Mutual assent - offer and acceptance

Question 1

How to determine mutual assent

Answer 1

mutual asset [acceptance of the other’s offer] determined by objective standard such that words or conduct manifested a present intention to enter into a contract

Question 2

three questions to ask to determine whether there was a K

Answer 2

is there mutual assent (offer and acceptance)

is there consideration or substitute for consideration

are there defenses to creation of the K

Question 3

how to analyze whether there has been an offer – definition of offer and requirements to have an offer

Answer 3

an offer creates a reasonable expectation in the offer that the offeror is willing to enter into a K on the basis of the offered terms – i.e. creates a power of acceptance in the other person and liability on you

Requirements:

(a) An expression of a promise, undertaking, or commitment to enter into a K (OBJECTIVE intent to make K, not mere invitation to begin preliminary negotiations)

(b) Certainty and definiteness in the essential terms

(c) Communication of the prior two things to the offeree (offeree must have knowledge)

Question 4

When are price quotations offers and not offers

Answer 4

GENERALLY - not offers, they are invitations to deal [b/c usually too vague]

CAN BE OFFERS IF: price quote is given in response to an inquiry that contains a quantity term

Question 5

language that suggests invitation to enter into negotiations

Answer 5

I quote

I am asking $30 for

I would consider selling for

Question 6

factors that bear on whether there was an INTENT to make an offer/promise

Answer 6

language

surrounding circumstances (laughing or serious?)

prior practice and relationship of the parties

method of communication
— broad communications media - suggests solicitation of an offer not an offer
— advertisements (catalogs, circular letters) containing price quotes are usually mere invitations for offers

Question 7

if A’s statement to B is not an offer but is an invitation to deal, then B’s response cannot be ________.

Answer 7

an acceptance

Question 8

how to tell whether an offer is definite and certain in its terms

• basic rule
• what MUST be definite and certain in its terms for all contracts generally
• what must be definite and certain in its terms for certain types of contracts
• what doesn’t have to be definite and certain / what can be missing

Answer 8

Basic rule:
Ask whether enough of the essential terms have been provided so that a K including them is capable of being enforced
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What MUST be definite and certain in general

(1) Identification of the offeree or a class to which they belong [otherwise how will you infer the power to accept?]

(2) Subject matter
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what must be definite and certain for certain types of Ks

(1) if sale of goods — quantity term

(2) if real estate – land and price terms with some particularity [most courts will not supply a missing price term]

(3) contract for services – nature of the services
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What does not have to be definite and certain for there to be a K

(1) price, if the parties intended to form a K without price being settled (except for real property)

If K for goods –> UCC says that price = reasonable price at time of delivery

(2) time

law implies that K is to be performed within a reasonable time

Question 9

what is the objective intent to enter into a K

Answer 9

what a reasonable person would think when looking at offeror’s actions and words

Question 10

when are advertisements offers and not offers

Answer 10

GENERALLY not offers - too uncertain, invitations to deal

OFFERS IF:
(1) contains promise
(2) certain/definite terms (such as terms of quantity)
(3) offer is clearly identified

Question 11

If employment contract does not specify duration of employment, what is construed?

Answer 11

construed as creating a terminable at will contract by either party

Question 12

what is a requirements contract and output contract and what is significant with regard to quantity of goods in the contract terms

Answer 12

REQUIREMENTS K - a buyer promises to buy from a certain seller all of the goods that the buyer requires, and seller agrees to sell that amount to the buyer

OUTPUT K - a seller promises to sell to a certain buyer all of the goods that the seller produces, and the buyer agrees to buy that amount from the seller

Quantity term need not be specific in the offer … but there are limits:

It is assumed that the parties will act in good faith; so, there can’t be a tender of or a demand for a quantity unreasonably disproportionate to (1) any stated estimate, or (2) (in the absence of a stated estimate) any normal or otherwise comparable prior output or require- ments.

triggers for these Ks — require, need, produce, all, only, exclusively, solely

Question 13

Can there be formation of a K if terms are left open?

Answer 13

There can still be formation of a contract if it appears that the parties intended to make a contract and there is a reasonably certain basis for giving a remedy.

majority of juris-dictions and Article 2 hold that the court can supply reasonable terms for those that are missing.

