Offer and Acceptance Flashcards
What terminates an offeree’s power to accept an offer?
Death or incapacity of the offeror
This rule can be illustrated by the case of Davis v Jacoby.
What type of contract did the Davis court hold was offered by Whitehead?
Bilateral contract
What must be established for an offer to be irrevocable in a bilateral contract context?
One of two methods:
* Firm offer under UCC Art 2
* Option contract
What is a firm offer as per UCC 2-205?
An offer that meets specific requirements to be irrevocable
What is an option contract?
A mechanism allowing buyers to secure the right to purchase for a specified time
What must be met to form an option contract?
Mutual assent and consideration
In Petterson v Pattberg, what did Pattberg offer to Petterson?
$780 discount on mortgage principal for full payment by a deadline
What was the critical issue in Petterson v Pattberg?
Did Pattberg’s revocation of the offer prevent formation of a binding unilateral contract?
Can an offer for a unilateral contract be revoked after substantial performance begins?
No, unless substantial performance has begun or an exception applies
What did the court rule about Pattberg’s revocation of the offer?
Revocation was valid as Petterson had not completed the act of payment
What constitutes ‘performance’ in the context of a unilateral contract?
Completion of the requested act, such as full payment
What was the dissenting opinion in Petterson v Pattberg?
Pattberg’s refusal to accept payment made performance impossible
What two methods can terminate an offer?
Lapse and rejection
What happens when an offeree makes a counter-offer?
It rejects the initial offer
Fill in the blank: An offer remains _____ until the requested act is completed.
revocable
True or False: An offeree can accept an offer after it has been revoked.
False
What principle does the case of Petterson v Pattberg highlight regarding contract formation?
Timing is crucial in the formation of a contract
Offer and Acceptance
Livingstone v Evans
Facts:
The defendant, T.J. Evans, through his agent, offered to sell land to the plaintiff, Livingstone, for $1,800 on certain terms. On the same day that Livingstone received the offer, he sent a telegram to Evans’ agent stating: “Send lowest cash price. Will give $1,600 cash. Wire.” In response, the agent replied, “Cannot reduce price.”
Upon receiving this telegram, Livingstone then wrote an acceptance of the original offer of $1,800. The defendants admitted that the acceptance of the original offer would form a valid contract unless the plaintiff’s counter-offer (through the telegram) had effectively revoked the original offer, thereby preventing the plaintiff from binding the defendant with his acceptance.
Issue:
The key legal issue in the case was whether Livingstone’s counter-offer in the form of his telegram constituted a rejection of Evans’ original offer, thereby ending the original offer and preventing its revival through subsequent acceptance.
Decision:
The court ruled in favor of the plaintiff, finding that a binding contract had been formed when the defendant’s telegram (“Cannot reduce price”) was interpreted as a renewal or revival of the original offer. This renewal gave the plaintiff the right to accept the original offer, which he did.
Legal Principles:
1. Counter-Offer as Rejection: The court relied on the principle from Hyde v. Wrench (1840), which established that a counter-offer operates as a rejection of the original offer. The plaintiff’s telegram, which included both an inquiry and a counter-offer to pay $1,600, effectively terminated the defendant’s original offer.
2. Renewal of the Original Offer: The critical aspect of the case was the defendant’s response (“Cannot reduce price”). The court found that this response was not just a rejection of the counter-offer but a renewal of the original offer. By stating that he could not reduce the price, the defendant effectively confirmed his willingness to proceed under the original terms, thus enabling the plaintiff to accept it.
3. Effect of Counter-Offer on Original Offer: The court determined that while the plaintiff’s initial telegram was a counter-offer, the defendant’s response effectively revived the original offer. The court saw the defendant’s telegram as an indication that he was still willing to sell on the original terms, thus allowing the plaintiff to accept it and create a binding contract.
Reasoning:
* Hyde v. Wrench (1840) was cited as authoritative, establishing that a counter-offer is a rejection of the original offer and that the offer cannot be revived unless the offeror explicitly renews it.
* The defendant’s telegram stating “Cannot reduce price” was interpreted as a renewal of the original offer, allowing the plaintiff to accept it and form a binding contract.
