WHAT COUNTS AS ACCEPTANCE?
R.2nd §45: When the offeror has specified that acceptance con be through promise or performance, then starting to perform counts as an acceptance. BUT, when the offeror specifies that acceptance can only be by performance, then the performance must be complete in order to constitute acceptance but beginning to perform makes it impossible for the offeror to revoke the offer.
· This is best illustrated in awards cases.
o If you offer an award for capturing someone, you didn’t want to be bound to everyone who promises to perform, only those who do perform. However, the award cannot be revokes once someone has finished the performance.
Drennon v. Star Paving pg. 225 (R.2nd §87(2))
· Facts: Subcontractor submits erroneous bid, general contractor uses it, GC is awarded contact and SC tries to rescind bid.
· Rule: R.2nd §87(2) – reliance interest can be used to create an option contract. If the offeree relies on the offer to his detriment, and the offeror had reason to believe that the offeree might rely on that offer, then the offer becomes an option contract and the offer cannot be revoked.
Holman Erection v. Orville Madsen & Sons (pg. 231) (Contractor v. Subcontractor)
Facts: GC won overall bid with bid provided by P. D decides not to use P on the actual job and H sues.
Rule: SC is not reliant on GC the same way that GC is reliant on SC. There is no detriment to SC if GC does not use SC.
Rule: The nature of the bidding process dictates that we give a little more leeway to the GC to the SC. The GC gets the bids late and works under a tight schedule
Liability When Negotiations Fail: Reliance, Good Faith, Restitution
Reliance
money spent in anticipation of the contract
misrepresentation of his intention to contract (Markov v. ABC Transfer pg. 234)
Good Faith
it is implied that parties enter into express agreements to negotiate in good faith
Restitution (unjust enrichment)
compensated in restoring benefit
court distinguishes between services designed to promote company’s own interest (Songbird pg. 233) rather than services designed to benefit the other party (Precision Testing pg. 234)
there has to be actual benefit conferred on the other party (receiving down payment money) and not preparation to pay
Reliance/Promissory Estoppel
someone spends money in anticipation of an agreement and then the agreement fails
Hoffman v. Red Owl Stores (pg.
still in negotiations with the D, D leased the property to another company
Rule: Under PA law, an agreement to negotiate in good faith is an enforceable contract if 1) both parties manifest intention to be bound 2) terms of the agreement sufficiently definite to be enforced and 3) there is consideration
Restitution- The Requirement of Definiteness
even if there is a clear offer and acceptance, it is possible that the contract is unenforceable it is too indefinite
court will work to find terms to enforce the contract
reluctant to find a contract void where there is intent to be bound and a clear offer and acceptance
Reasons that parties might have indefinite terms:
they do not want to take the time or trouble to spell out the terms but would rather rely on the terms imposed by a court in the event that a dispute arises
reluctant to raise difficult issues for fear that the deal may fall through
they do not foresee problems that may arise
