Contracts: Offer and Acceptance
Loch Ness owns the Ness Cafe, a tavern. He offers to buy "All the alcohol I need next year" from the Boozitupp Liquor Wholesaler. Before Boozitupp accepts, Prohibition is enacted and the sale of alcohol becomes illegal. Can Boozitupp still accept Loch Ness' offer?
No, due to intervening illegality, which terminates the offer. Rest. 2d §§35, 36. RELATED ISSUE: Had the sale of alcohol become illegal before Loch Ness made the offer, the offer would be invalid; had it become illegal after Boozitupp accepted, the contract would be void due to impossibility.
Towels 4 Sports offers to sell its overstock of golf towels to Coach Tree,the coach of the local high school golf team for $300. Coach Tree says, "No thanks. I don't want them." May Coach change his mind, turn around and subsequently accept the offer?
No. According to Restatement of Contracts §36, express rejection terminates an offer. As such, the offeree may not thereafter accept it.
Socrates offers to sell his collection of Great Philosophers bubble gum cards to Plato for $20. Plato offers $15 for them. At common law, is Socrates' offer still valid?
No. According to the Rest. 2d §38, a counteroffer terminates the original offer. This is the "mirror image" rule. UCC VIEW: Under UCC §2-207, between merchants only, the addition of terms or alteration of others does not, in some cases, terminate the offer. RELATED ISSUE: If Plato had said, "I am keeping your $20 offer under advisement. Would you be interested in taking $15 and an autographed Cleveland Indians baseball instead?", the offer would still be open, because Plato expressly reserved it. This is known as an "inquiry into terms."
Offer
(1) A communication by the offeror; (2) creating a reasonable expectation in the offeree; (3) that offeror is willing to enter into a contract; (4) on specified terms; (4) such that offeree need only accept in order to form a contract. NOTE: The offeror must manifest an intent to be presently bound. It is important to distinguish an offer from a negotiation or offer to negotiate. The offer must have the language of a promise, definiteness as to essential terms, and be communicated to the offeree. FACTORS: In determining if there has been an offer, look to see if the communication is a promise. Consider language, circumstances, prior practices and relations of parties, method of communication, and industry custom. Language like "I offer" or "I promise" is typical; words like "I quote," "I'm asking," and "I'd consider" typically are words inviting negotiation
What are the six ways in which an offer may be terminated (except through acceptance)?
(1) Revocation (2) Death or insanity of wither party (3) Destruction of subject matter (4) Intervening illegality (5) Rejection/Counteroffer (6) Time (Lapse of) ReD DIRT
Ima Glamore, owner of the Goddess of Odd-Sizes Shoe Store, and Slick Rick are chatting. Ima Glamore comments, "I'm planning on selling my designer diamond studded pumps for $500." Slick Rick says, "Here's my check. I accept." Could a contract result?
No, because a reasonable person would conclude that Ima Glamore's statement was merely a statement of intent and made no promise. An offer requires the present intention to enter into a contract; here, Ima Glamore did not intend to create in Slick Rick the immediate power of acceptance—as such, no contract results.
Does an offer continue until it is expressly revoked?
No. Although the offeror can set any time limit she likes, in the absence of a time limit, the offer expires at the end of a reasonable time. "Reasonable time" varies according to circumstances, including trade customs and nature and subject matter of the contract. The means of communication is also relevant—an oral offer made in a face-to-face meeting normally lapses when the meeting ends; a phone offer lapses when the conversation ends. NOTE: If an offer gives an offeree a set time—say, seven days—in which to accept the offer, the time period begins when the offeree receives the offer, unless the offeror specifically provides otherwise (or the offeree should know the offer had been unusually delayed).
Must the offeror expressly revoke his offer to offeree in order for the revocation to be valid?
No. Any act that is inconsistent with the offer is sufficient to revoke, as long (and as soon) as the offeree knows about it (e.g., selling a house to another buyer).
At a lunch meeting on October 28, 1929, Speck Eulator offers to buy 10,000 shares of Alchemy Welding Company stock for $200 a share from Dee Fensed. On October 29, the stock market crashes, and Alchemy drops to 59 cents a share. On October 30, Dee calls Speck, and says, "I accept your offer." Could there be a contract?
No. Speck's offer had lapsed due to business custom. The stock market changes so quickly that two days would be too long a time in which to decide (unless Speck specifically provided otherwise). Note also that the offer was made orally and in a face-to-face meeting. Normally, such an offer lapses when the meeting ends.
In its advertising circular, the My Way Mart advertises wash and wear interview suits for $25.99. Is this an offer?
No. Such ads generally are construed as invitations for offers, disseminating prices at which the seller will receive offers. They are not offers because the quantity term is missing and, thus, there is no clear offeree. (As such, there is no "power of acceptance" in a reader of the ad, the exercise of which would create a contract.)
Kennedy Mays has a veritable wonderland of lawn ornaments in her front yard. Sunny Mentell, passing by one day, asks Kennedy, "Would you consider selling the jockey holding the lantern for $150?" Kennedy replies, "I accept." Could there be a contract?
