2. CONTRACTS: Offer and Acceptance

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rubidoux
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2. CONTRACTS: Offer and Acceptance
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2012-05-18 13:50:21
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offer and acceptance
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  1. MUTUAL ASSENT:
    GENERAL
    An agreement on the same bargain at the same time, a meeting of the minds -- courts use an objective measure, by which each party is bound to the apparent intention that he manifested to the other party.
  2. THE OFFER:
    GENERAL
    An offer creates a power of acceptance in the offeree and a corresponding liability on the part of the offeror.

    For a communication to be an offer it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.

    • To determine whether there is an offer consider:
    • (1) was there an expression of a promise, undertaking, or commitment to enter into a contract?
    • (2) were there certainty and defineiteness in the essential terms?
    • (3) was there communication of the above to offeree?

    The language used may show that an offer was or was not intended. Surrounding circumstances will be considered by courts in determining whether an offer exists. A court will also look to prior relationship and practice of the parties.

    Advertisements, catalogs, etc, are usually construed as mere invitations for offers.

    Any offer must contain definite and certain terms and it must identify the offeree or class to which she belongs to justify the inference that the offeror intended to create the power of acceptance.
  3. THE OFFER:
    MISSING TERMS
    The fact that one or more terms are left open does not prevent the formation of a contract if it appears the parties intended to make a contract and there is a reasonably certain basis for giving a remedy.

    A court can supply reasonable terms for those that are missing.

    However, the more terms left open, the more likely it is that the court will find there was no intent to make an offer.

    The failure to state a price doesn't prevent the formation of a contract if the parties intended to, except in offers for sale of property. Under art2 price will be a reasonable price at time of delivery if the price is left open.

    If price is left to one of the parties to set at some later time, that party must act in good faith. If that party doesn't act in good faith, the other party may set the price herself or cancel the contract.
  4. THE OFFER:
    VAGUE TERMS
    If there are terms that are too vague to be enforced a court will not supply them.

    Vagueness can be cured by part performance where it supplies the needed clarification of the terms.

    The vagueness can also be cured by an acceptance that makes a choice clear.
  5. THE OFFER:
    TERMS TO BE AGREED ON LATER
    If the terms are material, it makes the offer too uncertain. The courts will not supply a reasonable term, as the parties have provided otherwise. But if there is other evidence of agreement over the terms, courts will accept.
  6. TERMINATION OF OFFER:
    BY OFFEROR -- REVOCATION
    A revocation is a retraction of an offer by the offeror, terminates the offeree's power of acceptance if it is communicated to her before she accepts.

    • Revocation may be communicated directly to the offeree. Offers made by publication may be terminated by publication through comparable means. The offer may be effectively terminated if the offeree indirectly receives: (1) correct information,
    • (2) from a reliable source,
    • (3) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make an offer.

    A revocation is generally effective when received by the offeree. Where revocation is by publication, it is effective when published.
  7. TERMINATION OF OFFER:
    LIMITATIONS ON OFFEROR'S POWER TO REVOKE
    An option is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer. It cannot be revoked, as can an offer in which the offeror promises to keep it open for some period.

    • Under art2, a merchant's firm offer cannot be revoked:
    • (1) if a merchant;
    • (2) offers to sell goods in a signed writing; and
    • (3) the writing gives assurances that it will be held open;
    • (4) the offer is not revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time (but not to exceed 3 mos).

    Where the offeror could reasonably expect that the offeree would rely to her detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time.
  8. TERMINATION OF OFFER:
    PART PERFORMANCE -- TRUE UNILATERAL CONTRACTS
    Offer for true unilateral contract becomes irrevocable once performance begins.

    Acceptance is not final until performance is complete and offeree is not bound until complete.

    Part performance does not include preparing to perform, but offeree's preparations may constitute detrimental reliance sufficient to make the offereor's promise binding to the extent of the reliance.
  9. TERMINATION OF OFFER:
    BY OFFEREE
    EXPRESS REJECTION -- will terminate the offer.

    COUNTEROFFER AS REJECTION -- contains the same subject matter but different terms and will terminate the offer; an inquiry does not terminate the offer --> the test is whether a reasonable person would believe that the original offer had been rejected.
  10. TERMINATION OF OFFER:
    REJECTION OF OPTION
    Because an option is a contract to keep an offer open, a rejection of or a counteroffer to an option does not constitute a termination of the offer.

