Contracts July 2007 Flashcards
(5 cards)
Summary
A valid contract requires an offer, an acceptance and, when as here, the contract cannot be performed within one year, a writing that satisfies the Statute of Frauds. Here, Baker made an offer to work for Café that was accepted when Café’s Owner sent an acceptance by express mail to Baker. It is irrelevant that Baker did not read the acceptance. The fact that an earlier rejection was mailed is also irrelevant because a rejection, unlike an acceptance, is effective only upon receipt, and Baker did not receive the rejection before receiving the acceptance. When both a rejection and an acceptance are sent, whichever is received first is effective. Lastly, the writings, being signed, satisfy the requirements of the Statute of Frauds. Therefore, Café has an enforceable contract.
Baker’s signed letter of May 1 to Café agreeing to work as a pastry chef for Café is a valid offer.
A person makes an offer when the person communicates to another a statement of “willingness to enter into a bargain, so made as to justify” the other person who hears the statement “in understanding that his assent to that bargain is invited and will conclude it.” RESTATEMENT (SECOND)OFCONTRACTS § 24 (1981). Here, Baker’s letter of May 1 to Café was an offer because an objective recipient of the letter, such as Café, would reasonably conclude that assent would create a contract.
An offer cannot ripen into a contract by acceptance unless its terms are reasonably certain. Id. § 33(1). Here, the terms were clear and certain and identified the parties, the subject matter, and the price.
Café Owner’s phone call to Baker on the morning of May 7 asking if he would possibly work for less was not a counteroffer but merely a request for changed terms.
A counteroffer is a statement from the offeree to the offeror, relating to the same subject matter as the original offer but suggesting a substituted bargain from the original terms. Id. § 39(1). Generally, if an offeree makes a counteroffer, the offeree can no longer accept the original offer. Id. § 39(2). Here, Café’s Owner said to Baker “The $100,000 is pretty stiff. Could you possibly consider working for less?” This utterance is not a counteroffer because it did not offer substitute terms to Baker and did not indicate any unwillingness to conclude the bargain on Baker’s terms if Baker would not accept an alternative salary. All Café’s Owner did was ask Baker if he could possibly work for less. Café’s Owner proposed no alternative salary. Because Café’s Owner’s call to Baker was not a counteroffer, but merely a request for unspecified changed terms, it did not preclude Café’s later acceptance of Baker’s offer.
Although Café’s Owner initially rejected Baker’s offer in writing, he later accepted the offer. Because Baker received the acceptance before he received the rejection, Baker’s offer is deemed accepted.
A rejection is a manifestation of intent not to accept an offer. Id. § 38(2). A rejection terminates the offeree’s power to accept an offer. Id. § 38(1). However, a rejection does not extinguish the offeree’s right to accept an offer until the rejection is received by the offeror. Id. § 40. Here, Café’s Owner’s letter stating “I am no longer interested in hiring you” clearly manifests an intent not to go forward with the bargain and constitutes a rejection of Baker’s offer.
However, Café’s Owner’s second letter, in which Café agreed to Baker’s terms, was an acceptance because it was a manifestation of assent to the terms of an offer made in a manner invited by the offer. Id. § 50(1). The question then becomes which of the two letters sent by Café’s Owner is effective, the rejection or the acceptance.
An acceptance is effective upon dispatch under the so-called “mailbox rule.” Id. § 63. A rejection is effective only upon receipt. But when an acceptance is sent after a rejection (that is, both the acceptance and the rejection are sent), whichever gets to the recipient first is effective. Id. § 40. Here, Café’s letter of acceptance was received by Baker first, while the letter containing the rejection was still on the way to Baker. See id. § 68 (a communication is received when it comes into the possession of the person to whom it is addressed). The fact that Baker did not read the letter does not alter this result. Because the acceptance was the first communication received, it is effective. Therefore, Café accepted Baker’s offer to work for Café, and a contract was created.
If a contract cannot be performed within a year, it must meet the requirements of the Statute of Frauds. Here the contract satisfies that statute and, therefore, is enforceable.
A contract must satisfy the Statute of Frauds if it cannot be fully performed within one year. Id. § 130. Here, the two-year employment requirement cannot be completed in one year, and therefore the contract is within the purview of the Statute of Frauds and must satisfy the requirements of the Statute of Frauds to be enforceable.
A contract within the Statute of Frauds satisfies that statute and is enforceable if it is evidenced by a writing signed by “the party to be charged,” which (a) reasonably identifies the subject matter of the contract; (b) is sufficient to indicate that a contract has been made; and (c) “states with reasonable certainty the essential terms” of the contract. Id. § 131.
Here, each party signed a writing that is sufficient under these criteria as it identifies the position, person, term, and salary. Therefore, the Statute of Frauds is satisfied, and the employment contract is enforceable. Because this is a personal services contract, if Baker refuses to work for Café, Café can sue Baker for damages but cannot get specific performance.
