Business Law Chapter 11 The Agreement: Acceptance

Stipulated Means of Communication

-effective on dispatch, just like any other reasonable or authorized means of communication -difference is that an acceptance other than the stipulated means doesn't create a contract because it an acceptance at variance with the terms of the offer

Absence of Ambiguous Offers

-if an offer is unclear about which form of acceptance is necessary to create a contract, it may be accepted in any manner that is reasonable in light of the circumstances surrounding the offer -either a promise to perform or performance, if reasonable, creates a contract -order requesting prompt or current shipment of goods may be accepted either by a prompt promise to ship or by a prompt or current shipment of the goods -nonconforming goods are goods different from what the buyer ordered -Code provides that prompt shipment of either conforming goods (what the order asked for) or nonconforming goods operates as an acceptance of the order *protects buyers because sellers who ship the wrong goods have simultaneously accepted their offers and breached the contract by sending the wrong merchandise -no contract is created if the seller notifies the buyer within a reasonable time that the shipment of nonconforming goods is intended as an accommodation *shipment is a counteroffer

Intention to Accept

-in determining whether an offeree accepted an offer, the court is looking for the same present intent to contract on the part of the offeree that it found on the part of the offeror -judged by an objective standard -difference is that the offeree must objectively indicate a present intent to contract on the terms of the offer for a contract to result -offeror may specify in detail what behavior is required of the offeree to bind him to a contract *if the offeror does so, the offeree must comply with all terms of the offer before a contract results

Acceptance in Bilateral Contracts

-involves the exchange of a promise for a promise -to accept the offer to enter the contract, an offeree must make the promise requested by the offer -offerees who take action that objectively indicates agreement risk the formation of a contract

Acceptance in Unilateral Contracts

-involves the exchange of a promise for an act -to accept an offer or enter such a contract, the offeree must perform the requested act -courts applying modern contract rules may prevent an offeror from revoking such an offer once the offeree has begun performance -achieved by holding either that a bilateral contract is created by the beginning of performance or that the offeror's power to revoke is suspended for the period of time reasonably necessary for the offeree to complete performance

Operation of the Mailbox Rule: Common Law of Contracts

-mailbox rule would make acceptances effective upon dispatch when the offeree used a manner of communication that was expressly or impliedly authorized (Invited) by the offeror -any manner of communication suggested by the offeror would be expressly authorized, resulting in an acceptance sent by the suggested means being effective on dispatch -manner of communication used by the offeror in making the offer would be impliedly authorized as would a manner of communication common in the parties' trade or business -improperly dispatched acceptance or one that was sent by some means of communication that was non-authorized would be effective when received, assuming that the offer was still open at that time *placed on the offeree being revoked or acceptance being lost -mailbox rule applied more liberally by courts today

Silence as Acceptance

-not an acceptance -offeror cannot impose on the offeree a duty to respond to the offer -the circumstances of a case sometimes impose a duty on the offeree to reject the offer affirmatively or be bound by its terms *offeree's silence indicates an intent to accept -customary trade practice or prior dealings between the parties may indicate silence signals acceptance -offeree's silence can operate as an acceptance if the offeree has indicated that it will -offerees who accept an offeror's performance knowing what the offeror expects in return for his performance have impliedly accepted the offeror's terms

Acceptance

-occurs when an offeree agrees to be mutually bound to the terms of the contract by giving consideration, to seal the deal -in determining if an offeree accepted an offer and created a contract, a court will look for evidence of three factors: 1. offeree intended to enter the contract 2. offeree accepted on the terms proposed by the offeror 3. offeree communicated his acceptance to the offeror

Manner of Communication

-offeror has the power to specify the precise time, place, and manner in which acceptance must be communicated, which is called a stipulation -if the offeror stipulates a particular manner of acceptance, the offeree must respond in this way to form a valid acceptance -if offer suggests a method or place of communication or is silent on such matters, the offeree may accept within a reasonable time by any reasonable means of communication

Acceptances by Noninstantaneous Forms of Communication

-offeror may be attempting to revoke the offer while the offeree is attempting to accept it -acceptance may get lost and never received by the offeror -under the mail-box rule, properly addressed and dispatched acceptances can become effective when they are dispatched, even if they are lost and never received by the offeror *protects the offeree's reasonable belief that a binding contract was created when the acceptance was dispatched *exposes the offeror to the risk of being bound by an acceptance that she has never received, but they have the ability to minimize this risk by stipulating in her offer that she must actually receive the acceptance for it to be effective *offerors who do this maximize the time that they have to revoke their offers and ensure that they will never be bound by an acceptance that they have not received

Who Can Accept an Offer?

