IL CONTRACTS

Nordyne, Inc. v. International Controls & Measurements Corp.,

"The general rule is that a price quotation, such as one appearing in a catalogue or on a flyer, is not an offer, but is rather a suggestion to induce offers by others. However, a price quotation, 'if detailed enough, can amount to an offer creating the power of acceptance; to do so it must reasonably appear from the price quote that assent to the quote is all that is needed to ripen the offer into a contract.' Factors relevant in determining whether a price quotation is an offer include the extent of prior inquiry, the completeness of the terms of the suggested bargain, and the number of persons to whom the price quotation is communicated."

Distinguishing Between Acceptance and Counter-Offer

A response is a counter-offer if it demonstrates dissatisfaction with the offered terms and proposes alternative terms instead. Because an acceptance must express commitment to the offered contract, a counter-offer is not an acceptance. A counter-offer is also usually understood as terminating the original offer, unless the parties specify otherwise. With the original offer terminated, the question then will be whether the counter-offer is accepted by the original offeror (or whether it is rejected or allowed to lapse, or yet another counter-offer is made).

Defining Acceptance Under § 2-207 Just as under the common law, acceptance under § 2-207 may be by communication or by conduct. Acceptance by Expression of Commitment: § 2-207(1) UCC § 2-207(1). It applies when a contract is created by an offer and an acceptance that do not match each other precisely. It rejects the mirror-image rule by stating that a communication may be an acceptance "even though it states terms additional to or different from those offered ... ." However, the communication operates as an acceptance only if it is a "definite and seasonable expression of acceptance" and it does not operate as an acceptance if "acceptance is expressly made conditional on assent to the additional or different terms.

"[D]efinite ... expression of acceptance" means that the offeree's language must show a willingness to commit to the contract by accepting the offer. To determine whether a particular communication expresses commitment, look at the language used by the offeree. "Seasonable" is defined in § 1-205(b) as "at or within the time agreed or, if no time is agreed, at or within a reasonable time." In context, that means the response to the offer should be made within the time specified by the offer or, if none is specified, within a reasonable time after the offer, judging reasonableness based on all of the circumstances. we can paraphrase § 2-207(1) as follows: A purported acceptance that does not diverge significantly from the offer (as to the dickered terms) is an acceptance (of an offer), even though it does not mirror the offer, unless it states (in the way required by the jurisdiction) that the offeree's assent to the offer is conditional on the offeror's assent to the new terms in the purported acceptance.

The Restatement (Second) of Contracts § 2(1)

'The Restatement (Second) of Contracts § 2(1) defines a promise as a "manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made." The promisor may communicate ("manifest") commitment by words (spoken or written), by conduct (e.g., the nod of a head, or a handshake, or other act that shows commitment is intended), or by a combination of words and conduct.

§2-204 (Contract) Formation in General

(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

Chapter 1. Meaning of Terms §2 Promise; Promisor; Promisee; Beneficiary

(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. (2) The person manifesting the intention is the promisor. (3) The person to whom the manifestation is addressed is the promisee. (4) Where performance will benefit a person other than the promisee, that person is a beneficiary.

Topic 5. Acceptance of Offers § 50 Acceptance of Offer Defined; Acceptance by Performance; Acceptance by Promise

(1) Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer. (2) Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise. (3) Acceptance by a promise requires that the offeree complete every act essential to the making of the promise.

Chapter 3. Formation of Contracts—Mutual Assent Topic 3. Making of Offers § 30 Form of Acceptance Invited Illustration: 1. A sends a letter to B stating the terms of a proposed contract. At the end he writes, "You can accept this offer only by signing on the dotted line below my own signature." A replies by telegram, "I accept your offer." There is no contract. Illustration: 2. A offers to deliver to B at any time during the next 30 days any amount of coal, up to 100 tons, for which B will promise to pay $15 a ton. In order to accept this offer B must specify the amount of coal he desires and must promise to pay $15 a ton for it. An order for 50 tons by B concludes a definite agreement.

(1) An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance. (2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances.

