#11039 - Offer And Acceptance - Contracts

1. §22. Mode Of Assent: Offer And Acceptance:

   1. The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties.

   2. A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.

2. Offer and acceptance cross in the mail – cross-offers: there is no contract because there is no meeting of minds. When neither party is aware of the other’s offer, neither is treated as being an acceptance.

3. Objective standard (Lucy v. Zehmer):

   1. R2d §24: an offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.

      1. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party.

      2. Test: whether a reasonable person in the offeree’s position would have understood the offeror as manifesting contractual intent.

   2. Rationale:

      1. difficult to determine subjective intent;

      2. encourage due care not to carelessly act as if you made a promise when in fact you do not;

      3. cast the lost on the careless man rather than the innocent one;

      4. economic view: ask the one who is idiosyncratic to change he’s behavior, since he has the comparative advantage of reducing the risk of the misunderstanding.

   3. Intoxication:

A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication

1. he is unable to understand in a reasonable manner the nature and consequences of the transaction, or

2. he is unable to act in a reasonable manner in relation to the transaction.

1. R2d §24 An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.

2. Factors to be considered:

   1. Communicated to and known to the offeree

   2. Engender reasonable understanding that acceptance will create the contract (objective standard)

   3. Comprehensiveness and specificity of terms

   4. Previous relationship, dealings can cast light on how the recipient reasonable should have understood the communication

   5. Custom

   6. Words of the offer: “quote”, “proposal” etc.

1. Offer made in jest: An offer which the offeree knows or should know is made in jest is not a valid offer. Thus even if it is "accepted," no contract is created.

   1. But: if the offeree does not know, there can be an offer as long as a reasonable person in the offeree’s position would believe that the offer was intended to create a power of acceptance in the offeree.

2. Auctions: When an item is put up for auction, this is usually not an offer, but is rather a solicitation of offers (bids) from the audience. So unless the sale is expressly said to be "without reserve," the auctioneer may withdraw the goods from the sale even after the start of bidding. See UCC § 2-328(3)

   1. A reserve price: solicitation of offers

   2. Without reserve price: auctioneer offeror, bidders are offerees.

3. Price quotation (McWane): Price quotations are usual considered invitation for an offer, rather than an offer to form a binding contract

   1. Buyer’s purchase agreement submitted in response to a price quotation is usually deemed the offer

   2. Price quote might be considered an offer if it is sufficiently detailed and it “reasonable appears from the price quotation that assent to that quotation is all that is needed to ripen the offer into a contract.”

      1. quote developed after substantial negotiations;

      2. included description of the product, quantities at various prices, terms of payment, delivery terms;

      3. contained the statement: this quotation is offered for your acceptance within 30 days”;

      4. price paid was the price listed in the price quotation rather than the price listed in the purchases subsequent purchase order

   3. Determination of an offer – really depends on the intent of the person as demonstrated by all of the surrounding facts and circumstances

   4. Example: A writes to B, “I can quote you flour at $5 a barrel in carload lots.” This is not an offer, in view of the word “quote” and incompleteness of the terms. The same words, in response to an inquiry specifying detailed terms, would probably be an offer; and if A added “for immediate acceptance” the intent to make an offer would be unmistakable.

4. Advertisement: Most advertisements are not offers to sell. They are invitation for an offer of sale on the terms stated. Because quantity terms are missing, and no specific offeree

   1. It may be an offer if there is some language of commitment or some invitation to take action without further communication (specific numbers, price, etc.). (Lefkowitz) Example: "100 men’s jackets at $26 apiece, first come first served starting Saturday," is so specific that it probably is an offer.)

5. Preliminary negotiations: If a party who desires to contract solicits bids, this solicitation is not an offer, and cannot be accepted. Instead, it merely serves as a basis for preliminary negotiations

1. § 26. Preliminary Negotiations: A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.

2. Ways to find liability

   1. Promissory estoppel

   2. Quasi-contract (claims rarely succeed, unless the defendant specifically and wrongfully induced the benefit)

   3. Duty to bargain in good faith

1. R2d §36 (1) An offeree's power of acceptance may be terminated by

(a) rejection or counter-offer by the offeree, or

(b) lapse of time, or

(c) revocation by the offeror, or

(d) death or incapacity of the offeror or offeree.

(2) In addition, an offeree's power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer.

1. Normally, if the offeree rejects the offer, this will terminate her power of acceptance

2. Exceptions: But rejection will not terminate the power of acceptance if either: (1) the offeror indicates that the offer still stands despite the rejections; or (2) the offeree states that although she is not now accepting, she wishes to consider the offer further later

1. R2d §39: (1) A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.

(2) An offeree's power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree.

1. Example: A offers to sell B 100 widgets at $5 each, the offer to be left open indefinitely. B said on July 2, "I’ll buy 50 from you right now for $4; otherwise, I’d like to keep considering your original offer," A’s offer would have remained in force.

2. FORK negotiation (explore the possibility of a change in terms) or counteroffer?

   1. You need to make clear what you’re doing: you can say that it’s just a negotiation or a counteroffer.

1. R2d §41 (1) An offeree's power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time.

(2) What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made.

2. Face-to-face conversation: If the parties are bargaining face-to-face or over the phone, the power of acceptance continues only during the conversation, unless there is evidence of a contrary intent.

1. The offeror is free to revoke his offer at any time before it is accepted (except in the case of option contracts)

   1. Effective upon receipt: R2d §42 An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract.

   2. Lost revocation: If the letter or telegram revoking the offer is lost through misdelivery, the revocation never becomes effective.

2. Revocation by conduct: R2d §43 An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect.

3. Reward/ general offer: revocation must be accomplished by equivalent notice to the original offerees.

4. Irrevocable contracts:

   1. Option Contract: R2d §25 An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer for the stated period of time, even if the offeree rejects it or make a counteroffer.

      1. Rejection and then acceptance: The offeree can change her mind after rejecting an option contract offer. Offeror can be protected

         1. if he relied on the rejection (promissory estoppel), or

         2. if offeror receives consideration for giving up the rights.

      2. Nominal and sham consideration accepted: R2d §87 (1) (a) An offer is binding as an option contract if it is in writing and signed by the offeror, recites a purported consideration for the making of the...