Mutual assent

Exam # 1 Results



 Mean 81.38

 Std Deviation 12

 High Grade 100

 Low Grade 52

 Mode 96

 Median 83

The Agreement



Offer and Acceptance

Requirements for a K



 Agreement



 Consideration



 Capacity



 Legality

Agreement - an offer made by one party,

assented to (accepted) by another party



 Mutual Assent

– c.f. Defenses to the formation of a K

 Requirements



 Termination



 Acceptance

Mutual Assent



 the formation of a K requires a bargain

in which there is a manifestation of

mutual assent to the same bargain



 mutual assent manifested by each party

either

– making a promise, or

– beginning to render performance

Mutual Assent

 ordinarily evidenced by offer and

acceptance

 it is reaching an accord as to the terms

of their agreement

 subjectively or objectively?

– Objective Theory of K: intention of parties

determined not by what they think, but by

their outward conduct

– Reasonable Person test

Offer



 Formal Definition: the manifestation of

willingness to enter into a bargain, so made

as to justify another person in understanding

that assent to that bargain is invited and will

conclude the bargain

 Simpler: a promise or commitment to do or

refrain from doing some specified thing in the

future

– but only one sided

» What does the other side get?

Effect of an Offer



 an easier way to understand what an

offer is...

 an offer creates a power in the offeree to

enter into a K

 an offer creates an immediate power of

acceptance in the offeree

– if no power of acceptance is created, there

is no offer

Offer:

Common Law Requirements

 An offer will create an immediate power

of acceptance in the offeree only if it has

three elements:

– serious intention by the offeror to become

bound (Lucy v. Zehmer)

– terms must be reasonably certain or

definite

– offer must be communicated

Intention

 How do we determine a party‟s

intention?



 Objective Theory

– what would a reasonable person in the

offeree‟s (not offeror‟s) position conclude

the offeror‟s words and actions meant

– $1000 for a birdie?

– Davina and her car?

Serious Intention Present?



 Expression of opinion

– medical treatment?



 Preliminary Negotiations, Bids



 Statements of Future Intention

– agreements to agree?

– Traditional v. Modern view

– “Emerging Trends…” p. 214-215

» Type I v. Type II preliminary agreements

Enforcement of Preliminary

Agreements – (Intention)

 Type I

– All essential terms have been agreed on

– No disputed issues remain to be resolved

– Written k intended to satisfy formalities

 Type II

– Agreeing to continue negotiations in good faith

– Resolution of negotiations is not required

– What legal effect does it have on the parties?

» What are their obligations?

How Definite Must an Offer Be?

 We will pay you a couple of million $ per

year if you allow us to televise all your

football games

 We will pay you $5.1 million per year in

exchange for the rights to televise all your

NCAA sanctioned, Division I football

contests. We will broadcast the games not

later than 1:30 p.m., EST on the day of the

contest. The University will provide the

opportunity to interview....

If parties intend to

enter into a K...

uncertainty concerning incidental

or collateral matters will not be

fatal to the K‟s existence

Intention to enter into a K?

 Advertisements?

 Where offer is clear, definite and

explicit and leaves nothing open for

negotiation, it constitutes an offer,

acceptance of which will complete the K

... but advertisements are usually considered

invitations to enter into negotiations

... seller doesn‟t normally have an unlimited

supply of whatever it is he or she is selling

How can an advertisement

become an offer?



 Advertisement makes a promise so

definite in character that it is apparent

that the offeror is binding herself to the

conditions stated

Newspaper Advertisement

April 13, 1956



Saturday 9 a.m.

2 Brand New Pastel

Mink 3-Skin Scarfs

Selling for $89.50

Out they go

Saturday. Each … $1.00

Newspaper Advertisement

April 13, 1956



1 Black Lapin Stole

Beautiful,

Worth $139.50… $1.00

First Come

First Served

Lefkowitz v. Great Minneapolis

Surplus Store, Inc.

 Lefkowitz first person in store, forks

over $$, demands merchandise

 Store says “ad not an offer”

– Even if it was, it‟s intended for women

only

 Plaintiff sues, alleging breach of K

 How does the court resolve?

Was the advertisement an Offer?

Was it…



 Clear?

 Definite?

 Explicit?

 Leaving nothing open for negotiation?





If so, Advertisement = Offer

Intention to enter into a K?



 Auctions

– with reserve

» seller has opportunity to withdraw

– without reserve



 Agreements to Agree

– look to intent, rather than form of the

agreement

– “Emerging Trends…”

Intention to enter into a K?



 Social Engagements?

– Is the offer clear, definite and explicit,

leaving nothing open for negotiation?

– Do you have to give the ring back?

 Medical opinions.... treatment

expectations....?

