#11438 - Offers And Acceptance - Contracts

OFFER & ACCEPTANCE & ASSENT

1. Objective Assent and Misunderstanding

   1. Objective approach to determining assent and meaning: rule-based and formalized

   2. Lucy v. Zehmer (pg 370)

      1. 3 possible scenarios

         1. L & Z both intended to contract. Z changed his mind.

         2. L intended to contract. Z was joking. L did not know and had no reason to know Z was joking.

         3. Both parties understood it was a joke even though by outward appearances it was a contract.

      2. VA SS believes (1) best fits the facts. And says that Lucy wins even under (2) because Z was more at fault, and L had the reasonable view of the events. (or because we cannot distinguish 1 from 2, objectively)

      3. Hypo: if, under (2) Z tells L he was joking before L leaves the restaurant, so that L does not have chance to rely. Quick change also diminishes risk that Z actually just changed his mind.

         1. The worry is that giving Z the power to get out of the contract undermines the finality of contract and creates uncertainty (even if it makes sense from a negligence-based liability perspective)

         2. Unilateral mistake doctrine may provide an out

      4. US law today says no contract under scenario (3)

         1. Keller v. Holderman, p. 239, and R2 § 201(1)(“Where the parties have attached the same meaning to a promise or agreement or a term thereof, it is interpreted in accordance with that meaning.”)

      5. Scenario 4: L intended to contract. Z was joking. L was aware Z thought it was a joke even though by outward appearances it was a contract.

         1. no contract under R2 §§ 20(2); 201(2)

         2. The part of the law of unconscionability dealing with unfair surprise can be explained by this principle. An explanation is that L is more at fault than Z in this situation. Z is using language and the contractual form carelessly. L is knowingly taking advantage of Z’s carelessness.

      6. Scenario 5: L intended to contract. Z was joking. Neither was aware of the view of the other. Both views were reasonable in the confused circumstances.

         1. No Contract: See R2 §20(1)(a); Colfax Envelope Corp., p. 381.

         2. An explanation is that neither party is more at fault so there is no basis for choosing one party’s understanding over the other.

      7. Scenario 6: oral, with witnesses

         1. Statute of fruads defense, even if fact finder believed witnesses. Statutory requirement of writing is serving cautionary function.

         2. If facts are unclear, then the writing serves an evidentiary function

         3. Law places great importance on writings embodying (or evidencing) an agreement

         4. Judicial disposition to treat a writing as conclusive produces false positives in cases like Lucy v. Zehmer. The statute of frauds produces false negatives when an agreement is not reduced to a writing. But the overall effect is to reduce litigation and uncertainty.

   3. Mutual Misunderstanding

      1. Either party may opt for a contract on the other’s terms. See Mears v. Nationwide Mutual, p. 302 (holding contest winner may stipulate prize is cheapest car of type promised as prize to avoid problem of indefiniteness).

         1. The other party has no legitimate ground to object to being held to the deal it thought it was making.

      2. Raffles v. Wichelhaus (pg 374) – Contract for India cotton to be delivered by “Peerless.” B refuses to accept delivery of cotton arriving on the Peerless that sailed in December, claiming he understood the contract was for cotton arriving on the Peerless that sailed in October.

         1. Rule f mutual misunderstanding = when neither party bears more fault = no contract

         2. Contract requires a true meeting of the minds

         3. Better than (ii): in a case of a material misunderstanding when neither party is more at fault there is no contract because there is no basis for preferring one party’s view over the other.

         4. A general point is that despite the anxiety about looking outside a written expression of a contract to determine meaning it is inevitable that courts will do so. Even an unambiguous writing may suffer from a latent ambiguity.

      3. Frigaliment Importing Co. v. B.N.S. Intern. Sales Corp, p. 376. The plaintiff is the buyer of chickens. It is seeking damages for breach of warranty, presumably the value of broilers and fryers it claims it was promised minus the value of the fowl it received.

         1. How strong must the practice of using “chicken” to describe broilers be to hold the seller to the practice?

            1. Given the fact defendant is new to the trade it could be held to a usage of which it was unaware only if the usage was really strong in the sense of being well-established and universal.