Topic 4. Duration of the Offeree's Power of Acceptance

(1) An offeree's power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time. (2) What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made. (3) Unless otherwise indicated by the language or the circumstances, and subject to the rule stated in § 49, an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which the offer is received.

§ 36 Methods of Termination of the Power of Acceptance

(1) An offeree's power of acceptance may be terminated by (a) rejection or counter-offer by the offeree, or (b) lapse of time, or (c) revocation by the offeror, or (d) death or incapacity of the offeror or offeree. (2) In addition, an offeree's power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer.

§ 33 Certainty Illustrations: 1. A agrees to sell and B to buy goods for $2,000, $1,000 in cash and the "balance on installment terms over a period of two years," with a provision for liquidated damages. If it is found that both parties manifested an intent to conclude a binding agreement, the indefiniteness of the quoted language does not prevent the award of the liquidated damages. 2. A agrees to sell and B to buy a specific tract of land for $10,000, $4,000 in cash and $6,000 on mortgage. A agrees to obtain the mortgage loan for B or, if unable to do so, to lend B the amount, but the terms of loan are not stated, although both parties manifest an intent to conclude a binding agreement. The contract is too indefinite to support a decree of specific performance against B, but B may obtain such a decree if he offers to pay the full price in cash.

(1) Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain. (2) The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy. (3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.

Chapter 3. Formation of Contracts—Mutual Assent Topic 3. Making of Offers § 29 To Whom an Offer is Addressed

(1) The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance. (2) An offer may create a power of acceptance in a specified person or in one or more of a specified group or class of persons, acting separately or together, or in anyone or everyone who makes a specified promise or renders a specified performance

§ 34 Certainty and Choice of Terms; Effect of Performance or Reliance Comments: A bargain may be concluded which leaves a choice of terms to be made by one party or the other. If the agreement is otherwise sufficiently definite to be a contract, it is not made invalid by the fact that it leaves particulars of performance to be specified by one of the parties.

(1) The terms of a contract may be reasonably certain even though it empowers one or both parties to make a selection of terms in the course of performance. (2) Part performance under an agreement may remove uncertainty and establish that a contract enforceable as a bargain has been formed. (3) Action in reliance on an agreement may make a contractual remedy appropriate even though uncertainty is not removed.

§ 20 Effect of Misunderstanding

(1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and (a) neither party knows or has reason to know the meaning attached by the other; or (b) each party knows or each party has reason to know the meaning attached by the other. (2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if (a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or (b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.

§ 2-206. Offer and Acceptance in Formation of Contract.

(1) Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances; (b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. (2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

Uniform Commercial Code § 2-206(1)(b).

(b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

Topic 4. Duration of the Offeree's Power of Acceptance § 45 Option Contract Created by Part Performance or Tender a. Offer limited to acceptance by performance only. This Section is limited to cases where the offer does not invite a promissory acceptance. Such an offer has often been referred to as an "offer for a unilateral contract." Illustrations: 1. B owes A $5000 payable in installments over a five-year period. A proposes that B discharge the debt by paying $4,500 cash within one month, but reserves the right to refuse any such payment. A has not made an offer. A tender by B in accordance with the proposal is an offer by B. 2. A, an insurance company, issues a bulletin to its agents, entitled "Extra Earnings Agreement," providing for annual bonus payments to the agents varying according to "monthly premiums in force" and "lapse ratio," but reserving the right to change or discontinue the bonus, individually or collectively, with or without notice, at any time before payment. There is no offer or promise.

(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it. (2) The offeror's duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.

Topic 5. Acceptance of Offers § 54 Acceptance by Performance; Necessity of Notification to Offeror

(1) Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification. (2) If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged unless (a) the offeree exercises reasonable diligence to notify the offeror of acceptance, or (b) the offeror learns of the performance within a reasonable time, or (c) the offer indicates that notification of acceptance is not required.

Topic 5. Acceptance of Offers § 62 Effect of Performance by Offeree Where Offer Invites Either Performance or Promise

(1) Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance. (2) Such an acceptance operates as a promise to render complete performance.