* The inquiry in the plaintiff’s telegram (“Will give $1,600 cash. Wire.”) was not enough to prevent the counter-offer from being considered a rejection. The court found that the offer was effectively made and rejected with a condition for further negotiation on the price, and the defendant’s response made the original offer open again for acceptance.
Conclusion:
The Alberta Supreme Court ruled that a binding contract had been formed between Livingstone and Evans, with Livingstone entitled to specific performance. The court held that the defendant’s telegram, though a response to a counter-offer, was a renewal of the original offer, which the plaintiff subsequently accepted. Thus, the plaintiff’s rights under the contract took priority over any later agreements involving the land. The case was decided in favor of Livingstone, and specific performance was granted.
Lapse and Rejection
ATKERS v JB SEDBERRY INC
Facts:
J.B. Sedberry, Inc., a Tennessee corporation, employed Charles William Akers and William Gambill Whitsitt under separate written contracts in 1947. Akers was employed as Chief Engineer with a five-year contract, and Whitsitt as Assistant Chief Engineer for the same duration. Both were guaranteed a salary plus a percentage of the company’s profits over the term of the contracts.
In late September 1950, tensions developed between Akers, Whitsitt, and A.M. Sorenson (the newly hired manager of Jay Bee Manufacturing Company), especially regarding the financial health of the business. To address their concerns, Akers and Whitsitt flew to Nashville to meet Mrs. M.B. Sedberry, the president of J.B. Sedberry, Inc.
During a meeting on September 29, 1950, Akers and Whitsitt offered their resignation, with a condition of a 90-day notice, which Mrs. Sedberry did not accept immediately. Instead, the meeting continued, and they discussed business operations. Following the meeting, Akers and Whitsitt returned to Texas to follow through on Mrs. Sedberry’s instructions.
However, on October 2, 1950, Mrs. Sedberry sent telegrams to both employees accepting their resignations immediately. Akers and Whitsitt both argued that their resignation offer had been rejected during the meeting on September 29, and thus no valid resignation offer was pending when the telegrams were sent.
Issue:
The main issue is whether Akers’ and Whitsitt’s resignation offers had lapsed or been rejected before Mrs. Sedberry accepted them, and whether the attempt to terminate their contracts constituted a breach.
Decision:
The Court of Appeals affirmed the trial court’s decision that J.B. Sedberry, Inc. unlawfully attempted to terminate the employment contracts, resulting in a breach of contract.
* Lapse of the Offer: The court concluded that Akers’ and Whitsitt’s offer to resign was a mere offer and was effectively terminated when Mrs. Sedberry rejected it, either explicitly or implicitly, by continuing the meeting and discussing business as if the offer was not on the table. The court determined that the offer did not continue beyond that conversation, citing legal principles governing the lapse of an offer when it is not accepted within a reasonable time or when the offeror acts in a way that leads the offeree to believe the offer is no longer valid.
* Rejection of the Offer: The court went on to discuss the rejection of the resignation offers, even though it was not essential to the decision (often referred to as dicta, meaning an opinion or observation not necessary for the decision of the case). The court noted that an offer is rejected when the offeree’s actions or words lead the offeror to reasonably infer that the offer will not be accepted. In this case, Mrs. Sedberry’s failure to indicate she was taking the resignation under consideration and her continued discussion of business matters led Akers and Whitsitt to reasonably believe their offer had been rejected.
* Breach of Contract: Because the resignation offers were no longer valid and the attempt to terminate the contracts was unlawful, the court ruled that J.B. Sedberry, Inc. had breached the contracts. Akers and Whitsitt were entitled to recover damages.
Key Legal Principles:
1. Lapse of an Offer: An offer can lapse or expire if it is not accepted within a reasonable time or if it is rejected, either explicitly or implicitly. A rejection of the offer terminates it, and the offer cannot be revived later.
2. Rejection of an Offer: A rejection occurs when the offeree communicates, either directly or through conduct, that they do not intend to accept the offer. In this case, the continued discussion of business without addressing the resignation led the court to find that the offer was effectively rejected.
3. Breach of Employment Contracts: A resignation offer must be accepted for it to be binding. Without valid acceptance, a resignation is not effective, and an employer cannot unilaterally terminate a contract by purporting to accept a non-existent offer.