No. Sunny's question is an invitation for negotiation or an offer, but it is not an offer in and of itself, because an offer requires the language of a promise, definiteness of essential terms, and communication to the offeree. An immediate power of acceptance must be created in the offeree for an offer to be valid; the offer must be unambiguous and unequivocal; the putative "offer" here is not. "Would you consider..." indicates an interest in negotiating; language like "I offer" or "I promise" typically indicates an offer.
What differences does the UCC make to the common law "mirror image" rule (i.e., the rule that a valid acceptance may not vary the terms of the offer)?
The UCC treats additional terms in the acceptance differently depending on their materiality and whether they add to or change the contract. NON-MATERIAL ADDITIONS: Where both parties are merchants, the offeror has not limited the offer to the original terms, and the changes are not material, the offeror's silence on the additional terms constitutes acceptance of them. (He must have a reasonable time after receipt of the acceptance in which to object.) MATERIAL ADDITIONS: If the additional term proposes a material change, it will require assent to become part of the contract. DIFFERENT TERMS: If a proposal is considered to provide a different term, most courts would deem the contract silent on the matter.
Christopher Columbus offers to sell his powerboat, the Santa Maria, to Leif Ericson. Columbus then turns around and sells it to Isabella instead. If Leif overhears of the sale from two strangers at the local tavern, Newe Worlde, is the offer revoked?
Yes. An offer may be terminated if the offeree knows of an act by the offeror that is inconsistent with the offer. Selling the subject of the offer to someone else would certainly qualify as a revocation; however, merely looking for other potential buyers would not.
Admiral Nelson mails his application for accident insurance along with a check for $50 to the Cracked Auto Insurance Company. The check covers the first six-month premium period. Several months go by and Cracked Auto does not return the check. Is there a contract?
Yes. Nelson's application for insurance was an offer. Normally, silence cannot constitute acceptance; however, where silence is coupled with taking benefits (here, Nelson's check) after an opportunity to reject, there can be an implied acceptance, and a contract exists.
Magellan offers to buy the unusual birdbath Pisarro keeps in his front yard for $400, providing Pisarro gets it to Magellan's house by Saturday. Pisarro says, "Well, I'm not at all fond of your terms, but OK." Does a contract exist?
Yes. Pisarro's acceptance is called a "grumbling acceptance"—he has not offered different terms, but merely expressed his dislike for those Magellan offered. However, because his acceptance is valid apart from the "grumbling," a contract results. The test is an objective one: Would a reasonable person assume the original offer had been rejected?
Leon makes Saul an offer. Saul dies without accepting the offer. Does Saul's passing terminate the offer?
Yes. Rest. 2d §48 provides that an offer is terminated by the death or insanity of either the offeror or the offeree. Note that the other party need not be notified of the death or insanity.
Prince Eduardo finds an heirloom cameo locket in the grass next to the mailbox in front of his home. Unbeknownst to him, the locket's owner, Carmella, is offering a $1,000 reward for the locket's return. Eduardo goes house to house, looking for the locket's owner, until he finds Carmella and gives her the locket. Does Carmella owe Edwardo the $1,000?
No, according to most courts, because Eduardo didn't know about the reward. Without knowledge of the reward, Eduardo is not entitled to it and Carmella is not contractually bound to pay it. MINORITY VIEW: Because Carmella got the benefit of her bargain, she should be required to pay. NOTE: As an offer for a reward, the offeror is looking for performance in return, not a return promise. As such, it seeks a unilateral contract. The offer of a reward is one of the very few clear-cut instances in which an offer could not be construed as seeking a bilateral contract.
The Got Your Groove Record Club sends Melanie Frey a mailer which reads, in part: "A stupendous offer! First time ever! Every record ever recorded. You receive 10,000 records a week. We bill you in convenient monthly payments of $1,299.00. If we do not hear from you before next Wednesday telling us you reject this incredible offer, we'll assume you want the records and we'll start sending them immediately." Melanie does not respond. Contract?
No. The general rule is that the offeror cannot insist on silence as a means of acceptance. The exceptions to this all require some act by the offeree—a prior agreement between parties that silence will mean acceptance (e.g., in a Book-of-the-Month Club) or the offeree takes benefits or exercises dominion over what the offeror offers, having had an opportunity to reject.
Can silence constitute acceptance?
No. The general rule is that the offeror cannot insist on silence as a means of acceptance. The exceptions to this all require some act by the offeree—a prior agreement between parties that silence will mean acceptance (e.g., in a Book-of-the-Month Club), or the offeree takes benefits or exercises dominion over what the offeror offers, having had an opportunity to reject.
Lincoln tells Johnson that he intends to offer Davis his season ticket to Ford's Theater for $200. Davis overhears Lincoln's comment, walks up, and says, "I accept." Is there a contract between Lincoln and Davis?
No. The offer must be communicated in the manner the offeror intended to create a power of acceptance in the offeree. RELATED ISSUE: Say Lincoln had written the offer in a letter and decided he didn't want to make the offer after all. His secretary picked up the letter and mailed it to Davis, an honest mistake on the secretary's part. The offer would be valid because it was made the way Lincoln had intended, even though he didn't intend to make an offer. (Note that Davis would have to be objectively unaware of the mistake.) This protects the reasonable expectation of the offeree. It would not hold if, say, the letter were stolen by a thief, Booth, who mailed it to Davis—in that instance, no offer would result.