Question 14

effect of vague contract term and exception

Answer 14

if vague (‘split profits on a “liberal basis”’), NO PRESUMPTION TO SUPPLY REASONABLE TERMS – presumption only applies for vague Ks

EXCEPTION – uncertainty can be cured by part performance that clarifies the vague term or by acceptance of full performance.

Question 15

rule when terms are to be agreed upon later

Answer 15

If the term is a material term, the offer is too uncer- tain.

Question 16

if there is a continuous offer open to create a series of contracts, what can buyer do?

Answer 16

accept multiple time while it is open

Question 17

methods of termination of offer

Answer 17

termination by offeree
- lapse of time
- rejection or counteroffer

termination by offeror / revocation
– revocation

termination by operation of law
- death

Question 18

how does an offeree terminate an offer

Answer 18

(1) lapse of time
– failure to accept within time specified by offer or by reasonable period if no time specified

(2) rejection*
– express
— counteroffer (same subject matter but differ in terms; not a question!)
— conditional acceptance (it’s a rejection of old offer and constitutes a new offer) – but must be accepted by the other party’s express assent to the new terms NOT performance

NOT option contracts

Question 19

what are the quirks of conditional acceptance

Answer 19

When an acceptance is made expressly conditional on the acceptance of new terms, it is a rejection of the offer and constitutes a new offer

new offer created by conditional acceptance must be accepted by express assent NOT performance:

If the parties ship or accept goods after a conditional acceptance, a contract is formed by their conduct, and the new terms are NOT included.

Question 20

test for distinguishing between mere inquiry and actual counteroffer that constitutes rejection

Answer 20

The test is whether a reasonable person would believe that the original offer had been rejected.

An inquiry won’t terminate the offer when it is consistent with the idea that the offeree is still keeping the original proposal under consideration (for example, “Would you consider lowering your price by $5,000?”)

Question 21

when is rejection effective

Answer 21

when received by offeror

Question 22

what is an option contract and what does it mean to reject an option

Answer 22

option K = a contract to keep an offer open

rejection of option ≠ termination of offer

The offeree is still free to accept the original offer within the option period unless the offeror has detrimentally relied on the offeree’s rejection.

option Ks are for common law [merchant’s firm offer is for UCC]

Question 23

how can an offeror terminate an offer? explain direct and indirect revocation

Answer 23

revocation
— communicate the revocation to the offeree

“direct communication”
[I revoke, I no longer wish to contract with you, etc]
An offer made by publication can be directly revoked only by publication through comparable means

“indirect communication”
(1) offeree must receive 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

Question 24

when is a revocation effective

Answer 24

when received by the offeree or when published, if revocation is by publication

NO MAILBOX RULE FOR REVOCATION

Question 25

when are written communications “received”

Answer 25

when delivered to a place of business through which the K was made or another location authorized to receive it

i.e. when it comes into the physical possession of the person addressed, or someone authorized by him to receive it, or when it is deposited in some place authorized as the place for this or similar communications to be deposited

does not matter whether recipient actually reads it

same with phone messages

Question 26

offers can be revoked at will by the offeror, even if he has promised not to revoke for a certain period, EXCEPT in these circumstances

Answer 26

(1) options
[consideration is given expressly so that offer cannot be revoked for a certain amount of time]

(2) merchant’s firm offer under Article 2 - NO CONSIDERATION
Under Article 2: (1) if a merchant, (2) offers to buy or sell goods in a signed writing, and (3) the writing gives assurances that it will be held open, the offer is NOT revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time
(but in no event may such period exceed 3 months - if the period exceeds three months, they will be bound only for 3 months). [note that the offeror must be a merchant and in a signed writing by merchant]

(for example, “this offer will be held open for 10 days,” “this offer is firm for 10 days,” or “I shall not revoke this offer for 10 days”)

(3) Detrimental reliance [really FORESEEABLE reliance]
when offeror could reasonably expect/foresee that the offeree would rely on to their detriment on the offer, and the offeree DOES rely, the offer will be held irrevocable as an option contract for a reasonable length of time [foreseeable situations are subcontractor/contractor bidding situations]

(4) beginning performance on unilateral contract
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.
—- note: substantial preparations do not count to render an offer for a unilateral contract irrevocable [but may be detrimental reliance]

