Assent
– Mutual Assent: Generally, to constitute a contract, there must be a meeting of the minds of the parties, and both must agree to the same thing in the same sense. (Embry)
– Contract without Explicit Assent – Objective Intent: The mental assent of the parties is not requisite for the formation of a contract. 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. (Lucy)
o Objective Intent: The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. It judges his intention by his outward expression and excludes all questions in regard to his unexpressed intention. (Embry)
§ What a reasonable person in the position of the other party would conclude that his objective manifestations of intent meant.
§ If his words and acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of his mind.
§ Policy: Because neither contracting parties nor courts are mind-readers, it is important that the existence and terms of contracts be determined from the manifestations made by each of the parties, rather than be each party’s subjective intentions.
o A person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement. (Lucy)
§ Since the jesting promisor created the problem and evidently failed to make his attitude clear to the promisee, the responsibility for the apparent misunderstanding is his. Chirelstein.
– Agreement required only as to major terms: for a contract to be formed, the parties must reach mutual assent on all of the essential terms of the agreement.
o Parties
o Subject matter
o Time for performance
o Price
– Amicable domestic or social situations: presumption that legal relations were not intended.
– Fraction of Days: The general rule that the law knows no fractions of a day is not allowed to operate against right and justice, and these fractions will be taken into account when justice requires that it be done or when necessary to save a vested right. (Tilbert)
o Also, under the general rule, the entire day upon which a contract expires is open for compliance with it. (Tilbert)
– When the subject matter of an agreement is of a kind that is customarily dealt with in enforceable contracts, and the parties have in fact acted under the agreement, a court is likely to look with some distaste at provisions that seem to exclude all sanctions and remedy. Corbin on Contracts.
– Employment Policy: Employer statements of policy can give rise to contractual rights in employees without evidence that the parties mutually agreed that the policy statements would create contractual rights in the employee. Toussaint
o And hence, although the statement of policy is signed by neither party, can be unilaterally amended by the employer without notice to the employee, and contains no reference to a specific employee, his job or compensation, and no reference to the policy in pre-employment interviews and the employee does not learn of its existence until after his hiring.
Restatement (2nd) of Contracts §211. Standardized Agreements
(1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing.
(2) Such a writing is interpreted wherever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing.
(3) Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement.
Restatement (2nd) Of Contracts §20. Effect of Misunderstanding
(1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and
a. Neither party knows or has reason to know the meaning attached by the other; or
b. Each party knows or each party has reason to know the meaning attached by the other.
(2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if
a. That party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or
b. That party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.
Restatement (2nd) of Contracts §201. Illustration
4. “A agrees to sell and B to buy a quantity of eviscerated ‘chicken.’ A tender ‘stewing chicken’ or ‘fowl’; B rejects on the ground that the contract calls for ‘broilers’ or ‘fryers.’ Each party makes a claim for damages against the other. It is found that each acted in good faith and that neither had reason to know of the difference in meaning. Both claims fail.”
Offer
– Generally:
o An offer is an expression by one party of his assent to certain definite terms, provided that the other party involved in the bargaining transaction will likewise express his assent to the identically same terms. Corbin on Contracts.
o Where the offer [that some performance was promised in positive terms in return for something requested] is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract. (Lefkowitz)
– Intent: A contract should be construed to affect the intention of the parties thereto, as gathered from the entire writings constituting the contract. It is this intent that constitutes the essence of every contract. (Courteen Seed Co.)
o The modern law rightly construes both acts and words as having the meaning which a reasonable person present would put upon them in view of the surrounding circumstances. Even where words are used, a contract includes not only what the parties said, but also what is necessarily to be implied from what they said. And it may be said broadly that any conduct of one party, from which the other may reasonably draw the inference of a promise, is effective in law as such. (Southworth)
o Ex: “Asking” for a price/bid is not the same as “offering” or “will sell.” (Courteen Seed Co.)
o Ex: When purchaser’s letter inquired the price and terms on which the seller would sell the purchaser the goods, the seller’s answer to it was not a quotation of prices, but a definite offer to sell on the terms indicated, and could not be withdrawn after the terms had been accepted. (Fairmont)
– Information or invitation to negotiate does not constitute an offer. (Courteen Seed Co.)
