1. Common Law of ContractMutual Assent: The Study of Offer
andAcceptance in Common Law
2. The Basic Model without revocationOffer
AcceptanceRejectionCounteroffer = rejection+ new offerContract
formedNo Contracton terms of offerOfferor Offeror offerorAccepts
Rejects makes c-offerK on terms ofNo and so oncounteroffer
Contract
3. All About CommunicationMutual Assent is basis of contractK
communication can be done with:words (express)actions (implied)In
perfect world a persons intent is alwaysunderstood by other
party.we dont live in a perfect world
4. Questions to be AskedWhat is an offer and when is it
made?What is acceptance and when does it occur?At what point does
the power to accept an offerterminate such that an attempted
acceptance is nolonger timely?
5. Question 1: The Nature of an OfferClass text says an offer
is a manifestation of apresent willingness to enter into a contract
in theevent of an unconditional acceptance being made.The offer
must manifest BOTH an intent to belegally bound and contain
definite terms.Lets break this down!
6. Offer Must ContainManifested must be communicated to the
personto whom it is being addressed.Indicate desire to enter into
KDirected at some person or groupMust invite acceptanceMust contain
power of acceptance
7. ExampleOffer RequirementsProperty owner writes toprospective
buyer:Communicated?I offer to sell my farm forSpecify performances
&$2 million cash. If youother terms?wish to buy this
propertyDirected at someone?you must deliver yourInvite
Acceptance?written acceptance to meby midnight on Friday,K arise
w/out further November 11, 2005.approval?Is this an offer?
8. ExampleOffer Requirements I wish to sell my
farmCommunicated?and will consider anSpecify performances &
offer of not less than $2other terms? million. I invite you to make
an offer if you areDirected at someone? interested in
purchasingInvite Acceptance? it.K arise w/out
furtherOffer?approval?
9. ExampleOffer Requirements I am willing to sell
myCommunicated?farm to you, but will notSpecify performances &
accept less than $2other terms? million cash. Let me have your
reply as soon asDirected at someone? possible.Invite Acceptance?K
arise w/out furtherapproval?Offer?
10. Offer v. Preliminary Proposalwhat do the words themselves
indicate?are significant terms omitted?is communication directed at
particular person?what is the relationship of the parties?what are
common practices or trade usages?NOTE preliminary proposal =
invitation to treat
11. Special Rules Price-marked goods usually goods in
storewindow or on shelves do not constitute offer to sellbut rather
invitation to treat.Some American courts make exception for
purposes ofaction brought by consumer.In this instance displaying
the item constitutes an offer andplacing the item in ones basked
constitutes acceptance.
12. Special RulesAdvertisements, Price Lists and Circulars most
areconsidered invitations to treat. Unless:circumstance clearly
indicate intention to make an offeradvertisement invites those to
whom it is addressed to takespecific action without further
communication, orwhere over acceptance is unlikely (note
correction).Ads promising rewards probably fall into all threeand
are thus offers.
13. Carbolic Smoke Ball Case
14. Invitation to TreatAn invitation to treat is not an offer,
but anindication of a persons willingness to negotiate
acontract.response to such an invitation constitute offerswhich may
be accepted or rejected and notacceptances which would lead to a
binding contract.
15. Ordinary Ad, An Offer?
16. Can an Ad be an Offer?What about this ad:The Great
Minneapolis Surplus Store published thefollowing advertisement in a
Minneapolis newspaper: SATURDAY 9 AM. 2 BRAND NEW Pastel MINK
3-SKIN SCARFS Selling for $89.50 Out they go SATURDAY. Each
......... $1.00 1 BLACK LAPIN STOLE . . . Beautiful, worth
$139.50........$1.OO FIRST COME FIRST SERVEDOffer or Invitation to
Treat?
17. An Ad Can be an Offerwhere the offer is clear, definite and
explicit, andleaves nothing open for negotiation, it constitutes
anoffer, acceptance of which will complete thecontract. . . .Thus,
language used in the ad is key.Look at the language in the Carbolic
Smoke Caseand the language in the previous example (whichwas also a
famous case).