Definiteness



 ...made under such circumstances that

the person receiving it has reason to

believe that the offeror is willing to deal

on the terms indicated

 Why important?

– because courts will later have to determine

whether or not performance is in

compliance with the terms of the K

Gap Filling



 Courts will sometimes supply missing

terms when parties have made it clear

that they intended to form a K

– but what terms are absolutely essential?

– must contain subject matter, quantity and

some indication of intent to be

contractually bound

Gap Filling



 Courts won‟t write K for you



 They‟ll supply only reasonable terms



 Note UCC 2-204 modification of K law

in this area p. A-22

Communication of Offer



 You can‟t agree to a bargain if you don‟t

know it exists

– rewards?

» offers to enter into unilateral K

Communication of Offer



 When is offer effective?

 Who can communicate an offer?

 Medium of communication?

– Noticing letter regarding offer on desk....

– How is public notified of offers?

» Rewards? Must have actual knowledge (but

see footnote on page 217)

Acceptance

The second half of the

agreement....



“Offer and Acceptance”

Definition



 “Acceptance of an offer is a

manifestation of assent to the proffered

terms made by the offeree in a manner

required or invited by the offeror”

– Voluntary act

– Words or conduct

– Unequivocal

– Communicated

...manifestation of assent to the

proffered terms made by...



 What does the offeree have to

have to be an offeree?

 What is manifestation of assent?

 What does “proffered terms”

mean?

...by the offeree in a manner

invited or required by the

offeror... (the master of the offer)

 If the offeree has “power of

acceptance”, what does the offeror

have, as indicated by the above

statement?

 What is the Mirror Image Rule?

 Later, we‟ll need to understand the ramifications of

footnote 10 on p. 219... UCC 2-207

Who is the Offeree?



 Is the power of acceptance transferable?



 Why or why not?



 Under what circumstances might an

acceptance be made by other than the

offeree?

Third Party Acceptance



 Option Contracts... right to exercise

considered a right granted under the

K... more on third party rights in later

chapter...



 Agents acting on behalf of their

principal... as we have already

discussed

Accepting a Bilateral Offer



 Offeree accepts a Bilateral offer by

doing what?

 What must the Offeree do with the

promise?

 Why is communication important in an

offer to enter into a bilateral K?

Accepting a Unilateral Offer



 Offeree accepts a Unilateral offer by

doing what?



 Is notification or communication of

acceptance to the offeror necessary?



 Note UCC treatment of an order to buy

goods...

Quick Check to see if Acceptance

is Effective?

 Timely communication?

 What means were used?

 Are those means appropriate and/or

authorized?

– Expressly

– Impliedly

 Acceptance upon dispatch (Mailbox

Rule... Deposited Acceptance)

Effective Acceptance?



 Remember... offeror is master of the

offer

 Note exceptions (to rule that acceptance

effective when sent by authorized means)

– improperly dispatched

– master of offer... (may require receipt of

acceptance)

– rejection followed by acceptance

» What is the rule?

What if I say nothing?

Silence as Assent?

 What happened to requirement of

communication?

 “Silence in the absence of a duty to

speak does not amount to an

acceptance”.... unsolicited mail?

 CD clubs, Book of the Month, etc...

– note pre-existing relationship

Mirror Image Rule



 Addition of new conditions or terms

will act as a rejection and counteroffer

 Note that conditions will act to reject

only if they sufficiently qualify the

acceptance...

– review sale of Honda examples

 Again... remember that UCC will affect

this rule.... more later

Termination of the Offer



Rules for determining whether or

not the Power of Acceptance

still exists...

Methods by which an Offer can

be Terminated



 Seven ways, other than by acceptance



 Broadly classified as follows:

– By action of the parties involved

– By operation of law

By Action of the Parties



 Revocation



 Rejection



 Counteroffer

By Operation of Law



 Lapse of Time



 Destruction of Subject Matter



 Death or Incompetence



 Illegality

Action of the Parties?



 Who are the parties involved?

– Offeror

– Offeree

 What are their respective actions?

– Offeror: can revoke

– Offeree: can reject

– Offeree: can reject and make counteroffer

– Offeree: can accept!

Revocation



 any word or act which expressly, or by

implication, states that the offeror no

longer intends to enter into the

proposed agreement

– but what if offeror promised to hold the

offer open for a definite period of time?

How is revocation made?



 Communication issues



 Timing issues...

– when effective?

Irrevocable Offers – i.e., offers that

can’t be revoked…

 Option Ks

 Legislative enactment

– UCC 2-205... “the firm offer rule”.... offers

irrevocable without consideration?

