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Offer and Acceptance
I. General Provisions / Terms of the K
A. Was there a meeting of the minds?
1. Objective theory of K
Would a reasonable person in the other person's shoes think there was a contract?
a.
Words?
b.
Conduct?
B. Did either party misunderstand the terms?
1. Restatement ( 20)
a. No
mutual assent if parties attach materially different meanings to their manifestation and
(1) neither party has reason to know of other party's meaning; or (2) each party knows or
has reason to know the meaning attached by the other. ( 20)
b. If
the seller and buyer attach two different meanings, and neither knows the other's meaning,
there is no binding K.
(1) If seller and buyer both knew of each other's diff. meaning, no K.
(2) If one party knows or has reason to know of other meaning, innocent
party prevails.
c.
Policy: Protect Innocent Party
C. Do preliminary negotiations suggest that the
parties were willing to enter into a K?
D. Do the UCC open-term provisions apply?
II. Issue: Was there an offer?
Rule: An offer is a present 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.
A. Present manifestation to enter into a K?
B. Certainty and definiteness of terms?
1. Restatement
a. If
lacking an important term A term which is reasonable in the circumstances is supplied by
the court.
(1) Actual intent what did the parties want (did they address it?)
(2) Hypothetical intent if they had thought about it, what would they
have said?
(3) Policy what's the fairest/best way to resolve it?
2. UCC
a.
Must include quantity and person addressed to
3. Output of seller or
requirements of buyer
a.
Must be specific enough and be based on good faith output and requirements.
4. Are the terms specific
enough that an offeree could say "I accept"?
a.
Invites person to take specific action without further communication
C. K and terms communicated to offeree?
III. Issue: Was the offer terminated?
A. Did the offer expire?
1. Rule: An offer expires at
the lapse of the stated time or after a reasonable time. ( 41)
a.
Stated Time
b.
Reasonable Time
a. Question of fact depending on circumstances
b. Offer sent by mail always reasonably accepted if mailed by midnight
same day.
B. Did the offeree reject the offer?
1. Rule: A rejection by the
offeree kills an offer it can't be unrejected
2. Offeree's conduct implies
rejection
3. Policy considerations
a.
Offeree needs to be able to rely on rejection
C. Was there a counter-offer or a conditional
acceptance? ( 39, 59)
1. Rule: Terminates an
existing offer
a.
Deals with same matter
b.
Proposes a substitute bargain
c.
Kills the offer preceding it.
2. Policy considerations
a.
There can only be one offer on the table at a time
3. Exceptions to conditional
acceptance
a.
Implied condition (e.g. good title)
b.
Acceptance coupled with mere inquiry
D. Did either party die or become incapacitated?
1. If either party dies or
becomes incapacitated, the offer is terminated.
E. Did the offeror revoke the offer? ( 43)
1. To a specific individual
must communicate that offer is revoked
a.
Directly
b.
Indirectly
(1) Offerer takes definite action inconsistent with the offer
2. To the public
a.
Revoke by same method offer was made
b.
Revoke before anyone relies
3. Can't revoke if reliance
is foreseeable
4. Unilateral K ( 45)
a.
Two promises
(1) Promise to pay upon completion
(2) Implied promise to keep the offer open for a reasonable time after
offeree begins performance.
F. Exceptions
1. Is the offer a firm offer?
( 2-205)
a.
Written promise signed by a merchant and kept open for the time stated but for no more
than three months. No consideration required.
2. Is the offer an option
contract? ( 87)
a.
Requires
(1) writing
(2) consideration
(3) fair terms and reasonable time
b.
Rejection or counter-offer doesn't terminate the offeree's power to accept
(1) Exception: buyer rejects and seller relies
c.
Acceptance not effective until receipt
IV. Issue: Was there an acceptance?
A. Modes of Acceptance
1. Generally
a.
Rule: Unless otherwise indicated in language or circumstances, an offer invites acceptance
in any manner and by any medium reasonable in the circumstances.
(1) If an offer prescribes the place, time, or manner of acceptance, it
must be complied with.
(2) If an offer merely suggests place, etc., another method of
acceptance is permitted
(a) reasonable means = the one used by the offeror
(3) An acceptance sent by improper means is effective on dispatch if it
arrives within the time that a properly dispatched acceptance would have arrived (
67) (only if acceptance not prescribed)
b.