Topic 5. Acceptance of Offers § 69 Acceptance by Silence or Exercise of Dominion Illustration: 1. A gives several lessons on the violin to B's child, intending to give the child a course of twenty lessons, and to charge B the price. B never requested A to give this instruction but silently allows the lessons to be continued to their end, having reason to know A's intention. B is bound to pay the price of the course. 2. A offers by mail to sell to B a horse already in B's possession for $250, saying: "I am so sure that you will accept that you need not trouble to write me. Your silence alone will operate as acceptance." B makes no reply, but he does not intend to accept. There is no contract. 3. The facts being otherwise as stated in Illustration 2, B replies by return mail, saying: "I accept your offer." There is a contract. 4. The facts being otherwise as stated in Illustration 2, B makes no reply and remains inactive with the intention of thereby expressing his acceptance. There is a contract. 6. A has for years insured B's property against fire under annual policies. At the expiration of one policy, in accordance with the usual practice, A sends B a renewal policy and a bill for the premium. B retains the policy for two months and then refuses to pay the premium on demand. B is liable for the premium accrued prior to his rejection. 7. A sends B a one-volume edition of Shakespeare with a letter, saying, "If you wish to buy this book send me $6.50 within one week after receipt hereof, otherwise notify me and I will forward postage for return." B examines the book and without replying makes a gift of it to his wife. B owes A $6.50. 8. The facts being otherwise as stated in Illustration 7, B examines the book and without replying carefully lays it on a shelf to await A's messenger. There is no contract. 9. The facts being otherwise as stated in Illustration 7, B examines the book and uses it or gives it to his wife, writing A at the same time that he has taken the book, but that it is worth only $5 and that he will pay no more. A may at his option treat B as a tort-feasor or as contracting to pay $6.50.

(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only: (a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation. (b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer. (c) Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept. (2) An offeree who does any act inconsistent with the offeror's ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him.

§ 2-207. Additional Terms in Acceptance or Confirmation. (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

Uniform Commercial Code § 2-206(2)

(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

§2-305 Open Price Term (1)The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if (a) nothing is said as to price; or (b) the price is left to be agreed by the parties and they fail to agree; or (c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded. (2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.

(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price. (4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.

§2-311. Options and Cooperation Respecting Performance. (1) An agreement for sale which is otherwise sufficiently definite (subsection (3) of Section 2-204) to be a contract is not made invalid by the fact that it leaves particulars of performance to be specified by one of the parties. Any such specification must be made in good faith and within limits set by commercial reasonableness. (2) Unless otherwise agreed specifications relating to assortment of the goods are at the buyer's option and except as otherwise provided in subsections (1)(c) and (3) of Section 2-319 specifications or arrangements relating to shipment are at the seller's option.

(3) Where such specification would materially affect the other party's performance but is not seasonably made or where one party's cooperation is necessary to the agreed performance of the other but is not seasonably forthcoming, the other party in addition to all other remedies (a) is excused for any resulting delay in his own performance; and (b) may also either proceed to perform in any reasonable manner or after the time for a material part of his own performance treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods.

§19 Conduct as Manifestation of Assent b. "Reason to know." A person has reason to know a fact, present or future, if he has information from which a person of ordinary intelligence would infer that the fact in question does or will exist. Reason to know is to be distinguished from knowledge and from "should know." Knowledge means conscious belief in the truth of a fact; reason to know need not be conscious. "Should know" imports a duty to others to ascertain facts; the words "reason to know" are used both where the actor has a duty to another and where he would not be acting adequately in the protection of his own interests were he not acting with reference to the facts which he has reason to know.

1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act. (2) The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents. (3) The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause.

Chapter 1. Meaning of Terms § 1 Contract Defined

1. Contract Defined A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law insome way recognizes as a duty.

§ 2-309 (3) Absence of Specific Time Provisions; Notice of Termination. 3) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable. A term specifying standards for the nature and timing of notice is enforceable if the standards are not manifestly unreasonable.