         2. What is the relevance of the fact that the seller is new to the trade?

            1. A new entrant to a trade might be held to such a usage because we think they have a duty to learn the language of the trade.

            2. Or we might reason that the other party is less at fault for they would expect anyone in the trade to know of such a usage.

            3. When a usage is weaker it is harder to fault the new entrant.

            4. But it also is hard to fault the other party who is more steeped in peculiar trade usages.

         3. Facts on price also suggest neither party more at fault in the misunderstanding: fowl = 30 cents; contract price = 33 cents; broilers = 35 cents. Both parties were aware of these prices, so both should have realized the chicken was mispriced in their favor on their view of what chicken meant.

         4. Friendly’s opinion suggests he doesn’t hold chicken=fowl, but rather that buyer failed to establish chicken is limited to boilers. Friendly never describes seller’s interpretation as the more reasonable one. This makes it more like Raffles…

            1. Note at p. 380 : the loss falls on the buyer because of the seller’s justifiable change of position.

            2. This doesn’t follow. If there is no contract, then the seller’s right to be paid for the chicken the buyer took under protest would be in restitution and not under the contract. The seller at most would be entitled to the market price of the chicken and not the contract price.

      4. Embry v. Hargadine, McKittrick Dry Goods (pg 381): Embry’s contract terminates on December 15. On December 23 he talks with McKittrick about a contract for “another year.” The case shows how American courts handle claims involving an alleged informal oral agreement.

         1. Alleged agreement would be under Statute of Frauds if it ran from Jan. 1 of next year, because then it would take more than one year from the date of its making to perform. Because contract not held to be within the statute shows that contract was considered to run from December 15.

         2. Parties disagree about what was said. In US: juries resolve this factual dispute unless claim is in equity or both waive jury trial. Jury finds for D.

         3. Jury instruction: it could find a contract only if both parties thought there was a contract.

            1. Wrong: It is enough that Embry thought he had a contract and McKittrick should have known that was what Embry would take this to be his meaning.

            2. On remand – only question put to jury will be if it believes Embry. Issue of credibility, not “whether what was said/conduct was reasonable.”

1. Offer & Acceptance rules

   1. To some extent, these rules and sub-rules track social practice and expectations; to some extent they enable judges to resolve intractable factual questions as a matter of law.

   2. A court wishing to find no contract may hold

      1. No offer was made

      2. The offer was terminated

      3. There was no acceptance

   3. A court wishing to find a contract may find

      1. Effective offer and acceptance

   4. Sometimes a rule will be decisive, but often one gets the impression a rule is invoked to justify a decision reached on some other ground.

   5. Offer

      1. Second Restatement of Contracts § 24: “An offer is the manifestation of a 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. An offer gives the recipient the power to put the offeror under a legal obligation by accepting the offer.

      3. Did the sender reasonably appear to intend to give the recipient that power by inviting the recipient to conclude a contract by acceptance?

         1. This way of putting the question gives you an idea of why people who were imbued with the idea of liberty and committed to the view that obligation usually required a benefit to the obligor created a body of rules protecting the sender from the risk of an unwanted or unilateral obligation.

      4. When does an offer terminate?

         1. if a stated time limit passes, after a reasonable time, if it is rejected, if it is revoked, if the offeror die

   6. Acceptance

      1. Traditional common law rule: acceptance must be unequivocal and on the terms of the offer to be effective

   7. Lonergan v. Scolnik (pg 414) – D sends “form letter” to P in response to P’s inquiry regarding D’s advertisement in the paper. P sends letter to D seeking further information, D responds. D sells land to third party. P receives D’s letter. P sends letter of acceptance, believing it to be acceptance of an offer – he put money in escrow. D did not think he had an outstanding offer when he sold land to third party. Misunderstanding is because P did not notice when the letter was post-marked so he thought he answered quickly.

      1. Note on meeting of the minds: That an offeror no longer considers himself bound to an offer is beside the point if the offeree reasonably believes that the offer is still on the table. This is the objective principle applied to remote, non-simultaneous communication.

      2. P’s belief that he had an offer in hand based on the letter was unreasonable.

         1. Other possible interpretations

            1. Absence of reliance.

            2. mutual misunderstanding in which neither bears more fault

            3. Construing the 4-8...