– Advertisements: Generally, Advertisements are construed, not as an offer, but as an invitation for an offer of sale on the terms stated (invitation to bargain), which offer, when received, may be accepted or rejected and which therefore does not become a contract of sale until accepted by the seller; and until a contract has been so made, the seller may modify or revoke such prices or terms. (Lefkowitz)
o Ex: An advertisement did not constitute an offer of sale to the general public because not everyone qualifies for financing and the dealership did not have an unlimited number of Ford Escorts to sell, it was unreasonable for Ps to believe that the advertisement was an offer binding the advertiser. Ford Motor Credit Co. v. Russell
– Quotation of Prices: A quotation of prices is not an offer to sell, in the sense that a completed contract will arise out of the giving of an order for merchandise in accordance with the proposed terms. (Fairmont)
o Although a price quotation, standing alone, is not an offer, there may be circumstances under which a price quotation, when considered together with facts and circumstances, may constitute an offer which, if accepted, will result in a binding contract. (Southworth)
§ Factors: Quantity listed, addressed to a particular person, use of the term “offer” instead of “quote”, no need for further expression of assent (reserves the power to close the deal).
§ Reluctance to find contract.
o It is also recognized that such an offer may be made to more than one person. Thus, the fact that a price quotation is sent to more than one person does not, of itself, require a holding that such a price quotation is not an offer. (Southworth)
– Indefinite offers: for a contract to be formed, the parties must reach mutual assent on all of the essential terms of the agreement.
o Parties
o Subject matter
o Time for performance
o Price
– Option contract: an offer to contract and a contract in which the offeror promises that she will keep the offer open for a certain time.
– Soliciting bids is not an offer but serves as a basis for preliminary negotiation.
U.C.C. §2-204(3): Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.
U.C.C. §2-311(1): An agreement for sale which is otherwise sufficiently definite to be a contract is not made invalid by the fact that it leaves particulars of performance to be specified by one of the parties. Any such specification must be made in good faith and within limits set by commercial reasonableness.
Acceptance
– Acceptance is a voluntary act of the offeree whereby he exercises the legal power conferred upon him by the offer, and thereby creates the set of legal relations called a contract.
– The offeror has, in the beginning, full power to determine the acts that are to constitute acceptance.
– Where there is an offer to form a bilateral contract, the offeree must communicate his acceptance to the offeror before any contractual obligation can come into being. A mere mental intent to accept the offer, no matter how carefully formed, is not sufficient. The acceptance must be transmitted to the offeror in some overt manner. (Ardente)
– Effective Acceptance: To be effective, an acceptance must be definite and unequivocal. (Ardente)
o “An acceptance which is equivocal or upon condition or with a limitation is a counteroffer and requires acceptance by the original offeror before a contractual relationship can exist.” (Ardente)
§ Exception: An acceptance may be valid despite conditional language if the acceptance is clearly independent of the condition. (Ardente)
§ “Frequently an offeree, while making a positive acceptance of the offer, also makes a request or suggestion that some addition or modification be made. So long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer whether such request is granted or not, a contract is formed.” (Ardente)
– Method of acceptance: offeror is master of his offer. He may prescribe the method for acceptance
o Mode of acceptance unspecified: in any manner and by any medium reasonable under the circumstances.
o Acceptance of Unilateral contract: accepted only by full performance.
o Option contract arises on part performance: If offeree begins to perform, most courts treat the offer as having become temporarily irrevocable – option contract.
o Acceptance of bilateral Contract: usually in words, but can also be in actions if they fairly indicate to the offeror that the offeree intends to enter into the contract.
o Unclear whether acceptance through promise or performance: accepted by either.
§ Buying Shipment of goods: UCC §2-206(1)(b) – acceptance by promise to ship or by the prompt shipment.
– Form of Acceptance – UCC §2-206(1)(a): (1) Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances.
– If the offeror prescribes an exclusive manner of acceptance, an attempt on the part of the offeree to accept the offer in a different manner does not bind the offeror in the absence of a meeting of the minds on the altered type of acceptance. (Allied Steel)
– If an offeror merely suggests a permitted method of acceptance, other methods of acceptance are not precluded. (Allied Steel)
– Acceptance of an offer by part performance in accordance with the terms of the offer is sufficient to complete the contract. (Allied Steel)
– Restatement (2nd) of Contracts §32 – Invitation of Promise or Performance: In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or (b) rendering the performance, as the offeree chooses.