4. A promises B to sell certain goods to him, and B promises to pay a specified price therefor. No time of performance is fixed. The time for delivery and payment is a reasonable time. What is a reasonable time depends on the nature, purpose and circumstances of the action to be taken.

What is a condition precedent?

A "condition precedent" is an event that must occur in order for a contract to be formed or in order for a performance duty to arise within a contract. Conditions precedent to contract formation are rarer than conditions precedent to contract performance, but the former nonetheless arise

Carbolic Smoke ball 1893

A conditional contract that was complete when the user buys and uses 3 times. - Mrs. Carlill has completed performance and then contracted influenza and was entitle The advertisement was construed as offering a reward because it sought to induce performance.

Sun Printing & Publishing Ass'n v. Remington Paper & Power Co.

A contract fails if it is based on an agreement to agree on a price and that price cannot be agreed-upon for the time duration it is to apply. An agreement over price that sets a maximum price is not definite enough to hold a contract valid.

Embry v. Hargadine, McKittrick Dry Goods Co. (1907)

A contract may be formed without reference to the subjective intentions of either party Intentions under contract law are judged, for the most part, by the reasonable person standard. This is an objective standard. except in a few circumstances, subjective intentions are not relevant.

Topic 3. Making of Offers § 30 Form of Acceptance Invited

nc(1) An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance. (2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances.

Chapter 3. Formation of Contracts—Mutual Assent Topic 3. Making of Offers § 26 Preliminary Negotiations Illustrations: 1. A, a clothing merchant, advertises overcoats of a certain kind for sale at $50. This is not an offer, but an invitation to the public to come and purchase. The addition of the words "Out they go Saturday; First Come First Served" might make the advertisement an offer. 2. A advertises that he will pay $5 for every copy of a certain book that may be sent to him. This is an offer, and A is bound to pay $5 for every copy sent while the offer is unrevoked. Illustration: 4. A writes B, "I am eager to sell my house. I would consider $20,000 for it." B promptly answers, "I will buy your house for $20,000 cash." There is no contract. A's letter is a request or suggestion that an offer be made to him. B has made an offer.

A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent. Illustration: 3. A writes to B, "I can quote you flour at $5 a barrel in carload lots." This is not an offer, in view of the word "quote" and incompleteness of the terms. The same words, in response to an inquiry specifying detailed terms, would probably be an offer; and if A added "for immediate acceptance" the intent to make an offer would be unmistakable.

§ 77 Illusory and Alternative Promises Illustrations for a: 1. A offers to deliver to B at $2 a bushel as many bushels of wheat, not exceeding 5,000, as B may choose to order within the next 30 days. B accepts, agreeing to buy at that price as much as he shall order from A within that time. B's acceptance involves no promise by him, and is not consideration. Compare §§ 31, 34. 2. A promises B to act as B's agent for three years from a future date on certain terms; B agrees that A may so act, but reserves the power to terminate the agreement at any time. B's agreement is not consideration, since it involves no promise by him. Illustrations for b: 3. A offers to deliver to B at $2 a bushel as many bushels of wheat, not exceeding 5,000, as B may choose to order within the next 30 days, if B will promise to order at least 1,000 bushels within that time. B accepts. B's promise is consideration since it reserves only a limited option and cannot be performed without doing something which would be consideration if it alone were bargained for. 5. A promises B to act as B's agent for three years on certain terms, starting immediately; B agrees that A may so act, but reserves the power to terminate the agreement on 30 days notice. B's agreement is consideration, since he promises to continue the agency for at least 30 days.

A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless (a) each of the alternative performances would have been consideration if it alone had been bargained for; or (b) one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration.

What does a termination clause do?

A termination clause gives one or both parties the right to put an end to future performance obligations under the contract. Termination clauses come in two varieties: A termination-for-cause clause gives one or both parties the right to end performance obligations for any reason(s) specified in the clause A termination-at-will or termination-for-convenience clause gives one or both parties the right to end the performance obligations for any reason (or for no reason) Note that termination-for-cause clauses do not create a danger that a party's promise might be illusory, because the right to terminate arises only upon the event specified in the clause. The party with the right to terminate is bound to perform the contract unless and until the specified event occurs.

