Mutual Assent—The Requirements of Offer and Acceptance by both parties to show their mutual assent to the same bargain.
Offer: a proposal by one party to the other showing a willingness to enter into a bargain.
It is made in such a way that other party is justified in believing that his assent to that bargain is invited and will result in a binding contract.
An offer creates a power in the offeree to create a contract by an appropriate acceptance.
Three elements to be legally sufficient as an offer:
manifestation of present contractual intent
words or conduct must be words of offer (present contractual intent) rather than words of preliminary negotiation (invitations to offeree to make an offer are not sufficient).
TEST: would a reasonable person in the shoes of the offeree feel that, if he accepted the proposal, a contract would be complete and that no further negotiations would be necessary to bind both parties? A party should have reasonable expectations in relying on a promise by the apparent intentions of the other party.
The words used (offer, not invitation)
To whom proposal is made (to the public, ie advertisements, are invitations even though words might suggest offer)
Definiteness and certainty of terms (present contractual intent v negotiations)
Written contract contemplated (is offeree bound immediately or only upon execution of the writing?)
ROL the secret feelings, intentions or beliefs of a party will not affect the formation of a contract in which their words and acts indicate that they intended to enter into a binding agreement. Consider the general accepted meaning of the terms used; the meaning of the term according to trade or custom; the meaning the parties may have assigned to the term in the course of past dealings. P’s reliance on what D told him about rehiring him was reasonable.
ROL A party to an alleged oral contract may testify as to whether he felt obligated to the other party. Testimony as to the subjective opinions of a party may be admitted even though an objective showing of an agreement is required above all.
ROL an employer in an otherwise at-will employment may be bound by policies set forth in an employee manual. A disclaimer must be conspicuous. The objective theory imposes a contract obligation on the basis of the outward manifestations of a party’s assent that is sufficient to create reasonable reliance by the other party. Subjective intention of employer is irrelevant.
certainty and definiteness of terms: terms of the offer must be sufficiently clear and complete so the court can determine what the parties were intending. Essential terms:
parties to the contract
time for performance: where time for performance is omitted, courts will imply reasonable time from the date of acceptance.
d. price: Where price terms are omitted, courts may imply a reasonable price or fair market value. Where price terms indefinite, courts will not imply and will hold contract unenforceable.
Terms must be express or capable of reasonable implication from their agreement. Courts may imply reasonable terms as long as they are consistent with express intentions. Such terms are implied-in-fact from the dealings and relationship between the parties. Courts will not re-make contracts and will never imply terms that are imperfect or incomplete in the contract.
Agreements to agree: an offer reserves some term for future agreement; if essential, the offer is too uncertain so no legal obligation until that future agreement is made.
UCC § 2-204: for sale of goods, the omission of one or more essential terms does not make an offer invalid as long as parties intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. What are reasonable terms:
§2-305: if price is omitted or left open, then it is a reasonable price at the time set for delivery.
§2-308: if place of delivery not specified, it is the seller’s place of business unless the goods are known to be elsewhere.
§2-309: if time of shipment not specified, it is reasonable time after contracting.
§2-310: if time for payment not specified, it is due at time and place where buyer is to receive the goods.
ROL a general letter informing that a merchant has a product for sale may not constitute an offer that binds the merchant upon acceptance.
(Real estate lease): ROL A real estate lease provision calling for the renewal of the lease at a rental to be agreed upon is unenforceable due to its omission of a material term. A party to a contract must assent to the obligation before the court will require him to perform it. Since renewal term did not contain any formula for determining the proper rent, D did not assent to be bound by a rent imposed by the court. No enforceable contract.
UCC does not apply to real estate contracts.
(Letter of intent): ROL parties who have made their pact “subject to” a later definitive agreement have manifested an intent not to be bound. Intent is measured objectively and must be determined from the language used when no ambiguity in its terms exists. P listed as a condition that its own shareholders and board of directors has to approve the deal shows an intent not to be bound. Letters of intent set the stage for negotiations on details which may or may not be ironed out.
Factors to determine whether parties intend to be bound before a document is written (fully executed):
whether there has been an express reservation of the right not to be bound in the absence of writing
whether there has been partial performance of the contract
whether all terms of the alleged contract have been agreed upon
whether the agreement at issue is the type of contract that is usually committed to writing.
communication to the offeree.
Acceptance: a voluntary
Mistakes in transmission by intermediary
Offeree aware: no contract
Offeree unaware: split of authority:
Majority view – there is a contract on the terms conveyed to the offeree. The intermediary was the agent of the offeror and offeror is liable OR since offeror chose the intermediary then he who caused the loss should bear the burden. This sometimes breaks down when the other party was the first to use the particular intermediary.
Minority view – no contract has resulted because neither party has reached an agreement.
Offeror’s Control over Contract Formation
Offeror may establish by terms of offer a time limit for Acceptance.
General Rule: offeree’s power of acceptance is terminated after expiration of whatever period of time was specified in the offer. If no period specified, the offer lapses at the end of a reasonable period of time considering subject matter, fluctuation of market conditions, business custom.
Time period begins to run from date of actual receipt by the offeree. If there was a delay in receipt and the offeree knew or should have known (ie postmark), the period begins to run from the date it ordinarily would have reached him.
Even if offer states specific period of time does not stop offeror from revoking during that period.
No time limit specified
ROL An offer to give away a prize contingent upon performance of an act is enforceable by one doing the act. Prize-winning contests are unilateral contracts and remain open until offeror withdraws. Performance of the act requested is all that is necessary to accept the offer and create a contract. Performance = consideration.
Offeror may establish means of Acceptance
General Rule: acceptance must be by a means authorized by the offeror. If the offeror expressly or impliedly requests a certain type of means of communication of the acceptance, offeree must use that means or some equally rapid and reliant means. If no specific means requested, offeree must use a means reasonable under all circumstances.
Latent: the offer or acceptance appears certain, but an uncertainty arises in light of extrinsic facts. Ex: A accepts O’s offer to sell “my automobile” but O has two automobiles.
Patent: the uncertainty is obvious on examination of the parties’ expressions. Ex: an offer to sell “my property.” No enforceable contract.