Offer and Acceptance
I. Intent to contract
1. Objective theory of contracts :
a. What was said (=expressed K) and done (=implied K)?
b. Generally, there must be a meeting of the minds of the parties, meaning both must agree to the same thing in the same sense. But it is not always true. à What words and actions indicate to a reasonable person?
c. A party’s intent is deemed to be what a reasonable person in the position of the other party would think that the first party’s objective manifestation of intent (what was said or done) meant, looking to the outward (=external=objective) expression of a person as manifesting his intention rather than to his secret and unexpressed intention. For instance, in deciding whether A intended to make an offer to B, the issue is whether A’s conduct reasonably indicated to one in B’s position that A was making an offer. (Lucy)
2. Jurydecides whether P’s version or D’s version is true, based on the whole circumstances.
3. A contract may be formed without reference to the subjective intentions of either party. If a reasonable person would have taken a party’s words to constitute assent to the formation of a contract, then that contract will be enforceable. (Embry)
4. Latent ambiguity: If a latent ambiguity arises that shows that there had been no meeting of the minds, there is no mutual assent to contract. (Raffles : There was no consensus, no meeting of the mind, therefore no binding contract)
5. Conclusion: Therefore, don’t be misled by a party’s own characterization of a statement as an offer.
II. Offer
A. An offer is the manifestation of willingness to enter into a bargain so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. (§24)
1. Can reasonable person assume that this is an offer made based on totality of the communications?
2. Function: Offer empowers offeree to have the power of acceptance.
3. Compare with preliminary negotiations: If a party who desires to contract solicits bids, this solicitation is not an offer, and cannot be accepted. Thus, a manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent (§26) E Not an offer
4. Compare with invitation to an offer E Not an offer
5. Compare with opinion or estimate E Not an offer (Eg. Your car will be repaired within 3-4 days., McGee)
6. An offer may propose either a bilateral or a unilateral contract.
a. Bilateral Contract: A bilateral contract is a contract in which both sides make promises.
b. Unilateral contract: A unilateral contract is one which involves an exchange of the offeror’s promise for the offeree’s act. In a unilateral contract the offeree does not make a promise, but instead imply acts. Only completion is acceptance.
B. The terms of the K must be reasonably certain to constitute an offer (Lonergan)
1. The offer must be clear, definite, and explicit commitmentand leaves nothing open for negotiation.
2. The term must have quantity, quality, conditions, specifics, price, time of performance, etc.
3. The terms are reasonably certain if you know what it takes to breach the K and an appropriate remedy (§33)
C. Generally newspaper ads are NOT offers.
1. When an offer goes out to lots of people (oversubscription) you can’t assume that it constitutes an actual offer. Ads construe as an invitation for an offer. (Lonergan, Ford Motor) Displaying in a show window of an article with a price is not an offer but an invitation for an offer, too. (Fisher)
2. Two exception
a. Specific act invited to perform: without further communication and leave nothing for negotiation. Ads for rewards (eg. returning a lost article, supplying particular information)
b. Specific terms: If the advertisement contains specific words of commitment, especially a promise to sell a particular number of units, then it may be an offer. Thus, where the terms of the offer is clear, definite, and explicit commitment and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the K (Lefkowitz—first come first served) The test is “whether the facts show that some performance was promised in positive terms in return for something requested.” Whether such an advertisement is an offer rather than an invitation to make an offer depends on the legal intention of the parties and the surrounding circumstances.
D. Modification by offeror: Possible any time prior to the time of acceptance of offeree. However, once
accepted, then modification is not allowed. (Lefkowitz)
E. Termination of the offeree’s power of acceptance: Lapse, Rejection, and Counter-offer
1. Lapse of Time : The offeror, as master of his offer, can fix a time limit for acceptance. At the end of this time limit, the offeree’s power of acceptance automatically terminates. (§41)
a. When no time fixed E End of reasonable time: If the offeror does not set a time limit for acceptance, the power of acceptance terminates at the end of a reasonable time period which depends on facts and all the circumstances existing when the offer and attempted acceptance are made. (§41)
i. Why the offer terminates after reasonable time automatically even though it was initiated by offeror? For social economy to protect offeror.
b. In a face-to-face / voice-to-voice conversation (or telephone conversation): Ordinarily, the power of acceptance continues only to the close of their conversation, unless there is evidence of a contrary intent. Thus, the offer terminates at the end of the conversation. (Exception: When there are any other facts and circumstances that indicate a contrary intention on the part of the offeror.) (Akers)
c. An offer sent by mail: Ordinarily, an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which the offer is received. (Exception: When there are any other facts and circumstances) (§41)
d. When the offeror was a minor: Accepted when reasonable time passed after the minor became a majority.