(5) beginning performance when offer is indifferent as to manner of acceptance
– a bilateral contract may be formed upon upon start of performance by offeree when manner of acceptance is indifferent = contract is complete = no revocation

Question 27

what’s a reasonable amount of time to keep an offer open

Answer 27

depends on circumstances

could argue that over one month is no longer reasonable

Question 28

what is the limitation on the power of an offeree to reject an offer

Answer 28

generally cannot reject if already accepted

Question 29

methods of termination by operation of law

Answer 29

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) before acceptance
***Death or insanity need not be communicated to the other party

Destruction of the proposed contract’s subject matter

OR

Supervening illegality

Question 30

what is acceptance

Answer 30

manifestation of assent to the terms of an offer

Question 31

Who are “merchants” and what is “signed” for purposes of UCC firm offer rule

Answer 31

merchants - pretty much any party

signed – anything that looks authenticated will work (merchant’s own stationary counts)

Question 32

what are bids

Answer 32

offers

Question 33

Who may accept an offer and when is right to accept transferrable

Answer 33

who may accept – generally, only person to whom offer is addressed or a member of a class to which offer is directed

transferability allowed IF offeree paid consideration to keep open open (option K)

generally, though, power of acceptance cannot be assigned

Question 34

general requirements for acceptance

Answer 34

• right person accepts it
• offeree must know about the offer
• acceptance is performed correctly

Question 35

how may an offer to form a bilateral K be accepted

Answer 35

In any reasonable manner…. usually….

promise to perform

or

beginning of performance

Question 36

Requirements for acceptance of bilateral K in general

Answer 36

(1) acceptance must be communicated to the offeror [unless K says otherwise]

Silence ≠ acceptance EXCEPT in 2 situations
[a] Due to prior dealings or practices, it would be commercially reasonable for the offeror to consider silence an acceptance

[b] if the recipient of services knows or should have known that the services were being rendered with the expectation of compensation and, by a word, could have prevented the mistake, the recipient may be held to have accepted the offer if they fail to speak
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(2) Unless otherwise indicated*, you can accept an offer in any reasonable manner and by any medium reasonable under the circumstances

*“Otherwise indicated” –> offers to buy goods for current or prompt shipment
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(3) acceptance must be absolute and unequivocal
- mirror image rule

Question 37

Requirements for acceptance of unilateral K

Answer 37

(1) completion of performance
[note you are not obligated to complete performance just because you begin performance]

(2) offeree KNOWS of the offer

(3) Offeree must notify the offeror within a reasonable time AFTER performance has been completed

Exception to notice requirement:
(1) the offeror waived notice, OR
(2) offeree’s performance would normally come to the offeror’s attention within a reasonable time

Question 38

Requirements for acceptance of a K under UCC Article 2

Answer 38

(1) Offers to buy goods for current or prompt shipment must be accepted EITHER by (a) a promise to ship OR by (b) current or prompt shipment of conforming or nonconforming goods

(2) mirror image not required [battle of the forms]
The inclusion of additional or different terms by the offeree in a definite and timely acceptance is ACCEPTANCE and does NOT constitute a rejection and counteroffer ……UNLESS the acceptance is expressly made conditional on assent to the additional or different terms.
[mirror image rule is common law]

Question 39

Accommodation shipment rule

Answer 39

The shipment of nonconforming goods* is an acceptance creating a bilateral contract as well as a breach of the contract

NOT a breach if the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation.

The buyer is not required to accept accommodation goods and may reject them.

If the buyer rejects, the shipper isn’t in breach and may reclaim the accommodation goods, because the tender does not constitute an acceptance of the buyer’s original offer.

***ACCOMMODATION RULE ONLY APPLIES WHEN SHIPMENT IS USED AS FORM OF ACCEPTANCE – IF SELLER ACCEPTS BY PROMISING TO SHIP AND THEN SELLS NONCONFORMING GOODS, HE IS IN BREACH AND NO ACCOMMODATION POSSIBLE

Question 40

what does UCC say when moment of mutual assent to create a K is uncertain?

Answer 40

In situations where it is unclear what specific communication was the offer and which the acceptance but the parties act as though there is a contract, the UCC considers this a binding contract even though the moment of its making is uncertain.

Question 41

how does UCC treat acceptance with additional terms?