§ 24 Offer Defined Illustration: 1. A says to B, "That book you are holding is yours if you promise to pay me $5 for it." This is an offer empowering B, by making the requested promise, to make himself owner of the book and thus complete A's performance. In that event there is also an implied warranty of title made by A.

An offer is the 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. Illustration: 2. A promises B $100 if B goes to college. If the circumstances give B reason to know that A is not undertaking to pay B to go to college but is promising a gratuity, there is no offer.

Topic 4. Duration of the Offeree's Power of Acceptance § 48 Death or Incapacity of Offeror or Offeree

An offeree's power of acceptance is terminated when the offeree or offeror dies or is deprived of legal capacity to enter into the proposed contract.

Example K: Restatement (Second) of Contracts § 39, Illustrations 1 and 2 1. A offers B to sell him a parcel of land for $5,000, stating that the offer will remain open for thirty days. B replies, "I will pay $4,800 for the parcel," and on A's declining that, B writes, within the thirty day period, "I accept your offer to sell for $5,000." 2. A makes the same offer to B as that stated in Illustration 1, and B replies, "Won't you take less?" A answers, "No."

Analysis: In Illustration 1, there is no contract unless A's reply to the counter-offer manifested an intention to renew his original offer. B's reply is a counter-offer and therefore terminates A's original offer, though A may renew the offer (e.g., "I won't take that amount, but I'm still ready to sell at $5,000"). In Illustration 2, B's response is an inquiry, not a counter-offer, and A's original offer stands. An acceptance thereafter by B within the thirty-day period is effective.

Topic 5. Acceptance of Offers § 56 Acceptance by Promise; Necessity of Notification to Offeror

Except as stated in § 69 or where the offer manifests a contrary intention, it is essential to an acceptance by promise either that the offeree exercise reasonable diligence to notify the offeror of acceptance or that the offeror receive the acceptance seasonably.

A party's intention will be held to be what a reasonable person in the position of the other party would conclude the manifestation to mean.

For more than a century the objective theory of contracts has been dominant.14 Under this theory the mental intentions of the parties are irrelevant.15 Still, even under the objective theory, the acts manifesting assent must be done either intentionally or negligently.

underlying principles and assumptions that are the foundations of contract law

Freedom of contract: Parties should decide for themselves what responsibilities to undertake, with only the smallest of restrictions, and should not ask the court to choose for them; • Predictability and security: Parties operate more effectively when they can comfortably predict and order their lives according to the legal implications of their actions; • Commercial reasonableness: Rules should reflect the way parties actually conduct business; • Fairness: Parties should be protected from being misled, unreasonably pressured, or otherwise led into contracts that do not represent their true choices or that shock the conscience.

Under UCC what is the last shot rule

If the parties performed, the standard interpretation was that the last party to send a document had made "the final offer" and the other party's performance accepted the terms in that last document. This came to be known as the "last shot rule."

Topic 5. Acceptance of Offers § 54 Acceptance by Performance; Necessity of Notification to Offeror b. Performance operating as return promise. This Section applies only to offers which invite acceptance by performance. Where the offeree is empowered to choose between acceptance by performance and acceptance by promise (see § 32), this Section applies only if he chooses to accept by performance. See § 50(2). In such a case the acceptance often carries with it a return commitment (see § 62), and it is rare that the offer dispenses with notification of such a commitment. Compare §§ 56, 69. Unless the performance will come to the offeror's attention in normal course, it is not likely to be a reasonable mode of acceptance. See § 30. In the exceptional case where acceptance is invited by a performance which will not come promptly to the offeror's attention, Subsection (2) usually requires notification of acceptance. Uniform Commercial Code § 2-206(2) provides that if no notification is sent within a reasonable time in such a case, the offeror may treat the offer as having lapsed before acceptance. Compare § 41.

Illustration: 1. A mails a written order to B for goods to be manufactured specially for A, and requests B to begin at once since manufacture will take several weeks. Under § 62 acceptance is complete when B begins, but A's contractual duty is discharged and he may treat the offer as having lapsed before acceptance unless within a reasonable time B sends notification of acceptance or unless the offer or a prior course of dealing indicates that notification is not required.

