Business Law Chapter 8: Offer and Acceptance

Acceptance

A clear expression of assent in reply to an offer

Counteroffer

A reply to an offer in which the offeree makes a new proposal as to the terms of the contract.

Offer

An expression of a willingness to do something in exchange for something else provided by another person.

An offer may terminate by rejection or counteroffer

Any manifestation of rejection or a counteroffer terminates the offer.

UCC: UCC vs Common Law - Common Law

Applies to employment and sales of land, services or insurance.

Offer and Acceptance

Both offer and acceptance are viewed objectively

Firm Offer

If a merchant in a signed writing promises an offer will be kept open, the merchant is bound to hold the offer open for stated time or reasonable time no greater than 3 months (Missouri Rule; UCC - 90 days)

Non-Offer: Preliminary Negotiations

Inquiries or general discussions of potential contract terms. Ex: Are you interested in...; would you take $1,000 for your son's Grand Am

UCC: Goods vs. Services

Look at the primary purpose of the contract. Ex: Going to dentist to get diamond capped teeth, you are going to the dentist for the sale of the service not for the diamond

Non-Offer: Auctions

Not offers unless they are advertised without reserve. Ex: opposite of eBay

Unilateral Contract Acceptance: Awareness

Offeree must know of offer before acceptance by performance - offer must have been received by the offeree.

Unilateral Contract Acceptance: Acceptance IS by...

Performance. Partial performance typically makes the offer irrevocable for a reasonable time to complete performance. Ex: I hire someone to paint house for $3000 and almost done, I can't revoke the offer

Offeree

The person to whom the offer is made.

Offeror

The person who makes the offer

UCC = ...

Uniform Commercial Code

UCC: UCC vs Common Law

You must distinguish whether the common law or the UCC applies in every contract

UCC: Three things that make a Merchant

1. A dealer in goods of the type contracted for 2. A person who holds himself out as having special knowledge as to the goods of the type contracted for 3. A person who employs a merchant as an agent

Requirements for Valid Acceptance

1. Acceptance by whom 2. Terms of acceptance - three requirements 3. Must be communicated

UCC Acceptance - Sale of Goods: Qualifies the Mirror Image Rule

1. An acceptance is valid despite additional terms 2. Additional terms are considered proposals for new additions to the contract 3. Exception: an acceptance made conditional on new term is a rejection and counteroffer

5 Ways an offer is terminated

1. An offer may terminate by revocation of offeror 2. An offer may terminate by lapse of time 3. An offer may terminate by rejection or counteroffer 4. An offer by terminate by Operation of Law 5. An offer may terminate by terms of the offer

An offer may terminate by Operation of Law

1. Death or by incompetence of either party 2. Intervening illegality (performance becomes after the offer but before acceptance), illegal e.g. zoning change 3. Destruction of the subject matter of the contract

Five Non-Offers

1. Expressions of Opinion 2. Statements of Intention 3. Preliminary Negotiations 4. Certain Advertisements 5. Auctions

Three Requirements for Valid Offer

1. Intention 2. Definiteness 3. Communication

Unilateral Contracts Acceptance

1. Must be made by performance 2. Offeree must be aware of the offer prior to performance 3. Offer is irrevocable for a reasonable time to allow complete performance when only partial performance is done

Variations Under the UCC

1. Parties to a contract have higher duties than under the common law 2. Requirements for a valid offer are changed 3. Consideration requirement is modified by the firm offer rule 3. Qualifies the mirror image rule for sales of goods

Requirements for Valid Offer: Intention

A serious and objective intention by the offeror to be bound. Offers made in obvious anger, jest, or excitement are not binding.

Valid Offer

A serious specific offer and a specific demand in a contract setting

Non-Offer: Expression of Opinion

A statement as to general quality or a prediction. Maybe when someone starts a statement with "I believe". Ex: My car's worth $10,000; Surgeon says a boy's leg will heal in a few days; contractor's estimate versus a bid

Non-Offer: Statements of Intention

A statement of what one may do in the future. Ex: I plan on selling my son's Grand Am for $1,000; I may; I'm going to; I'm considering etc.