18. Objectively Judging an Offer Lucy v. Zehmer
19. Offer? Leonard v.
Pepsicohttp://video.google.com/videoplay?docid=295016640043159024
20. AuctionsAs the text indicates, the auctioneers
statementsgenerally do not constitute an offer.The offer is made by
the person making the highestbidWhich is then accepted by the
auctioneer.
21. The Basic Model Offer AcceptanceRejectionCounteroffer =
rejection+ new offerContract formedNo Contracton terms of offer
OfferorOfferor offeror AcceptsRejects makes c-offerK on terms ofNo
and so oncounteroffer Contract
22. Question 3 At what point does the power to accept an
offerterminate such that an attempted acceptance is no longer
timely?
23. Termination of an OfferLapseRejection by the
OffereeRevocation by the Offeror
24. LapseAn offer does not last forever.The offeror is entitled
to specify timeIf no time is specified, then acceptance must be
w/ina reasonable time.clearly this is a risk & could result in
litigation.Reasonable = time needed to receive, consider andreply
under circumstances of transaction.
25. Stating A TimeThere can still be problems even if the time
isstated.Acceptance must be received by 5 P.M. PacificDaylight time
on Sunday, November 6, 2005.No problem here.Acceptance must be
received within five days.Problems?
26. Termination of Offer Before LapseRejectionOfferors Death or
Mental IncapacityRevocation (we will look at this
shortly)Counteroffer lets look at the case
27. CounteroffersLivingston v. Evans
28. What Did We Learn About Counteroffers?A counteroffer is
treated as a rejection.A mere inquiry is NOT a rejection.An
original offer can be revived even after acounteroffer has been
tendered.Whether something is an inquiry or counteroffer,and
whether the original offer has been revived is aquestion of fact
that a court must try fit within theserules.
29. What Else Did We Learnfrom this Case?How courts use
precedent and can be persuaded byother court opinionsHow courts
will distinguish cases offered by partyas precedent or
persuasion.That in fact specific performance CAN sometimesbe a
remedy (more on that much later).NOTE what amounts to a
counter-offer will bediscussed in more detail next week.
30. RevocationRevocation by Offeror terminates offer.It takes
effect once communicated to offeree.Indirect Revocationofferor
takes action clearly inconsistent w/ K intentofferee obtains
reliable info of this action.This can be tendered at anytime, even
before a settermination date UNLESS there was firm offer.
31. Firm Offer/OptionsA promise to keep an offer open for a
stated periodof time.Consideration must be given in exchange for
thispromise to keep open.We will discuss consideration later.An
offeror is considered to be in breach if herevokes firm offer.
32. Option w/ Consideration ExampleOption (Prelim K) promise to
keep offer openOfferorOfferee $100if exercised, will lead
toUnderlying Exchange(proposed K) FarmOfferor Offeror$2
million
33. Option w/out ConsiderationThere are two instances where an
option K can beformed without consideration being given:Court
applies doctrine of EstoppelUCC 2-205Merchant selling or buying
goodsoffer placed in writingwriting contains assurance the offer
will be held opensigned by the parties
34. Estoppel ExampleSeller writes to buyer offering to sell
farm, statingthat offer will be held open until Friday.No
consideration is given, thus not binding.Buyer, intending to accept
offer by Friday, quits hisjob in the city on Tuesday to devote his
fullattention to his new farm.Wednesday, seller revokesThursday,
buyer disregards revocation and tendersacceptance.
35. Estoppel ExampleBuyer claims reliance on promise not to
revokeoffer until Friday caused him to quit his job.If offer is not
enforced, buyer claims he will sufferunfair detrimentA court may
apply the doctrine of promissoryestoppel (to be discussed in more
detail later).Seller did promise to keep open the offerIts
reasonable to expect that buyer would rely on this.Buyer did in
fact rely, to his detriment.Whether buyers reliance was justified
is Q for court.
36. The Basic Model Offer AcceptanceRejectionCounteroffer =
rejection+ new offerContract formedNo Contracton terms of offer
OfferorOfferor offeror AcceptsRejects makes c-offerK on terms ofNo
and so oncounteroffer Contract