Mutual Assent: Offer and Acceptance
THE OFFER: Is the offer valid?
Promise, Undertaking, or Commitment. An offer is a proposal by one party to the other, manifesting a willingness to enter into a bargain, and made in such a way that the other person is justified in believing that his assent to that bargain is invited and, if given, will result in a binding contract between the parties.
i. Requirement of manifestation of present contractual intent. The words or conduct used in the proposal must be words of offer rather than mere words of preliminary negotiation (i.e., invitations to the proposee to make an offer are not sufficient). In short, the words must evidence a present contractual intent.
ii. The test: the objective theory of contracts. Would a reasonable person in the shoes of the addressee (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?
1. Factors considered. In applying this test, the courts consider the following factors, no one of which is conclusive:
a. The words used. Some words strongly suggest that an offer was intended, while others suggest a mere invitation to make an offer.
b. Surrounding circumstances. The surrounding circumstances may show that the words used did not sufficiently manifest a contractual intent.
c. To whom proposal is made. A proposal made to the public or to a large group of persons (e.g., by advertisements, catalogs, offering circulars, etc.) will more likely be construed as an invitation to make an offer rather than an offer in itself, even though the words used otherwise would suggest that a firm offer was intended.
d. Definiteness and certainty of terms. This factor is discussed below as a separate requirement for every offer; but the certainty of terms also reflects on whether the party making the proposal had a present contractual intent or was only entering into preliminary negotiations. The more definite the proposal, the more likely it will be construed as an offer.
e. Written contract contemplated. If the proposal contemplates or provides for a subsequent written instrument to memorialize the agreement, the question arises whether an offeree who accepts is bound immediately or only upon subsequent execution of the writing
2. Rationale. Courts today have rejected the requirement that there be any actual, subjective meeting of the minds. Demands for security and certainty in business transactions, and the fundamental objective of protecting a party’s reasonable expectations in relying on a promise, make it imperative that a contracting party be able to rely on the apparent intentions of the other party, without regard to his secret thoughts or mental reservations. [Restatement (Second) 20] 3. Ebry v. Hargadine – McKittrick Dry Goods Co.: The inner, subjective intentions of a party in regards to making a contract cannot void one if their words have created it. A contracting party is judged by its words and actions, not its intentions.
4. Exception. Just because objective evidence trumps subjective intent, it doesn’t follow that subjective intent is irrelevant. Objective evidence may be evidence of subjective intent.
5. Kabil Development Corp. v. Mignot SC of Oregon: As long as the jury understands that it is the outward, objective manifestations of a company’s actions that suggests a contract, testimony as to someone’s subjective imp
v. Unilateral Offers and Objective Intent. Unilateral offers of “notice to sell,” advertisements, and self serve stores. See Moulton v. Kershaw, Lefkowitz v. Great Minneapolis Surplus Store, Carbolic Smoke Ball Co, Pharmaceutical Society v. Boots Cash Chemists.
Certainty: Are the terms of the offer sufficiently clear and complete so that the court can determine what the parties were intending, and can fix damages in the event of non-performance?[Restatement (Second) 32]?
i. Essential Terms: Are the essential terms expressly or impliedly present?
1. Parties to the Contract
2. Subject Matter
3. Time for performance; and
ii. [Restatement (Second) 33] Certainty
1. Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.
2. The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving appropriate remedy.
The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or an acceptance.