Requirement for Valid Acceptance: communicated - mailbox rule

An acceptance is effective when correctly mailed, or sent by similar means, even if it is never received. Has no application in e-mail or internet acceptances. Acceptance must be sent by reasonable means to apply. This rule will not apply if the offeror negates it simply by specifying exactly how acceptance is to be made and when it is effective.

Mirror Image Rule

An acceptance which contains new or varying terms is considered a rejection and counteroffer. (The acceptance must be a mirror image of offer or it is invalid)

Requirements for Valid Offer: Definiteness

An offer definite enough to ascertain the terms of the contract. Including: names, description of goods or services, quantity, price, and important delivery terms.

UCC: UCC vs Common Law - the UCC

Applies to sales of goods and has other provisions governing leases of personal property, commercial paper, and mortgages on personal property

An offer may terminate by terms of the offer

Ex: This loan commitment shall be binding upon the bank until the prime interest rate rises by 1/4 of 1% or more.

Variations Under the UCC: Standards of Dealing

Good faith is implied in every contract. There is a higher standard for merchants - they must meet industry standards for dealing in fair trade.

Standard of Objectivity

Look at words spoken or written and conduct and what they would mean to a reasonable person.

Variations Under UCC: Offer

May have open terms including price. Price - reasonable time at delivery. Payment terms - on delivery. Delivery - sellers place of business. Shipment time - Reasonable. The courts will enforce the contract and fill in the missing terms if: The parties and goods are identifiable, the quantity is specified, the court determines the parties intended to make a contract.

Requirement for Valid Acceptance: Acceptance by Whom

Must be made by the offeree: you can't accept an offer made to another person

Requirement for Valid acceptance: Terms of Acceptance

Must be unconditional, unequivocal, and under the same terms. Unconditional - no ifs, ands or buts Unequivocal - Must be I accept, you have a deal, etc. Same terms - must be the mirror image of the offer or it's a rejection

UCC Acceptance - Sale of Goods: Between Merchants

New terms in an acceptance sometimes become part of the contract if: 1. The chance is not material (important) 2. No objection to the change is made by the offeror within 10 days

Requirements for Valid Offer: Communication

Offer must be communicated to the offeree. Requirements - communication by the offeror and receipt by the offeree (did the offeree know about the offer when she accepted?) Ex: Did the rescuer know about the money? If not the offeror don't have to pay it.

Mailbox Rule vs. Offers and Revocations

Offers and revocations must be received to be valid, and with the mailbox rule acceptances don't have to be received to be valid.

An offer may terminate by revocation of offeror

Revocation is typically possible any time up to acceptance, even if the offeror said he would keep it open for a certain period of time. Ex: garage sale offer for lawn mower - seller promises it will be open Exceptions: option contracts (where money is paid to keep the offer open) and merchant's firm offer under the UCC

UCC: Examples of things that aren't goods

Row of chairs permanently attacked to real estate.

Requirement for Valid Acceptance: Must be communicated

Silence is not acceptance absent prior agreement. The offer must have timely acceptance, meaning it must be accepted before offer is terminated by any means

An offer may terminate by lapse of time

Stated time: This offer is open for three days. Reasonable time: If a time is not stated, the offeree has a reasonable time to accept. The amount of time which is reasonable will vary with situation, for example, it will be a short time if it is an offer to buy commodities (like bananas) whose value will decline rapidly.

Non-Offer: Certain Advertisements

The danger is multiple acceptances. These are not offers unless they are: very specific, eliminating multiple acceptances. Ex: Store sells a Mink stole for really cheap, first come first serve. A fur buyer and other store owner wanted to buy it, the store owner said no.

UCC: Definition of Sale

The passage of title from Seller to Buyer for a price (consideration). It cannot be a lease, because there is no passage of title, and cannot be a gift, because there is no price.

UCC: Definition of Goods

Things tangible and movable. Tangible: has physical existence (desk vs. patent) Moveable: Can be carried from place to place (not attached to real estate).

Unilateral Contract Acceptance: Acceptance IS not..

Verbal

UCC: Example of a Good

Wallet, glasses, keyboard.