Answer 41

K IN WHICH any PARTY IS A NONMERCHANT
—- additional terms are considered to be mere proposals to modify the K that do NOT become part of the K unless offeror expressly agrees
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K IN WHICH BOTH PARTIES ARE MERCHANTS
— additional terms in the acceptance will be included in the K UNLESS

(a) They materially alter the original terms of the offer, such as by changing a party’s risk or the remedies available
[“material change = likely to cause hardship or surprise to offeror”]

(b) The offer expressly limits acceptance to the terms of the offer

OR

(c) The offeror has already objected to the particular terms, or objects within a reasonable time after notice of them is received

Note: Whether an alteration is material is a fact question.

Question 42

how does UCC treat acceptance with different terms?

Answer 42

K IN WHICH any PARTY IS A NONMERCHANT
—- different terms are considered to be mere proposals to modify the K that do NOT become part of the K unless offeror expressly agrees

K in which BOTH PARTIES ARE MERCHANTS
Jurisdictional split:

[1] treat different terms like additional terms, and follow the “additional terms” in determining whether the terms should be part of the contract.

[2] “knockout rule” applies – conflicting terms in the offer and acceptance are knocked out of the contract, because each party is assumed to object to the inclusion of such terms in the contract.
Gaps left by knocked out terms are filled by the UCC.

Question 43

what is still required even when there is acceptance with different terms

Answer 43

meeting of the minds

watch out for differences in price, quantity, or quality terms – may not be sufficient agreement to constitute a K

Question 44

what to know about a merchant’s confirmatory memo

Answer 44

A merchant’s memo confirming an oral agreement that contains different or additional terms is also subject to the battle of the forms provisions.

Question 45

mailbox rule and exceptions

Answer 45

Acceptance by mail or similar means is effective at the moment of dispatch, provided that the mail is properly addressed and stamped, unless one of these exceptions applies:

• The offer stipulates that acceptance is not effective until received.
• An option contract is involved (an acceptance under an option
  contract is effective only upon receipt).
• The offeree sends a rejection and then sends an acceptance, in which case whichever arrives first is effective.
• The offeree sends an acceptance and then a rejection, in which case the acceptance is effective (that is, the mailbox rule applies) unless BOTH the rejection arrives first AND the offeror detrimentally relies on it.

MAILBOX RULE ONLY APPLIES TO ACCEPTANCE OF K NOT REVOCATION OR REJECTION

Question 46

what happens when acceptance is by unauthorized means

Answer 46

An acceptance transmitted by unauthorized means or improperly transmitted by authorized means may still be effective if it is actually received by the offeror while the offer is still in existence.

Question 47

rules for auction contracts (UCC)

Answer 47

A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in another customary manner.

An auction sale is with reserve unless the goods are explicitly put up without reserve. “With reserve” means the auctioneer may withdraw the goods at any time until he announces completion of the sale.

Question 48

what are and are not material changes

Answer 48

material change = likely to cause hardship or surprise to offeror

not material change = term that is customary in the industry

Question 49

if post office loses acceptance in the mail, does the dispatch of the acceptance still count?

Answer 49

Yes. even if the post office loses the acceptance, a K is formed.

Question 50

under mailbox rule, does the acceptance have to be properly addressed?

Answer 50

YES - for mailbox rule to apply, the acceptance has to be properly posted. IF IT IS NOT, IT IS NOT SUBJECT TO THE MAILBOX RULE. that means that the improperly addressed letter would be effective upon RECEIPT.

Question 51

if an offeree comes to know that the offeror has done an act inconsistent with an outstanding offer [i.e. offeror sold the goods to someone else], then ….

Answer 51

offeree cannot accept it - power of acceptance terminates once you find out offeror revoked his offer to you

Question 52

X offers a toy to Y and says X will keep it open for Y until March 1. Y says hmmm I will think about it.

X sells toy to Z on Feb. 20.

On Feb 21, Y finds out from a reliable source that X sold to Z.

Can Y now accept?

What if Y never found out about the sale?

Answer 52

NO - offer was terminated by the INDIRECT REVOCATION that occurred when Y found out about the sale from X to Z.

IF Y did not find out about the sale, and Y accepted the offer, Y’s acceptance would have been valid and Y would have been able to sue.

Question 53

if offeror revokes offer after offeree sends acceptance in the mail, what result?

Answer 53

acceptance is effetive because it occurred prior to revocation