2. Rejection by offeree—normally, if the offeree rejects the offer, this will terminate her power of acceptance (only valid once received) and original offer terminates. (§38)
a. An offeree’s power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention.
b. Express rejection (by words) or implied rejection (by conduct) eg. The offeree led the offeror to believe she rejected the offer by brushing it aside. (Akers)
c. Avoid: A manifestation of intention not to accept an offer is a rejection. (§38(2))
i. Implied rejection, Counter-offer
d. Exception: But rejection will not terminate the power of acceptance if (1) the offeror indicates that the offer still stands despite the rejections (When the offeror has manifested a contrary intention.; or (2) the offeree states that although she is not now accepting, she wishes to consider the offer further later.
3. Counter-offer §39, §59
When counter-offer terminates the offer. à Acts as rejection à No acceptance à No K àNo damages (Mirror-image applies.)
When it is true acceptance even when counter-offer was made. à No counter-offer à Acceptance à K (Mirror-image does not apply.)
1. If the offeree makes a counter-offer, her power to accept the original offer is terminated just as if she had flatly rejected the offer. (mirror-image applies.) (Livingstone)
2. Conditional acceptance—an acceptance which is ‘equivocal’ or ‘upon condition’ or ‘with a limitation’ in some material respect from the offer prevents the formation of contract. (i.e., “I accept if you throw in the furniture”). (Ardente)
a. Using any of these terms (“on the condition that,” “provided that,” “so long as,” “if”) is just like saying “no.”This is actually a counter-offer and not an acceptance.
as it is still a form of contract. Typically, an offeree can provide consideration for the option contract by paying money for the contract or by rendering other performance or forbearance.)
b. Modern (§87) approach: But, the modern approach is that a signed option contract that recites the payment of consideration will be irrevocable, even if the consideration was never paid.
3. “Firm offers” under the UCC §2-205: The UCC is even more liberal in some cases: it allows formation of an irrevocable offer even if no recital of the payment of consideration is made (without consideration). By §2-205, an offer to buy or sell goods is irrevocable if it: is by a (1) merchant (i.e., one dealing professionally in the kind of goods in question); (2) is in a signed writing by offeror and gives explicit assurance that the offer will be held open. Such an offer is irrevocable even though it is without consideration.
a. Three months limit(MAXIMUM): (1) During the time stated or if no time is stated (2) for reasonable time, but in no event may such period of irrevocability exceeds three months, unless consideration is given.
b. The promise to keep open has to be in writing. Read questions carefully. Not every signed written offer by a merchant is a firm offer.
c. Forms supplied by offeree: If the firm offer is on a form drafted by the offeree, it is irrevocable only if the particular “firm offer” clause is separately signed by the offeror.
Common Law
UCC §2-205
Consideration à irrevocable
No consideration à irrevocable
4. Part performance or detrimental reliance: The offeree’s part performance or detrimental reliance may transform an otherwise revocable offer into a temporarily irrevocable one.
a. The detrimental reliance should be reasonable and foreseeable.
b. Offer for unilateral contract : Where the offer is for a unilateral contract, the beginning of performance by the offeree makes the offer temporarily irrevocable. As long as the offeree continues diligently to perform, the offer remains irrevocable until he has finished. Merely acting in justifiable reliance on a unilateral offer is sufficient to make that offer irrevocable for a reasonable period of time to complete performance.§45 (Drennan)
i. Cf. Preparations: This doctrine does not apply to preparation. It applies only to the beginning of actual performance, NOT the making of preparation to perform.
ii. Offers by sub-contractors: Reliance on the sub-contractor à makes the offer irrevocable à Promissory Estoppel : In order for promissory estoppel to apply, there must be: 1) a clear and definite offer; 2) a reasonable expectation that the offer will induce reliance in the other party; 3) actual and reasonable reliance by the offeree; 4) a detriment which only can be avoided by enforcement of the offer.
c. Preparations by offeree in bilateral contact : If the offer is for a bilateral contract (i.e., a contact which is to be accepted by a return promise), the offeree’s making of preparations will cause the offer to be temporarily irrevocable if justice requires.