– Where an offer is made by one party to another when they are not together, the acceptance of it by that other must be manifested by some appropriate act. It does not need that the acceptance shall come to knowledge of the one making the offer before he shall be bound. But though the manifestations need not be brought to his knowledge before he becomes bound, he is not bound, if that manifestation is not put in a proper way to be in the usual course of events, in some reasonable time communicated to him. (White)
– Restatement (2nd) of Contracts §69 -Acceptance by Silence or Exercise of Dominion:
(1) Where an offeree fails to reply to an offer, his silence and inaction ope
s rather than the formation of one or more unilateral contracts by actual performance on the part of the offeree.”
o Policy: “It is not always easy to determine whether an offerer requests an act or a promise to do the act. As a bilateral contract immediately and fully protects both parties, the interpretation is favored that a bilateral contract is proposed.”
– Option Contract Created by Part Performance or Tender/Unilateral Contract not Revocable once performance has started.
o Restatement (2nd) §45 In my own words: In a unilateral contract, beginning performance creates an option contract. During the duration of the option contract (offeree’s performance), the offeror cannot revoke and the offeror’s duty of performance is conditioned on the completion of the performance by the offeree.
– Revoking Anytime Before Acceptance: Any offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been performed. Petterson v. Pattberg
o “The offeror may see the approach of the offeree and know that an acceptance is contemplated. If the offer can say, ‘I revoke’ before the offeree accepts, however brief the interval of time between the two acts, there is no escape from the conclusion that the offer is terminated.” Williston on Contracts §60b. (Petterson v. Pattberg)
o Reliance Exception!
– Credit Cards: Issuance of a credit card is only an offer to extend credit, it does not create a contract. Once a credit card issuer withdraws its offer, a cardholder cannot compel it to extend credit to him in accordance with the terms of that offer. ——— “The issuance of a credit card is but an offer to extend a line of open account credit. It is unilateral and supported by no consideration. The offer may be withdrawn at any time, without prior notice, for any reason or for no reason at all, and its withdrawal breaches no duty – for there is no duty to continue it – and it violates no rights. Acceptance or use of the card by the offeree makes a contract between the parties according to its terms, but we have seen none which prevents a termination of the arrangement at any time by either party.”
– Notice of Acceptance of Unilateral Contract: the offeree does not need to give notice of his intention to perform/accept, but courts disagree on whether the offeree must give notice to the offeror once he has begun performance.
o Old view: no notice to the offeror is required, unless specifically imposed as a condition to acceptance.
o Restatement (2nd) and UCC view: although a unilateral contract becomes binding upon performance, the offeree must nonetheless give the offeror notice that he has performed, unless the offeror has reason to know of the performance.
§ Result of Failure to Notify: may discharge the contractual duty of the offeror. The notice requirement protects the offeror from being bound indefinitely by an acceptance of which he is unaware.
o Restatement (2nd) Contracts §54: A contract is formed by performance without any notice, unless the offeror requests a notice.
§ Exception: Notice is required if the offeree has reason to know that the offeror has no adequate means of learning of the performance promptly, unless the offeree exercises reasonable diligence to notify the offeror, or the offeror learns of the performance within a reasonable time, or the offeror indicates that notification of acceptance is not required.
o UCC §2-206(2): Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
– Reliance makes an offer Irrevocable:
o An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice. Restatement (2nd) of Contracts §87(2). Drennan v. Star Paving Co.
§ Contractor relied on a bid from a subcontractor. It was customary to do so. Contractor’s bid was accepted. Subcontractor revoked the bid before the Contractor could accept. The Court found the bid an irrevocable offer because of the justified/reasonable and foreseeable reliance.
§ A general contractor is not bound to a subcontractor by its bid that included the subcontractor’s name because a subcontractor does not suffer detrimental reliance if the general later decides to reject the bid. Holman Erection Co.
o Policy:
o A promise which the promisor should reasonably expect to induce action of forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. Restatement of Contracts §90
– Mailbox Rule: acceptance of an offer in which mail is an acceptable mode of acceptance is effective when deposited in the mail properly addressed and with sufficient postage affixed. Worms v. Burgess
o It is clear that in negotiations by mail one party must be in the dark about his contractual relations during the period for transmission of the letter. The “mailbox” rule imposes this uncertainty on the offeror. This risk allocation is eminently reasonable when it is recognized that the offeror can shift this risk by requiring receipt of acceptance when he makes the offer.
o Offeror has the power of deciding the means of acceptance.
