Mutual Assent - Offer

Question 1

The Offer*

Answer 1

An offer creates a power of acceptance in the offeree and a corresponding liability on the part of the offeror. For a communication to be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms. In deciding whether a communication creates this reasonable expectation, ask:
* Was there an expression of a promise, undertaking, or commitment to enter into a contract?
* Were there certainty and definiteness in the essential terms?
* Was there communication of the above to the offeree?

Ads = Not Offers
* Ads = Invitations to deals
* Exceptions: Promise, Certain/definite terms, Offeree identified

Question 2

Offers usually Must Include Definate Terms

Answer 2

• Offeree’s name
• Offer’s subject matter
• Price

Land Sale (Offers Must Include):
* Price
* Description

Sale of Goods (Offers Must Include):
* Quantity term

Requirements Contract: B promises to buy from S all goods B requires

Output Contract: S promises to sell to B all goods S produces

Employment and other Services:
In contracts for employment, if the duration of the employment is not specified, the offer, if accepted, is construed as creating a contract terminable at the will of either party. For other services, the nature of the work to be performed must be included in the offer.

Question 3

Lapse of Time (Termination of Offer)

Answer 3

Offer terminated if not accepted within reasonable time
* Reasonable time = 1 month

Question 4

Rejection (Termination of Offer)

Answer 4

Express Rejection:
* An express rejection is a statement by the offeree that they do not intend to accept the offer. Such a rejection will terminate the offer.

Counteroffer as Rejection:
* A counteroffer is an offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in its terms (for example, “I’ll take the house at that price, but only if you paint it first”).
* Distinguish - Mere Bargaining/Inquiry: The test is whether a reasonable person would believe that the original offer had been rejected.
* Period = Counteroffer (exam tip)
* Question Mark = Bargaining (exam tip)
* Conditional Acceptance = Rejection + New Offer (Common Law & UCC)

Question 5

Revocation

Answer 5

Offeror’s retraction of offer
* A revocation is generally effective when received by the offeree. Where revocation is by publication, it is effective when published.

Direct Revocation:
* An offeror may revoke by directly communicating the revocation to the offeree (for example, “I revoke my offer of May 25”).
* An offer made by publication can be directly revoked only by publication through comparable means (for example, an offer placed in the Wall Street Journal cannot be revoked by publishing in Better Homes and Gardens).

Indirect Revocation:
* An offer may also be revoked indirectly if the offeree receives:
* (1) correct information,
* (2) from a reliable source,
* (3) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer
* For example, after the offeror offers to sell their car to the offeree, the offeree is told by a reliable third party that the offeror just sold the car to someone else

Question 6

Option Contract

Answer 6

Offeree gives consideration for offeror to not revoke offer for period of time

Question 7

Merchant’s Firm Offer Rule

Answer 7

• Merchant Promises
• In Signed Writing
• To keep offer open for time stated or reasonable time

Enforceable for up to 3 months (never more)
* Need consideration to keep offer open for more than 3 months

No consideration required

Question 8

Detrimental Reliance

Answer 8

When the offeror could reasonably expect that the offeree would rely to their detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time.

Question 9

Beginning Performance in Response to True Unilateral Contract Offer

Answer 9

An offer for a true unilateral contract becomes irrevocable once performance has begun. The offeror must give the offeree a reasonable time to complete performance. Note that the offeree is not bound to complete performance—they may withdraw at any time prior to completion of performance, and there is no acceptance until performance is complete
* Mere preparation to perform = Doesn’t start performance (might still be able to argue detrimental reliance)

Question 10

Termination by Operation of Law

Answer 10

• Death or insanity of either party (unless the offer is of a kind the offeror could not terminate, such as, an option supported by consideration). Death or insanity need not be communicated to the other party. (only terminates revocable offers)
• Destruction of the proposed contract’s subject matter
• Supervening illegality