    The offeree is free to accept the original offer within the option period unless the offeror has detrimentally relied on the offeree's rejection.
  11. TERMINATION OF OFFER:
    LAPSE OF TIME
    Offeree must accept the offer within time period specified, or within a reasonable time.

    Look to when offer is received by offeree. If offer is delayed in transmission and offeree knows or it was apparent, then offer expires at the time it would have had it not been delayed.
  12. TERMINATION OF OFFER:
    BY OPERATION OF LAW
    Death or insanity of the parties terminates offer, not necessary that it be communicated to the offeree.

    Destruction of subject matter terminates offer.

    Supervening legal prohibition terminates offer.
  13. THE ACCEPTANCE:
    WHO MAY ACCEPT
    Generally only the person to whom the offer is addressed has the power of acceptance. One may also accept if she is a member of a class to whom the offer was directed.

    Offeree's power of acceptance cannot be assigned except in the case of an option contract.

    Offeree must know of the offer in order to accept and this is true of both bilateral and unilateral contracts.
  14. THE ACCEPTANCE:
    UNILATERAL CONTRACT
    The offeree is not required to give notice that he has begun the performance, but is required to notify within a reasonable time after performance has been completed. If the required notice is not given, a contract is formed, but the offeror's duties are discharged for failure of an implied condition subsequent.

    No notice is required if the offeror waived notice or if the performance would normally come to the offeree's attention within a reasonble time.
  15. THE ACCEPTANCE:
    BILATERAL CONTRACT
    May be accepted by either a promise to perform or by the beginning of performance.

    • Must be communicated to offeror unless:
    • -- the offer provides that acceptance need not be communicated; or
    • -- if the offeree silently takes benefits the courts will normally find acceptance, especially if prior dealings between the parties or trade practices known to both create a commercially reasonable expectation by the offeror that silence represents an acceptance. In such a case offeree must notify offeror if she does not intend to accept.
  16. THE ACCEPTANCE:
    OFFERS TO BUY GOODS FOR CURRENT OR PROMPT SHIPMENT
    Will be construed as inviting acceptance either by a promise to ship or by current or prompt shipment of conforming or non-conforming goods.

    If shipment is nonconforming, an acceptance creating a bilateral contract as well as a breach of the contract is made unless the seller seasonably notifies the buyer that a shipment of non-conforming goods is offered only as an accommodation. Buyer is not required to accept accommodation goods and may reject them. If he does the shipper is not in breach and may reclaim the goods.
  17. THE ACCEPTANCE:
    MUST BE UNEQUIVOCAL
    MIRROR IMAGE RULE: absolute and unequivocal acceptance of each and every term of the offer required at common law, otherwise it's a rejection and counteroffer.

    Statements that make implicit terms explicit do not prevent acceptance, grumbling acceptance okay.

    A request for clarification does not necessarily amount to a rejection and counteroffer.

    Art2 BATTLE OF FORMS: Instead of the mirror image rule, art2 provides instead that the prosposal of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and counteroffer, but rather is effective as an acceptance unless the acceptance is expressly made conditional on assent to the additional terms. Whether the terms become part of the contract depends on whether both parties are merchants.

    However, there are cases where, even if parties do not agree to the terms, if they begin to perform as if they have formed a contract, a contract is formed.
  18. THE ACCEPTANCE:
    MAILBOX RULE
    • Acceptance by mail or similar means creates a contract at the moment of dispatch, provided it is properly addressed and stamped, unless:
    • -- the offer stipulates that acceptance is not effective until received, or
    • -- an option contract is involved, in which case contract is formed upon receipt of acceptance.

    If offeree sends rejection and then acceptance, mailbox rule does not apply and there is no contract.

    If offeree sends acceptance and then rejection, mailbox rule will apply and contract is formed. However if offeror recieved and relied on rejection first, offeree will be estopped from enforcing the contract.

    An acceptance transmitted by unauthorized means or imporoperly transmitted by authorized means may still be effective if it is actually received by the offeror while the offer is still open.

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