Reason for the Court’s Discussion of Rejection (Dicta):
The court discussed rejection as an additional basis for its decision, even though it was not essential to the conclusion. This may have been a strategic move to provide an alternative legal rationale, strengthening the chances that the decision would withstand appellate scrutiny. By addressing both lapse and rejection, the court ensured that its decision was well-supported, covering different possible arguments that could be raised on appeal.
Conclusion:
The Court of Appeals upheld the trial court’s judgment, affirming that Mrs. Sedberry’s telegram accepting the resignation was invalid. The resignation offer had lapsed due to rejection, and J.B. Sedberry, Inc.’s attempt to terminate the contracts was a breach. Akers and Whitsitt were entitled to recover damages for the breach of their employment contracts. The case was remanded to the Chancery Court for further proceedings.
Dickinson v Dodds
Facts:
John Dodds (Defendant) offered to sell George Dickinson (Plaintiff) a property for £800 via a memorandum on June 10, 1874. The offer stated that it would remain open until 9 A.M. on Friday, June 12, 1874. Dickinson, intending to accept the offer, took action on June 11 but was delayed in communicating his acceptance. Later, Dickinson learned from a third party that Dodds had already agreed to sell the property to another buyer, Thomas Allan.
On the morning of June 12, Dickinson’s agent attempted to deliver an acceptance to Dodds at a railway station, but Dodds refused, stating that the property had already been sold. Dickinson sued for specific performance of the contract.
Issue:
Whether Dodds’ offer was revocable in the unilateral context before Dickinson’s acceptance.
Legal Context:
The case primarily revolves around revocation in a unilateral contract. In a unilateral contract, an offeror makes a promise in exchange for the performance of an act by the offeree. In this case, Dodds made a promise to sell the property if Dickinson accepted the offer by the deadline (9 A.M. on June 12). The key issue is whether Dodds could revoke the offer after Dickinson had begun acting on it but before he completed the acceptance.
Decision:
The Court of Appeal ruled that Dodds could revoke the offer before Dickinson’s acceptance, even though Dickinson had already acted based on the offer.
* Revocation of a Unilateral Offer: The court noted that revocation of a unilateral offer is possible before the act (acceptance) is completed. Since Dickinson had not formally accepted the offer before Dodds sold the property to Allan, Dodds was within his rights to revoke the offer.
* No Binding Agreement: The court determined that there was no binding contract between Dickinson and Dodds, despite Dickinson’s intention to accept the offer. The Plaintiff’s delay in communicating his acceptance—combined with his knowledge that Dodds had already entered into a contract with another party—meant there was no mutual agreement or meeting of the minds.
* Timing of Revocation: Even though Dickinson might have been unaware that the offer had been revoked when he attempted to accept on June 12, the court emphasized that an offeror is free to revoke the offer at any time before the offeree’s acceptance. Since Dodds had sold the property to Allan before Dickinson could finalize the acceptance, the revocation was valid and effective.
Key Legal Principles:
1. Revocation of Unilateral Contracts: In the context of unilateral contracts, an offeror can revoke the offer at any time before the offeree has completed the requested act (in this case, communicating acceptance). Even if the offeree has started to perform the act (by preparing to accept), the offeror remains free to revoke it unless the offeree has already fully accepted the offer.
2. No Binding Agreement Without Acceptance: A unilateral contract is not formed until the offeree performs the required act or communicates acceptance. The offeror can revoke the offer as long as the offeree has not yet completed the acceptance or act.
3. Awareness of Revocation: If the offeree becomes aware that the offeror has revoked the offer, no contract can be formed. Here, Dickinson knew by the time he attempted to accept that Dodds had already sold the property to Allan, meaning there was no valid acceptance or meeting of the minds.
Conclusion:
The Court of Appeal ruled that Dodds had validly revoked the offer to sell the property to Dickinson before Dickinson could complete his acceptance. Therefore, there was no contract, and Dickinson’s suit for specific performance was dismissed. This case reinforces the principle that, in unilateral contracts, the offeror can revoke the offer anytime before the offeree has completed the required act of acceptance.
Because he knew that there had been a sale of the property already had already occurred, revocation had occurred.
“if there was not such a continuing offer, the acceptance comes to nothing”- as he knew that the property was no longer available to be sold to him, the acceptance could not occur. The revocation had already occurred.