 Conduct of the Offeree

– Detrimental Reliance

– Promissory Estoppel

Option Ks – an offer that can’t be

revoked…

 Offeror promises to keep offer open

– what is effect?

 Offeree pays the offeror to keep the offer

open

– separate K which takes away offeror‟s right to

revoke

 Effect of death of Offeror in option K?

 Why can‟t this offer be revoked? What has

happened? What has been entered into?

Firm Offer Rule

…another type of offer that can’t be revoked

 Under UCC and state legislative

enactment...

– offers may become irrevocable when

» a merchant

» makes a written, signed offer

» to buy or sell goods, and,

» states that the offer will be held open

– regardless of lack of consideration

Are Newspaper Ads Firm

Offers?

 Generally, NO, but apply test:



– offer for purchase or sale of goods

– merchant dealing in those goods

– written and signed by merchant

– indication that offer will be kept open

Conduct of the Offeree



 Detrimental Reliance... either by

– promissory estoppel

» offeree changes actions based upon promise

– partial performance

» flagpole example

 This conduct might make the offer

irrevocable…

Some examples…



 Sale of a car

– Things to remember:

» Elements of Offer

 Intention, Definiteness, Communication

» Power of Acceptance created?

» Master of the Offer

» Mirror Image Rule

Sell you my Honda for $11,500?



 “No, thanks.”

 “No, thanks. Well, on second thought,

that sounds like a good deal. How

about it?”

– Subsequent attempt to accept, after initial

rejection, might be construed as a new

offer, possibly giving the original offeror

(now the offeree) the power of acceptance

Sell you my Honda for $11,500?



 “Sounds good, but give me a warranty

that it won‟t break down in the next 6

months. How „bout it?”

 “Sure, I accept... and you‟ll have it

detailed for me before delivery, right?”

 “No, thanks. But I do think it‟s worth

an even ten. What do you say?”

Detrimental Reliance – making the

offer irrevocable, w/o an option K

 Rental of commercial property (p.218)

– Angela has rented property for years…

– Economy favors tenant

– Angela says she‟s shopping for better rent

– Jake promises to reduce rent in next

negotiation; Angela doesn‟t shop, based

upon…

– Jake says he‟s changed his mind

Another example… Partial

Performance in an Offer

 $1000 if you climb to the top of the

flagpole and fix the pulley…

 “I revoke!!!”

 Burger Baby example (from previous

chapter, 10-4)

More on the Mirror Image Rule



 Acceptance must match offer exactly

 Any material change or addition to the

terms of the original offer terminates

the offer and creates a new

counteroffer, which need not be

accepted

Battle of the Forms &

the Mirror Image Rule

 Telephone Order, followed by...



 Purchase Order, followed by...



 Acceptance



 Confirmation

What’s the problem?



 Must have agreement.... an essential

element of K

 Mutual assent

 What if telephone order, purchase

order, acceptance and confirmation all

say different things?

 UCC comes to the rescue... discussed in

Ch. 19

Termination by Operation of Law



 Lapse of time



 Destruction of Subject Matter



 Death or Incompetence



 Illegality

Lapse of Time



 Offer terminates automatically when

the period of time specified in offer has

passed

 Acceptance may be required within

certain time

 No time specified?

Destruction of the

Subject Matter



 Automatic termination





 No communication required

Death or Incompetence



 Offer is personal as to both offeror and

offeree



 Do offers survive?



 Do contracts survive?

Supervening Illegality



 Statute or court decision might

terminate an offer

– Usury and credit cards



 K v. Offer

– terminates offer

– makes K unenforceable

Agreement Review





 Has a definite and certain offer been

communicated?

 Did the offeror intend to be bound?

 Has the offer been revoked?

 Has the offeror received a rejection?

 Was there a counteroffer?

Agreement Review



 Have any of the following occurred?

– lapse of time

– death

– incompetency

– destruction of subject matter

– supervening illegality



 Is acceptance effective?

Problem 11-1



 Requirement for an offer:

– offeror must show definite intention to

make and be bound by offer

 What is this?

– definite intention present?

– statement of intention?

Problem 11-2



 Offer to sell for $10,000

– Seller dies prior to acceptance...

– ...but buyer is unaware

– or equipment destroyed

– option K.... knowledge of death

– option K.... death of buyer

Problem 11-3



 CD clubs, book clubs

 What has Perez done in (a)?

 What has the book company done in

(b)?

 Postal Regulations?

Problem 11-4



 How are revocations made effective?

– Revocations effective upon receipt!

 Where and when did Tanya receive

revocation?

 When does acceptance become

effective?

– Upon dispatch

 What is the mailbox rule?

Problem 11-5: Offer &

Acceptance

 Solicitation of bids as offers?

 Acceptance of a valid offer?