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Contracts
Valparaiso University School of Law
White, Alan M.

Professor Alan White
Contracts Fall 2008

– Offer and Acceptance – Common Law
o Mutual Assent – each party must intend to enter the contract and must agree with the other to do so on mutually acceptable terms
o Requires enough terms for a court to fashion a remedy
o Assent and Accountability
§ Objective Test
· Apparent agreement from the manifestations of assent
· Reasonably interpreted
· A contract has been formed on the terms reflected in the manifestation
§ Subjective Test
· Meeting of the minds – examine each party’s actual understanding
§ Promise – manifestation of intent by the promisor that justifies the promise in understanding that a commitment has been made
§ Agreement – manifestation of mutual assent
§ Offer – creates a power of acceptance in the offeree
· Offer must be communicated to the offeree
· Indicate a desire to enter into a contract
o Specify performances to be exchanged the terms that will govern the relationship
· Offer must be directed at some person or group
· Offer must invite acceptance
· Upon acceptance, a contract will arise without any further approval
§ Offer v proposal
· The words used in the communication
· Proposals lack significant terms
· The relationship of the parties can decide the dealings
· What is the common practices or trade usages in the industry
§ Advertisements
· Considered solicitation for offers
§ Firm Offer
· Must be made by a merchant
· Must be a signed writing
· Give assurances that the offer will be held open
· Must be signed by offeror
· The offer is irrevocable until expiration of offer
o Expiration of the offer
§ Offerer can specify time within which acceptance must be made
§ If not specified time, it must be accepted within a reasonable time
· What amount of time would be needed to receive, consider, and reply to the offer under all the circumstances
§ Late acceptance
· A meaningless act that does not count as acceptance
· Depending on usage of trade
o New offer to the original offeror
o Termination of offer
§ Rejection – offer comes to end and offeree cannot recant rejection
§ Counteroffer – rejection of original offer and substitution with a new offer
§ Death or Mental Disability – if death or mental capacity happens before the acceptance, the offer automatically lapses because there can not be a meeting of the minds
§ Revocation – unless the offer is an option or a firm offer, a communicated revocation terminates the offer.
· Direct revocation – offeree receives notice of revocation that offeror no longer is willing to enter the contract.
· Indirect revocation – offeror takes actions clearly inconsistent with the continued intent to enter a contract and offeree is aware
o Acceptance
§ Offeree’s manifestation of assent to the offer
§ Must be a volitional act, performed freely, deliberately, and intent to enter into the contract
§ Only offeree can accept
§ Offeree can accept through performance, but must directly make the offeror aware of performance
o Qualified or Equivocal Acceptance
§ Mirror Image rule – a response is not an acceptance if it imposes conditions or changes terms
· Changes can be rejection with explanation
· A request for information which does not terminate offer
· Terms that are implicit to the offer [e.g. working title] is not a counteroffer
§ Last Shot Fired
· If a party performs in the event of a counteroffer, the last offer is considered the accepted contract
o Modes of Acceptance
§ Offeree’s acceptance must conform to any manner set by offeror
§ If no manner is set, any form that is reasonable under the circumstances is valid
o Silent acceptance or inadvertent acceptance
§ Must be aware of offer
§ Can not impose an affirmative step to show rejection
§ Silent acceptance if offeror proffers property or service and offeree excercises owner

t of the exchange is bargained for
o A term is material if it would surprise or create hardship to the other party
· Notification of objection to additional terms have been given or is given within reasonable time or receipt
§ What about different terms?
· Term them as additional terms and treat them the same
· Disregard different terms all together because they are not mentioned
· Conflicting terms cancel each other out – different terms both fall out of the contract
o 2-207(3) – mutual performance when no contract is formed
§ if performance shows intention of a contract
· The terms are set as those that the parties writings agree
· All conflicting terms fall away
· Gaps are filled with supplementary terms from the UCC
· Can fill gaps with trade usage or course of dealing
– Consideration
o Courts are concerned with the legitimacy of the transaction and will stretch to find consideration
o An obligation assumed without consideration may be enforceable under alternative theories.
o Consideration only affects outstanding promises to be enforced.
§ Donative promises, commercial exchange are two times when consideration is not required
o Elements of consideration
§ Detriment to promisee or benefit to promisor
· Detriment – relinquishment of a legal right
o Act
o Forbearance
o Partial or complete abandonment of an intangible right
o Or promises thereof
§ Detriment or benefit must be due to a bargained for exchange
· A promise that is sought by the promisor
· Must be given up by the promise