Acceptance must be unequivocal ( 58)
2. Bilateral contract
a.
Accepted by a promise?
b.
Accepted according to terms set out by offeror?
c.
Accepted by silence?
d.
Accepted late (counter-offer)?
(1) Silence is acceptance if don't notify that acceptance was late
e.
Implied in fact acceptance?
f.
Implied in law K?
3. Unilateral contract
a.
Accepted by performance?
(1) Restatement
(a) no notification necessary to make effective (unless requested)
(b) must exercise reasonable diligence to notify offeror of acceptance
if offeror has no other way to find out within a reasonable time; offeror must receive the
acceptance seasonably
(2) UCC
(a) offeror who is not seasonably notified of acceptance may assume the
offer has expired
b.
Began performance? If yes, OK ( 62)
(1) Not just preparation
c.
Unilateral K trick
(1) Send non-conforming goods and expect payment
4. Ambiguous ( 2-206)
a.
Offeree chooses may either promise or perform ( 32)
b.
Accepted by any reasonable medium
B. Mailbox rule?
1. Effective on dispatch
C. Send acceptance and rejection?
1. A, then R
a.
Estoppel If R arrives first, buyer can't enforce K
b.
Repudiation A might be considered breached
c.
Offer to rescind
2. R, then A
a.
Whichever arrives first
D. Were the goods destroyed? ( 2-509)
1. Is the seller a merchant?
(a)
buyer not responsible until he receives goods
2. Is the seller a
non-merchant?
(a)
buyer responsible on tender of delivery Consideration
I. Issue: Is there consideration?
Rule: Consideration is something of value bargained
for.
A. Policy functions
1. Evidentiary shows evidence
of a bargain
2. Cautioning ceremony,
seals, writing
3. Channeling earmarks
meaningful commitment
4. Less Injury distinguishes
transactions w/ more injury from less
5. Promotes Exchange promises
related to exchange will be enforced
B. Nominal consideration?
1. Rule: Nominal
consideration is consideration in name only and is not the "price" of the K.
2. Not enforceable
C. Conditional donative promise? How do the parties
view the condition? Is the condition the "price" of the K?
1. If yes, it is
consideration.
2. If no, is it relied on? If
yes, still might be enforceable w/o consideration.
D. Is the consideration forbearance of a valid claim?
1. Rule: Forbearance is
consideration when the claim is uncertain or the forbearing party believes that the claim
may be valid.
E. Did the promisee rely to her detriment? If so, the
promisor is estopped from changing position.
1. Rule: A promise which the
promisor should reasonably expect to induce action of the promisee and which does induce
such action is binding if injustice can be avoided only by enforcement of the promise. The
remedy granted for breach may be limited as justice requires.
2. Implied OK doesn't have to
be expressed
F. Does the pre-existing duty rule apply?
1. Rule: Performance or the
promise to perform an act which the promisor is already obligated to do is not
consideration.
2. Exceptions
a.
Third party exception?
(1) Majority rule legal duty rule doesn't apply if duty owed to a third
party
(2) Minority rule legal duty rule does apply if 3d party and no
consideration
(3) Cardozo (NY) legal duty rule doesn't apply if promise made to both
3d parties
b.
Modification?
(1) Restatement
(a) Rule: Parties may voluntarily modify. A promise may modify the
original K: (1) if it was made before the K was fully performed on either side; (2) the
underlying circumstances which prompted the modification were unanticipated by the
parties; and (3) the modification is fair and equitable.
(b) K not fully performed may be modified to the extent justice
requires in view of a material change of position in reliance on the promise.
(2) UCC
(a) Rule: A modification made without consideration is binding if it is
made in good faith.
(b) Rule: A clause stating that K may only be modified in writing needs
a seperate signature if between consumer and merchant. Not necessary between merchants.
(c) If these terms aren't met, the attempt may operate as a WAIVER.
(d) Modification within the Statute of Frauds?
c.
Accord and satisfaction?
(1) Rule: Accord and satisfaction occurs when a creditor agrees to
allow certain performance extinguish an obligation and the debtor executes the
performance.
(a) New performance must be different in nature than original
obligation.
