CONTRACTS I
Vacca Fall 2010
The Formation of a Contract Requires a Bargain Where There is a Manifestation of Mutual Assent to the Exchange and Consideration
Determining Mutual Assent
Determining Mutual assent through two step process of offer and acceptance
I) OFFER—is there an objective manifestation of intent to be bound (obj theory)
II) R2d sec 24
a. 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
b. Advertisements
i. Ads are not offers; they are invitations to make offers—Leonard v. Pepsi co., Scholnic
1. Without this general rule there would be a problem with multiple liabilities. Too many Ks would be breached when limited supplies cant meet overwhelming demand. As a result, companies would stop running ads. Consumers would be less informed because of less price shopping. As a result, the economy would be less efficient.
ii. UNLESS the ad is clear, definite, explicit, and leaves nothing open to negotiation
1. Language of the offer is key—Lefkowitz (time, items, quantity, price, first come first served—limits liability)
c. Price Quotes
i. Price quotes are not an offer; they are invitations to make offers—Minnesota Lindseed
1. Same policy as ads.
ii. UNLESS language indicates otherwise—See obj. Theory
III) Destroying the Offer
a. Four ways to Terminate an offer:
i. Direct Rejection or Counteroffer
1. Consistent with the obj. theory
a. Outward actions no longer show intent to be bound
b. Person trying to enforce the offer has knowledge and can’t possibly believe that the other is intending to be bound.
ii. Lapse of Time
1. Offer is good until a specified or reasonable amount of time
a. Reasonable time depends on the circumstances
i. Minnesota Lindseed—(volatile market indicated that there was lapse)
iii. Death or incapacity of the offeror
1. If the offeror dies, the offer dies with him.
a. As a practical matter, it is conceivable that the offeror could have revoked offer in the time between his death and the acceptance by the offeree.
b. If offeree does not know of offeror’s death, then not consistent with objective theory; a relic of the subjective theory days or a public policy argument.
iv. Indirect Revocation—when offeror takes definite action that is inconsistent with intent to be bound
1. Dickinson v. Dodds—Offer died when offeree was notified of revocation through third party. (fails prong 2)
2. Face to Face offers generally terminate when meeting ends
3. Revocation of public offers must be communicated through the same medium as originally communicated through.
IV) Preserving the Offer
a. Option Contracts—A promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer. i.e., it is a contract to keep an offer open.
i. Requirements:
1. In writing and signed by the offeror
2. Recites a purported consideration for the making of the offer to leave original offer open
3. Proposes an exchange on fair terms within a reasonable time.
ii. Under an option contract, an offer is irrevocable, even in the event of death by the offeror, because consideration makes options binding contracts to keep an offer open.
iii. When analyzing the receipt of consideration the courts have two approaches:
1.
i. BILATERAL—Acceptance by promise to perform
1. Look at language and circumstances to determine whether promise to perform or performance is more appropriate.
2. Acceptance by promise to perform must actually be received by offeror for contract to be formed—Behee
a. i.e., offeror must actually have knowledge of the acceptance before he is bound.
3. Dispatch/Mailbox Rule
a. Acceptance is effective at the time the mail is deposited in the mailbox.
i. Offeror does not have to actually receive the letter
1. UNLESS otherwise stipulated in contract
ii. Does not apply when option contracts are in place or to revocation
iii. If acceptance follows a rejection in mail, then whichever one was received first applies
iv. Rejection, revocation, and counter-offer do not follow mailbox rule. Effective upon receipt, not dispatch.
ii. UNILATERAL—Acceptance by performance
1. Look at the language of the offer to determine whether acceptance by promise or performance is more appropriate
2. Where an offer invites acceptance by performance, no notification is necessary to make acceptance effective.