Pavlov offers to sell his laboratory equipment to Fetchitt Rover. They argue about terms for a while and then Fetchitt says, "Well, assuming we can iron out the details later, I accept your offer." Is there a contract?
No. This is an "agreement to agree," and not a valid contract, because there has not been an unequivocal acceptance and there would be no basis on which to grant relief. As such, the offer has neither been accepted nor rejected.
King George III validly offers to sell Canada to James Monroe. Before Monroe accepts, George calls him and says, "I revoke my offer." May Monroe still accept the offer?
No. Unless there's something specific that makes them irrevocable, offers are revocable whenever the offeror wants to revoke. Once he revokes, the offeree can't accept and make a contract. Here, there's nothing to make the offer irrevocable, so once George revoked, Monroe no longer had the power to accept. COMMON EXCEPTIONS: "Firm offers" by merchants under the UCC and options (where the offeree pays to keep the offer open for a set period of time).
The Camelot Army/Navy Store puts the following ad in a local newspaper: "Sale—Saturday only—singing sword, Excalibur. Was $500, now only $24. First come, first served. Will open at 10 a.m." Arthur King sees the ad, camps out in front of Camelot Friday night, and is the first one in on Saturday morning. He says, "I accept your offer for Excalibur. Here's my $24." Is there a binding agreement?
Yes, because Camelot's offer was specific as to quantity and price, stated to whom the offer was made ("first come"), and, in general, was worded as a "promise." As such, it created an immediate power of acceptance in Arthur King, and when he accepted, a contract was formed. Note that most ads are not as definite as this one, and, as such, typically are considered only invitations for offers or intentions to sell.
Clay Courter gives ten-lesson private tennis classes to local families. Clay shows up at the Colon household seven weeks in a row on Thursday evening and teaches the Colon youngster, Santino, how to play tennis. His father, Michael., knows about the lessons, but says nothing. Michael did not ask Clay to come over, but is familiar with his work and lets Santino complete the course. Will Michael's silence constitute acceptance, making him liable to Lilly for the cost of the lessons?
Yes, because he accepted services having had the opportunity to reject them, under circumstances suggesting that a reasonable person would contemplate payment. As such, he must pay Clay.
Must a statement sufficiently identify the offeree to constitute an offer?
Yes, because it must create in the offeree an immediate power of acceptance. Although the offeree is normally one person, it can be a class of persons and even the general public, as long as the terms are sufficiently definite and the offeree is clearly identified. Note, however, that the broader the "class" of ostensible offerees, the more likely a court is to find that an "offer" (e.g., an advertisement) is actually only an invitation for offers. SIGNIFICANCE: No one except the offeree can accept an offer; so, for instance, if you're in a bar and you overhear an offer being made to someone else, you can't turn around and accept that offer, because you're not the offeree.
Rock Racer's Aston Martin luxury sports car is stolen and he offers $20,000 for its return. Suzie Sleuth, an amateur detective, locates and retrieves the car, which was abandoned in an alley near the airport, after learning of the reward and returns it to Rock (after taking it for an innocent spin around the block). Is Suzie entitled to the reward?
Yes. Rock's offer was to the public in general. Because Suzie knew of the offer, was the first to respond, and was under no pre-existing legal duty to return the Aston Martin, she is entitled to the reward. NOTE: As an offer for a reward, the offeror is looking for performance in return, not a return promise. As such, it seeks a unilateral contract. The offer of a reward is one of the very few clear-cut instances in which an offer could not be construed as seeking a bilateral contract.
Fern owns an antique shop, Junk Is Us. She offers to buy Euphrates Antique Wholesalers' entire inventory of old string, over a period of months. In accepting her offer, Euphrates includes an extra clause providing reasonable interest on overdue invoices. Is the additional clause part of the contract under the UCC?
Yes. The UCC does not follow the common-law "mirror image" rule, but treats additional terms in the acceptance differently depending on their materiality and whether they add to or change the contract. NON-MATERIAL ADDITIONS: Where both parties are merchants, and the offeror has not limited the offer to the original terms, and the changes are not material, the offeror's silence on the additional terms constitutes acceptance of them. (He must have a reasonable time after receipt of the acceptance in which to object.) MATERIAL ADDITIONS: If the additional term proposes a material change, it will require assent to become part of the contract. DIFFERENT TERMS: If a proposal is considered to provide a different term, most courts would deem the contract silent on the matter.
The W.S. Blimpee Company offers to sell the Hindenberg, a zeppelin, to The Tread Tire Co. for $10,000. The next day, the Hindenberg hits a cell phone tower and is destroyed. Is the offer terminated?
Yes. When anything (or anyone) essential to the performance of the contract is destroyed, the offer is terminated.
In determining whether an offer to enter into a contract has been made, is the context of the communication relevant?
Yes. Where the language itself is not definite, the relationship between the parties, prior practices, method of communication, and the like frequently can determine whether an offer has been made.