(c) UCC ( 1-207) allows party to reserve rights when performing
("under protest")
(b) "Full payment" checks
(A) Majority rule UCC doesn't apply A & S even if creditor reserves
rights
(B) Minority rule UCC does apply and debt not extinguished.
d.
Waiver?
(1) Rule: A waiver occurs when a party to an existing K promises to
perform even though a condition to her obligation to perform has not yet been met.
(a) Restatement
(A) Only non-material conditions may be waived
(B) May retract the waiver by notifying the promisee if (1) there's
still time to fulfill the condition; and (2) is not unjust because of a material change of
position.
(b) UCC ( 2-209)
(A) Must be written waiver; valid without consideration.
(B) A waiver may be retracted by (1) reasonable notification that
performance will be required; and (2) the retraction would be unjust in view of a material
change in reliance of the waiver.
(c) Modification v. Waiver
(A) Waiver may be retracted if no reliance
G. Is the K based on past consideration?
1. Restatement
a. A
promise to pay after bankrupcy or SOL has run is binding.
b.
Follows the minority rule A promise made in recognition of a benefit is binding to the
extent necessary to prevent injustice.
(1) Not binding if gift or disproportionate to the benefit conferred.
H. Was the K made under duress?
1. Economic duress does not
invalidate a K.
2. Was assent induced by an
improper threat that left the victim no reasonable alternative? ( 175)
a. a
tort or a crime
b.
harm the recipient and not benefit the party making the threat
c.
use of power for illegitimate ends
d
N.B. Threaten criminal prosec.; bad faith civil suit; breach of legal duty
I. Mutuality
J. Is the K unconscionable?
1. Is there gross inequality
of bargaining power and terms unreasonably favorable to one side?
a.
UCC 2-302; R 208
2. Procedural
3. Substantive
4. Remedies
a.
not enforce K
b.
enforce K w/out unconscionable clause
c.
limit the extent of the clause
d.
Specific Performance will not be granted if (1) K induced by unfair practices; (2)
exchange is grossly inadequate.
Remedies
I. Remedies generally
A. Non-breaching party has choice of measure
B. UCC states that remedies may be liberally applied;
damages don't need mathematical accuracy
II. Expectation, Reliance, Restitution
A. Expectation (most common)
1. Puts the party where they
would have been if the contract had been performed
2. Mitigation
a.
Services
b.
Unfinished goods
c.
Employment K
3. Forseeability
a.
Consequencial damages recoverable except
(1) Extremely disproportionate
(2) No written K
4. Emotional distress
a.
Usually not recoverable
b. OK
for funerals, weddings, etc.
5. Liquidated damages (UCC
2-718)
a.
Look at liquidated damages clause; if OK, enforce
b. If
no clause, look at actual damages; if determinable, enforce
c. If
damages not determinable, keep 20% of total K or $500, whichever is smaller
6. Certainty Damages measured
with reasonable certainty
a.
Don't have to be mathematically accurate
b.
New business rule
(1) Many jurisdiction no longer following
7. Specific performance
a.
Restatement ( 360)
(1) difficult to prove damages with reasonable certainty
(2) difficult to find a suitable substitute unique goods
(3) breaching party is insolvent might not be able to collect damages
b.
UCC ( 2-716)
(1) goods are unique
(2) other proper circumstances
c.
Policies:
a. Cts. don't like because they don't want to babysit
B. Reliance
1. Puts the party where they
would have been had the contract not existed
2. Never more than
expectation
C. Restitution
1. Restored a benefit on the
other party; deserve compensation
2. Quasi-Ks (Implied in law)
3. Deposits see LIQUIDATED
DAMAGES Statute of Frauds
I. Functions Served
II. Courts Disfavor
III. Categories within the Statute
A. Surety Ks
B. Marriage
C. Sale of Land
D. Long Term Ks (more than one year)
E. Real estate brokerage agreements
F. Sale of goods (UCC)
IV. Common Law Requirements
A. state terms with reasonable accuracy
B. signed by party
C. bundle of documents theory
V. UCC
A. Requirements (Goods $500 or more)
1. Evidence K
2. Signed
3. Quantity
B. Exceptions
1. Specially manufactured
goods
2. Party admits
3. Payment received
4. Goods delivered and
accepted
C. 1-206: Personal Property
1. Not enforceable beyond
$5,000
2. Must state price
