
to an offer
Where method of acceptance is not specified
any reasonable manner of
acceptance may be undertaken
Who can determine the manner in which an offer is accepted?
The offeror, as the “master of the offer”
This can include the suspension of the “mailbox rule”
“Mailbox Rule”
the general and common law rule is that acceptance is effective upon dispatch “(Restatement of Contracts §63)
Restatement of Contracts § 62
If it is unclear whether the offer calls for promise or performance, an offeree is free to decide in the face of ambiguity.
(where ambiguous, the offeree can decide)
If it is unclear (ambiguous) whether the offer calls for promise or performance
the offeree can decide (Restatement of Contracts § 62)
Silence usually _______ constitute acceptance
does not
When can silence constitute acceptance
- Offeree takes the benefit of the service after having reasonable time to reject it;
- Offeror has given reason to understand that silence will accept the offer, and such silence is reasonable under the circumstances;
- Previous course of dealings makes it reasonable to believe that offeree’s silence is acceptance; and
- Offeree acts in a manner inconsistent with the offeror’s ownership, such as exerting dominion or control overgoods.
(Restatement of Contracts § 69; Hobbs v.
Massasoit Whip Co.)
(Remember: silence can mean yes)
“Implied” contracts
A contract may be created where the factual circumstances would lead a court to hold that failure to act would create a contract.
Common Law “Mirror Image” Rule
an offeree’s acceptance of an offer is only
valid if they assent to the exact terms provided in the offer
Any deviation, no matter how minor, constitutes a counteroffer and extinguishes the previous offer.
conditional acceptance
purports to accept but adds additional terms, is not an acceptance, but a counteroffer
Under Restatement of Contracts § 59, An acceptance must be
unconditional
Under Common Law Mirror Image Rule, a mere inquiry is
not a counter-offer
Under Common Law Mirror Image Rule, acceptance to buy a home but also to
include furniture inside
is a counter-offer (Ardente v. Horan)
UCC 2-207 Battle of the Forms
A manifestation of acceptance is acceptance even if the terms accepted to are different from those in the offer.
The UCC ______ follow the mirror image rule
does not
Under UCC 2-207, Offeror can limit additional terms
with an express statement indicating the offer is limited to only those terms contained in the offer.
Under UCC 2-207, Whether an additional term is added to the contract depends on
the actions of the parties.
a. Where one party is not a merchant, the other party must expressly assent to the additional term.
b. Where both parties are merchants, the additional terms become part of the contract after a reasonable time without rejection.
Under UCC 2-207, Where one party is not a merchant
the other party must expressly assent to the additional term.
Under UCC 2-207, Where both parties are merchants
the additional terms become part of the contract after a reasonable time without rejection.
Under UCC 2-207, If the term is one that materially alters the contract, such
as price,
it will not become part of the contract.
Additional terms added to the contract through merchant inaction only applies to non-material terms.
Under UCC 2-207, Additional terms added to the contract through merchant inaction
only applies to non-material terms
Where two offers conflict about one term, the UCC applies
“knockout” rule, and replaces the term with a gap-filler
A gap filler is
An offeror may terminate the power of acceptance, and the acceptance may terminate on its own by:
Rejection by the offeree;
Counter-offer;
Lapse of time;
Revocation;
Death or Incapacity; or
Supervening illegality
(Restatement of Contracts § 36)
Under Restatement of Contracts §38, rejection by Offeree
terminates offeree’s power of acceptance (unless the offeror has manifested a contrary intention. A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement.)
Under Restatement of Contracts §39, when the offeree alters the offer
it creates a new offer —> that gives the original offeror the power of acceptance.
An offer may either expire because
it was not accepted within the time provided by the offeror as the “master of the offer,” or after a reasonable amount of time has passed. Usually in 90 days (Restatement of Contracts §41)
Restatement of Contracts §41
The offeror is free to revoke the power of acceptance
at any time before accepted, except in the cases of option contracts and firm offers.
(Restatement of Contracts §42)
The offeror is free to revoke the power of acceptance at any time before accepted EXCEPT
in the cases of option contracts and firm offers.
(Restatement of Contracts §42)
Revocation can either be:
- Direct
- Indirect if the offeree learns of actions inconsistent with the continuance of an offer. (Dickenson v. Dodds)
An offer can no longer be accepted if the offeror
dies or becomes legally incapacited
An offer is extinguished if its subject matter
becomes illegal in the interim.
An option contract is _____ once entered into
irrevocable
An option is
a separate contract that requires mutual assent and consideration (Restatement of Contracts §87)
Option contract is not terminated by
rejection, counter-offer, revocation, death, or incapacity (Restatement of Contracts §37)
T/F: Under Common law, consideration is required for option contracts
True
BUT Modern approach only requires a writing and the recital of consideration
The modern approach to option contracts only requires
a writing and the recital of consideration
An offer to sell goods is irrevocable if
- The offeror is a merchant (one who deals in the goods or
has specific knowledge or skills relevant to the practices
or goods involved in the transaction); - Is in signed writing; and
- Provides the offer will be held open
(Firm Offers UCC 2-205)
No firm offer may be held open for more than
3 months, even if they purport to exceed that time.
T/F: An offeree’s past performance or detrimental reliance does not affect the K
False. An offeree’s past performance or detrimental reliance may make an offer irrevocable
a unilateral offer is revocable until
the offeree begins the performance.(Carlill v. Carbolic Smoke Ball)
The performance doctrine only applies to
actual performance by the offeree
If there are only preparations to perform or those preparations are indistinguishable from performance, does the performance doctrine apply?
No, performance has not begun (Think: White v. Corlies & Tift)
Restatement of Contracts §87 (2)
If there is a bilateral contract, offeree’s
reliance in preparing may make the offer irrevocable where justice requires.
Can parties contract around the mailbox rule, or other default provisions?
Yes
When is mailbox rule not effective?
if the acceptance was not addressed correctly
Where there is both acceptance and rejection by an offeree: If acceptance is sent first, does subsequent rejection revoke the offer?
No, it does not.
Where there is both acceptance and rejection by an offeree: If rejection is sent first, does subsequent rejection revoke the offer?
It depends, if rejection is sent first - whichever arrives first is the one that governs
Option Contract is only effective upon
receipt, not dispatch (mailbox
rule does not apply to options.) Restatement of Contracts §63 (b)
A common law contract (not a sale of goods) will not be found where
the terms of an agreement are missing terms
UCC 2-204(3)
allows for the court to apply terms such as price, place of delivery, time for payment, and etc. that would otherwise negate a contract.
A common law contract (not a sale of goods) will not be found where
the terms of an agreement are missing terms
Where an agreement is not governed by the UCC, a contract will not survive with a missing term
Restatement of Contracts §71
General Rule: if the parties have a misunderstanding about what they
are agreeing to, it may prevent them from having “mutual assent.”
If the parties have a misunderstanding about what they are agreeing to, it may prevent them from having
“mutual assent.” Restatement of Contracts §71
(Misunderstanding) No contract is formed if:
- Each party had a different subjective belief;
- The term is one that is material to the contract; and
- Neither party knows or has reason to know of the misunderstanding.
Restatement of Contracts §201
If one party knows or has reason to know that the other party had a different understanding of the contract terms
then the other party’s meaning (the innocent party) will prevail.
Restatement §33 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.