-offerors have the right to determine who can bind them to a contract -only person with the legal power to accept an offer and create a contract is the original offeree -an attempt to accept by anyone other than the offeree is treated as an offer, because the party attempting to accept is indicating a present intent to contract on the original offer's terms

UCC Standard for Acceptance on the Offeror's Terms: The "Battle of the Forms"

-offerors use standard order forms prepared by their lawyers, and offerees use standard acceptance or acknowledgment forms drafted by their counsel -parties are likely read only crucial provisions concerning the goods ordered, the price, and the delivery date called for, and if these terms are agreeable, believe they have a contract -if a dispute arose before parties started to perform, a court applying the mirror image rule would hold that no contract resulted because the offer and acceptance forms did not match exactly -if a dispute arose after performance commenced, the court would hold that the offeror had impliedly accepted the offeree's counteroffer and was bound by its terms -"Battle of the Forms" section 2-207 changed the mirror image rule of contracts involving the sale of goods *allows the formation of a contract even when there is some variance between the terms of the offer and the terms of the acceptance *makes it possible under some circumstances for a term contained in the acceptance form to become part of the contract -Code provides that a definite and timely expression of acceptance creates a contract, even if it includes terms that are different from those stated in the offer or even if it states additional terms that the offer did not address -attempted acceptance that was expressly conditioned on the offeror's agreement to the offeree's terms would not be a valid acceptance -additional terms contained in the offeree's form are treated as "proposals for addition to the contract" -if the parties are both merchants, the additional terms become part of the contract unless: 1. offer expressly limited acceptance to its own terms 2. new terms would materially alter the offer 3. offeror gives notice of objection to the new terms within a reasonable time after receiving the acceptance -when the offeree has made his acceptance expressly conditional on the offeror's agreement to the new terms or when the offeree's response to the offer is clearly not "an expression of acceptance" - a contract will only result in such cases if the parties engage in conduct that "recognizes the existence of a contract" -under traditional contract principles, the offeror who accepts performance in the face of an express rejection or expressly conditional acceptance is not bound to all of the terms contained in the offeree's response -Code provides that the terms of a contract created by such performance are those on which the parties' writings agree, supplemented by appropriate gap-filling provisions, which is known as the knock-out rule

Acceptance when a Writing is Anticipated

-parties to a contract intend to prepare a written draft of their agreement for both parties to sign *good idea because it provides written evidence of the terms of the agreement if a dispute arises at a later date -if a dispute arises before such a writing has been prepared or signed, a question may arise concerning whether the signing of the agreement was a necessary condition to the creation of a contract -party to the agreement who now wants out of the deal may argue that the parties didn't intend to be bound until both parties signed the writing -clear expression of such an intent by the parties during the negotiation process prevents the formation of a contract until both parties have signed -in the absence of such a clear expression of intent, the courts ask whether a reasonable person familiar w/ all the circumstances of the parties' negotiations would conclude that the parties intended to be bound only when a formal agreement was signed -if it appears that the parties had concluded their negotiations and reached agreement on all the essential aspects of the transaction, most courts would find a contract at the time agreement was reached, even though no formal agreement had been signed

Operation of the Mailbox Rule: UCC

-provides that an offer that does not specify a particular means of acceptance is considered to invite acceptance by any reasonable means of communication -provides a properly dispatched acceptance sent by a reasonable means of communication within a reasonable time is effective on dispatch -what is reasonable depends on the circumstances in which the offer was made *include the speed and reliability of the means used by the offeree, the nature of the transaction, the existence of any trade usage governing the transaction, and the existence of prior dealings between the parties -mailed response to a telegraphed offer or vice versa might be considered reasonable and effective on dispatch -UCC provides that acceptances sent by an unreasonable means would be effective on dispatch if it is received within the time that an acceptance by a reasonable means would normally have arrived

Communication of Acceptance

-to accept an offer for a bilateral contract, the offeree must make the promise requested by the offer -offeror must communicate the terms of his proposal to the offeree before an offer results because communication is a necessary component of the present intent to contract required for the creation of an offer -offeree must communicate his intent to be bound by the offer before a contract can be created -to accept an offer for a unilateral contract, the offeree must perform the requested act -traditional contract law rule on this point assumes that the offeror will learn of the offeree's performance and holds that no further notice from the offeree is necessary to create a contract unless the offeror requests notice

Intent and Acceptance of the Offeror's Terms

-traditional contract rule is that an acceptance must be the mirror image of the offer -attempts by offerees to change the terms or add new terms are treated as counteroffers because they impliedly indicate an intent by the offeree to reject the offer instead of being bound by its terms -recent years had mirror image rule being applied by holding that only material (important) variances between an offer and a purported acceptance result in an implied rejection of the offer -no rejection is implied if an offeree asks about the terms of the offer without indicating its rejection (inquiry regarding terms) or accepts the offer's terms while complaining about them (grumbling acceptance)

Knock-out Rule

-used by the majority of courts when there is an acceptance that contains terms that are different from an offer -contract will consist of those terms on which the parties' writings agree plus any appropriate gap-filling presumptions of the Code

Acceptances by Instantaneous Forms of Communication

-when the parties are dealing face to face, by telephone, or by other means of communication that are virtually instantaneous, there are few problems when acceptance was communicated