CONTRACTS
MATHESON
FALL 2011
MANIFESTATION OF MUTUAL ASSENT
Introduction; Should Mutual Assent Be Judged Objectively or Subjectively?; Assent to Indefinite or Incomplete Agreements.
Objective vs. Subjective
Contract law is an attempt to enforce what parties want. Therefore, starting point should be assessment of intent by the subjective standard. However, where there is contention (the parties subjective intent disagree), the objective standard should then be used to assess intent (what a reasonable person would understand).
Assent
A party’s agreement to the proposed terms (articulated with sufficient clarity and specification to qualify as assent).
Manifestation
Language or conduct that is directed toward the other party (who hears, sees or otherwise knows about the manifestation)
Manifestation of Mutual Assent (Meeting of the Minds)
Each party has manifested assent to the proposed terms. Manifestation of mutual assent protects each party’s freedom of/from contract. The law should make it neither too easy nor too hard for parties to form contracts (and should strive to implement the intention of the parties).
Mutual assent is not an element of promissory estoppel or of promissory restitution because both doctrines focus on the commitments of only one party to the transaction.
Manifestation of mutual assent may be simultaneous or it may be the product of a back-and-forth “offer and acceptance process”.
In order to determine the point at which agreement was reached, the court must: (1) view the case subjectively (what the party was thinking at the time) or objectively (what a reasonable person would think); and (2) determine how clear, detailed and certain the terms must be in order to consider a contract to be in place.
If one party is displaying and stating one thing but thinking another, it is irrelevant if what was displayed and stated would be accepted by a reasonable person, no manifestation of mutual assent took place.
Mutual Assent by Offer and Acceptance.
Contract negotiation may be accomplished by a series of back-and-forth communications between parties. As a result courts have established a set of rules or standards to evaluate whether such communications result in assent to an agreement.
Offer (by the offeror) – manifest assent to specified contractual terms [gives the offeree the power to “accept” and thus create a contract by manifesting assent to the same terms.
Assent occurs when the offeree communicates (through word or conduct) “I agree to that”. [the offeror concedes that the offeree can bind them to a specific performance (give away some freedom)]
In marginal cases, courts are often reluctant to rule that an offer was made – because the result might be significant liability that the purported offeror did not mean to make.
An offer may be terminated before accepted (revocation, rejection, lapse, death or incapacity of either party); or a counter-offer may be made by the offeree (to become counter-offeror).
Defining “Offer”
Everything about a communication – what it says and how it says it – is relevant to determining whether it constitutes an offer.
Purported offers are judged (like all contract communications) are judged by their objective meaning (would the communication be understood as an offer by a reasonable person in the offeree position?)
The courts have developed specialized rules and guidelines to determine whether advertisements and rewards; requests for bids, proposals, or quotes; and price quotations constitute offers.
Distinguishing Offers from Preliminary Negotiations
Based upon the examples given in the CB, to be an offer a communication must (be):
1. Clear;
2. Definite;
3. Explicit
(states goods and provides an opportunity for the offeree to determine quantity and price);
4. Leave nothing open for negotiation;
5. Unambiguous
(both offeror and offeree must share a common understanding of the terms including remedy in the event of a breach of contract);
6. Received by the offeree;
7. Articulate an action or inaction on the part of the offeror upon acceptance by the offeree;
8. Conclude the contract negotiation, thus establishing a contract;
9. Understood by the offeree to conclude the contract negotiation.
Unilateral vs. Bilateral Offers
Offer for a Unilateral Contract – Offeree accepts the offer by engaging in the conduct specified within the offer.
Offer for a Bilateral Contract – Offeree accepts the contract with a reciprocal promise (as opposed to reciprocal performance)
Generally, an advertisement does not constitute an offer. An ad is not transformed into an enforceable offer merely by a potential offeree’s expression of willingness to accept the offer through, among other means, completion of an order form (Pepsi Stuff). Otherwise, potentially unlimited exposure, contrast with Lefkowitz (performance was promised (in positive terms) [fur coat] in return for something requested [$1]; and the offer was clear, definite, explicit, and left nothing open for negotiation).
Defining Acceptance
The Bidding Process: RFPs, RFBs, and RFQs
Terms are often used interchangeably or incorrectly. When analyzing a client’s situation or case law, consider the language used, the parties’ reasonable expectations, and the surrounding circumstances, to determine whether an offer occurred in the bidding process.
When an offer is made, the offeree gains the “power of acceptance” – the right to complete the process of mutual assent simply by saying “yes” and communicating that affirmative answer to the offeror; or they can make a counter-offer, reject the offer or simply let it lapse.
Like offers, acceptances must be: (1) definite; (2) certain; (3) manifest the assenting party’s willingness to be bound to the terms; (4) communicated to the other party.
Distinguishing between Acceptance and Counter-offer
Restatement (Second) § 50. Acceptance of Offer.
(1) Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.
Restatement (Second) § 39. Counter-offers.
(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.
An offeree can communicate dissatisfaction with an offer and yet still accept it but at the same time, grumbles or questions may signify that assent has not been manifested and therefore the offer has not been accepted.
The Mirror Image Rule
Under common law, an acceptance must be a “mirror image” of the offer, matching the terms of the offer. “Acceptance [of an offer] must be ‘positive, u
ection of terms in his acceptance.
(2) Unless otherwise indicated by the language or the circumstances, and offer invites acceptance in any manner and by any medium reasonable in the circumstances.
Also see UCC § 2-206, CISG Art. 18, and UNIDROIT Art. 2.1.(6)
Restatement (Second) § 32. Invitation of Promise or Performance
In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.
Presumption is that a bilateral contract has been offered but offers for reward are generally considered unilateral contract offers.
Restatement (Second) § 62. Effect of Performance by Offeree Where Offer Invites Either Performance or Promise
(1) Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance.
(2) Such an acceptance operates as a promise to render complete performance.
Restatement (Second) § 45. Option Contract Created By Part Performance Or Tender (only applies to offers for unilateral contract)
(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
(2) The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.
Acceptance by Conduct or by Inaction
Conduct is inherently ambiguous as a source of meaning. In certain circumstances, silence or inaction can constitute assent.
Restatement (Second) § 69. Acceptance by Silence or Exercise of Dominion
(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only:
(a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.
(b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer.
(c) Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept.
(2) An offeree who does any act inconsistent with the offeror’s ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him.
