Mutual assent

Exam # 1 Results Mean  Std Deviation  High Grade  Low Grade  Mode  Median  81.38 12 100 52 96 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? 