Flashcards in Contracts 2 - Offer and Acceptance Deck (48):
Offer - 2 Requirements
(1) Outward manifestation.
(2) A signal that acceptance will conclude the deal.
Not an offer. It's the general give and take that occurs during bargaining.
Invitation for an Offer
Not an offer. It's when someone is closing in on a deal but wants the other party to commit first. "How much are you willing to pay me for these goods?"
Are not offers because responses may exceed supply. However, if language identifies who gets the limited supply of goods then it's an offer. e.g. first come first served, first 10 customers only.
Generally treated as offers. Can have language in the offer that specifies a limitation on how many can accept.
Self-Limiting Reward offers
Offers that indicate the task to be rewarded can only be performed once.
Open-Field Reward Offers
Reward offers that indicate the task to be performed can potentially be performed by multiple parties.
The auctioneer is inviting offers and the responsive bids are the offers. But if auction is held 'without reserve', auctioneer is making an offer to sell to the highest bidder.
Legal Effect of an Offer
Creates the power of acceptance in the offeree.
4 Ways to Terminate Power of Acceptance
(2) Death or incapacity.
(3) Revocation by offeror.
(4) Rejection by offeree.
Termination by Lapse of Time
The time stated in the offer or if no time is stated then after a reasonable time. reasonable factors include (1) looking at subject matter and market conditions, and (2) degree of urgency and means of transmission.
Face-to-Face Conversation Rule
An offer made in a face-to-face conversation generally lapses at the end of the conversation, unless the offer specifies otherwise.
Termination by Death or Incapacity of Either Party
Death terminates power of acceptance and so does either party becoming mentally incompetent.
Termination by Offeror's Revocation
Offeror may revoke at any time and for any reason so long as: (1) revoked before offer is accepted and (2) revocation is communicated to the offeree.
(1) Offeror takes some action that is inconsistent with the intention to go through with the offer and (2) The offeree learns about such action from a reliable source.
Functional Equivalents Rule
With an offer made to multiple people, offeror revokes by communicating the revocation in a functionally equivalent manner as the offer was made. But if there's a better means of communicating that is reasonably available, those means must be used to revoke. Terminates power of acceptance even if offeree is unaware.
Preventing Revocation - Common Law
The offeror could revoke even if he expressly promised the offeree that he would hold the offer open.
Common Law Option Contract
(2) Subsidiary promise to keep that offer open. Sell by/lapse date doesn't count.
(3) Consideration for subsidiary promise.
Option Contract - False Recital
Majority, recital of consideration is rebuttable. Minority, it's ok to be false.
Option Contract - Promissory Estoppel
Courts will sometimes, not often, enforce a subsidiary promise to keep an offer open if there has been a detrimental reliance.
Promissory estoppel applies when a general contractor relies on bid of subcontract to formulate his own bid.
Firm Offer (UCC) - Requirements
(1) Offer is made by merchant.
(2) Offer is made in writing signed by merchant.
(3) Offer expressly states by its terms that it will be held open.
Firm Offer - Time
Will remain irrevocable for period of time specified, if not specified then for reasonable time. Can't be more than 3 months, if more than 3 months is stated it's only irrevocable for first 3 months. If you want to keep it open longer than 3 gotta have an option contract.
Rejection via Counteroffer
Is a rejection, while also creating a new offer. However a mere inquiry is not a counteroffer.
Mirror Image Rule (Common Law)
Acceptance must mirror the terms of the offer. Any variation results in a counteroffer and thus rejection of the initial offer.
Revival of an offer after rejection or lapse
Offeror can revive a terminated offer by language or conduct restating the offer or giving more time to decide.
Exchange promise for a promise. Once promises are exchanged, both parties are bound.
A promise in exchange for performance. The offeror is bound only when performance is completed, offeree is never bound.
Revocation of Unilateral Contract Offer - Common Law
The offeror was free to revoke the unilateral offer up until the moment the offeree actually completed performance.
Revocation of Unilateral Contract Offer - Modern Law
Once the offeree begins performance, an option contract is created. Offeree is still free to abandon performance or not do it, acceptance is still effective only upon completion. Mere preparations do not create an option contract.
Acceptance Under Common Law
(1) Must mirror the terms of the offer.
(2) Must be communicated to the offeror. If not stipulated, offeree is free to use any reasonable means of transmission. Reasonable can be (a) means used by offeror, (b) customary means in similar transactions, or (c) means equivalent in speed and reliability to that used by offeror.
Acceptance By Silence
Generally doesn't constitute acceptance except: (1) offeree takes the benefit of offeror's service with a reasonable opportunity to reject it and with reason to know compensation was expected; (2) if offeror gives offeree reason to understand that silence may be acceptance and offeree then intends silence to be acceptance; and (3) previous dealings or circumstances make it reasonable the offeree should notify the offeror he not not intend to accept.
Acceptance by mail is effective upon dispatch if properly posted.
Consequences of Mailbox Rule
(1) Offeror may not revoke once acceptance has been dispatched.
(2) Once dispatched there's a binding K and offeree can't withdraw acceptance.
(3) Offeror is bound even if acceptance is lost in transit.
Mailbox Rule and Option Contracts
Mailbox rule doesn't apply and acceptance is only effective upon receipt.
UCC: 3 Ways Acceptance by Seller of Buyer's Offer
(1) Promise to ship goods in conformity with terms of the offer.
(2) Prompt or current shipment of the goods in conformity with terms of the offer.
(3) Seller can also accept by shipping non-conforming goods. Unless they ship non-conforming goods as an 'accommodation', then its a counteroffer.
Negotiated terms. Transaction specific terms that identify the particular goods to be sold, quantities, and price.
Standard terms that appear in the parties respective forms and are much less likely to match.
Battle of the Forms
Unless acceptance is expressly made conditional on the assent to additional or different terms, the nonconforming acceptance will operate as an effective acceptance of the offer.
Battle of the Forms - Consumer as Party
The additional or different terms are mere proposals for addition and they are not part of the contract unless the offeror expressly agrees to them.
Are those terms that address a new topic not addressed by the offer.
Are those terms that purport to change an existing term of the offer.
Effect of "Additional" Terms
They automatically become part of the K except:
(1) The offer expressly limits acceptance to its own terms.
(2) If the offeror objects to them within a reasonable time.
(3) If the terms would materially alter the K.
Battle of the Forms - Material Alteration
Terms that would result in surprise or hardship if incorporated without the express awareness of the other party. E.g. warranty disclaimers, clauses that materially shorten the deadline for raising complaints, clauses that change usages of trade or past courses of dealing.
Effect of "Different" Terms
Knockout Rule - The different terms of each communication dealing with the same topic are knocked out and omitted from the contract. Minority: the different terms of the acceptance will be treated as mere proposals for addition.
Written Confirmations - Transactions not between Merchants
The terms in the written confirmation that are additional or different are mere proposals for addition.
Written Confirmations - Between Merchants
Additional terms are automatically part of K unless the materially alter K or object in reasonable time. Different terms are mere proposals. If both parties send written proposals then knockout rule applies.