Professor Sullivan, Contracts II Outline
CHAPTER 3: AGREEMENT
SECTION 2: SPECIAL PROBLEMS IN THE AGREEMENT PROCESS
COUNTEROFFERS, FORM BATTLES, AND UCC SECTION 2-207
Minneapolis & St. Louis Rail Road v. Columbus Rolling Co (p. 307/ 69)
Columbus (D) offered to sell between 2k to 5k tons of 50lb. rails for $54 per gross ton. Minneapolis (P) placed an order for 1,200 tons, which D refused to fill. P then placed a second order for 2k tons, which D also refused to fill and denied the existence of a contract. D wins.
Rule: An “acceptance” of an offer which does not assent to the offer as made is a rejection by the offeree and a counteroffer to the offeror, who then acquires the right to accept or reject the counter offer. Maintains some control in the hands of the offeror as master of the offer. The seller shouldn’t be obligated to the original offer when the offeree goes back to it after making a counteroffer, which is a rejection.
Common Law Mirror Image Rule
The acceptance has to be identical to the offer and if it is not identical then no contract is formed (any deviation voids the offer). Only 2 courses of action for an offer. 1) Accept and thus manifest assent or 2) Reject. No middle ground.
Effects of Request and Suggestions
§ 59. Purported Acceptance Which Adds Qualifications
A reply to an offer which purports to accept it but is conditional on the offeror’s assent to terms additional to or different from those offered is not an acceptance but is a counter-offer. (The counteroffer (which is a rejection) destroys the power to accept.)
§ 61. Acceptance Which Requests Change of Terms
An acceptance which requests a change or addition to the terms of the offer is not thereby invalidated unless the acceptance is made to depend on an assent to the changed or added terms. (Requested changes do not destroy the power to accept.) (p. 310)
(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.
***(The idea that a counteroffer terminates an offeree’s power of acceptance is a default rule, which can be contracted around unilaterally by either the offeror or offeree. “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.)
The Battle of Forms, Mirror Image Rule and UCC 2-207 (applies to the sale of goods) (Reference Chart)
The key factor that brings 2-207 into force is that there is a conflict or disparity in the terms contained in the written communications (like the order and acknowledgement; preprinted boilerplate terms drafted by the other party). The purpose of UCC 2-207 is to resolve the question of whether a contract was formed despite a disparity in the offer and response, and, if a contract was formed, which of the conflicting terms became part of the contract. Article 2 is created to prevent parties from using the CL mirror image rule to renege on a contract by finding a technicality.
UCC § 2-207 is more flexible than the mirror image common law rule.
UCC § 2-207 are very similar to the Restatements in that where there are additional or different terms, the focus is on whether the other side is adding qualifications or conditions to their acceptance which is not acceptance. Or whether they are requesting a change not conditional to the acceptance.
The “Grumbling” Acceptance
Employee signed and accepted terms to be reinstated, but made notation requesting to see his personnel file. Court regarded as “grumbling” acceptance. Acceptance accompanied by an expression of dissatisfaction. It’s an effective acceptance as long as it falls short of actual dissent.
DTE Energy v. Briggs Electric (p. 312/70)
DTE (P) contended that a forum-selection clause, which was sent to Briggs (D) as part of an Order Acknowledgment, in response to D’s purchase order was enforceable. D wins.
Rule: Under the UCC, a forum-selection clause in a contract between merchants will not be enforced where it is contained in fine print, is considered an additional term, and materially alters the parties’ contract. (UCC 2-207 provides that a written confirmation operates as an acceptance even though its terms are not identical to those contained in the offer. One exception to this general rule is that a party can state “acceptance is expressly made conditional on assent to the additional or different terms.”)
i. Routes to Contract Formation (p. 318-319)
3 Routes to contract formation under UCC § 2-207: 1) before the comma in subsection (1), 2) in subsection (3), 3) after the comma in subsection (3)
UCC § 2-207:
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance
those terms (initially) and never expressly assented to the terms.
INDEFINITE AGREEMENT AND GAPS
George Varney v. Isaac Ditmars (p. 340/79)
Varney working for Ditmars @ $35/week. Varney receives another job offer, Ditmars promises additional $5/week + fair share of profits after he close his books for the year if he stays. Varney gets sick and miss 3 weeks of work. Ditmars fires him 5 days after he got sick. Varney seeks back pay and fair share of profits.
Majority Rule: Court ruled the statement of “fair share of profits” was too vague, indefinite and uncertain. For the validity of a contract, the promise, or agreement of the parties to it must be certain and explicit, and their full intention may be ascertained to a reasonable degree of certainty. Agreement must neither be vague or indefinite, and if thus, parol evidence can be resorted to.
The promisor controls the profitability and could make it worth very little or worth a lot (employee has no control). Could refer to the “market value.”
We assume reasonable price in case of sale of goods with no fixed price. But this statement of “fair share of profits” is vague, indefinite & uncertain.
Judge Cardozo dissent: Promise is not always too vague to be enforced. As long as the promise was made with contractual intent, there can be enough data to fill in the gaps. Original Gap Filler: Custom of Industry
Quantum meruit: “as much as deserved.” A reasonable sum of money to be paid for services rendered or work done when the amount due is not stipulated in a legally enforceable contract.
Quantum valebant: “as much as they are worth.” A lawsuit to recover payment for goods that have been sold and delivered.
United Press: prices do not have to be expressly mentioned to form a valid contract.
Petz: No contract as long as any elements is open to negotiation