Topic 3. Making of Offers § 30 Form of Acceptance Invited a. Required form. The offeror is the master of his offer. See Comment a to § 29. The form of acceptance is less likely to affect the substance of the bargain than the identity of the offeree, and is often quite immaterial. But the offeror is entitled to insist on a particular mode of manifestation of assent. The terms of the offer may limit acceptance to a particular mode; whether it does so is a matter of interpretation.

Illustration: 1. A sends a letter to B stating the terms of a proposed contract. At the end he writes, "You can accept this offer only by signing on the dotted line below my own signature." A replies by telegram, "I accept your offer." There is no contract.

Topic 3. Making of Offers § 30 Form of Acceptance Invited c. Term supplied in acceptance. An offer may contain a choice of terms, and may invite or require an acceptance making a selection among the terms stated. Or the offer may indicate a term such as quantity to be filled in by the offeree. An acceptance to be effective must comply with the terms of the offer, and those terms or the circumstances may make it plain that the acceptance must specify terms. Section 60. In such cases the offer does not fail for indefiniteness, but no contract is made by an attempted acceptance which does not supply the term as indicated. See § 33. The offer assents in advance to the term chosen or filled in by the offeree.

Illustration: 2. A offers to deliver to B at any time during the next 30 days any amount of coal, up to 100 tons, for which B will promise to pay $15 a ton. In order to accept this offer B must specify the amount of coal he desires and must promise to pay $15 a ton for it. An order for 50 tons by B concludes a definite agreement.

Topic 4. Duration of the Offeree's Power of Acceptance § 45 Option Contract Created by Part Performance or Tender c. Tender of performance. A proposal to receive a payment of money or a delivery of goods is an offer only if acceptance can be completed without further cooperation by the offeror. If there is an offer, it follows that acceptance must be complete at the latest when performance is tendered. A tender of performance, so bargained for and given in exchange for the offer, ordinarily furnishes consideration and creates a contract. See §§ 17, 71, 72. This is so whether or not the tender carries with it any incidental promises. See §§ 54, 62. If no commitment is made by the offeree, the contract is an option contract. See § 25.

Illustration: 3. A promises B to sell him a specified chattel for $5, stating that B is not to be bound until he pays the money. B tenders $5 within a reasonable time, but A refuses to accept the tender. There is a breach of contract.

§ 41 Lapse of Time d. Direct negotiations. Where the parties bargain face to face or over the telephone, the time for acceptance does not ordinarily extend beyond the end of the conversation unless a contrary intention is indicated. A contrary intention may be indicated either by express words or by the circumstances. For example, the delivery of a written offer to the offeree, or an expectation that some action will be taken before acceptance, may indicate that a delayed acceptance is invited.

Illustration: 4. While A and B are engaged in conversation, A makes B an offer to which B then makes no reply, but on meeting A again a few hours later B states that he accepts the offer. There is no contract unless the offer or the circumstances indicate that the offer is intended to continue beyond the immediate conversation.

§ 41 Lapse of Time e. Offers made by mail or telegram. Where the parties are at a distance from each other, the normal understanding is that the time for acceptance is extended at least by the normal time for transmission of the offer and for the sending of the offeree's reply. But in the absence of a significant speculative element in the situation, a considerably longer time may be reasonable. The fact that an offer is made by telegram or mailgram may or may not indicate that the time for reply is shorter than it would be if the mail were used. Compare § 65.

Illustration: 5. A makes B an offer by mail to sell goods. B receives the offer at the close of business hours and accepts it by letter promptly the next morning. The acceptance is timely.

Topic 4. Duration of the Offeree's Power of Acceptance § 45 Option Contract Created by Part Performance or Tender f. Preparations for performance. What is begun or tendered must be part of the actual performance invited in order to preclude revocation under this Section. Beginning preparations, though they may be essential to carrying out the contract or to accepting the offer, is not enough. Preparations to perform may, however, constitute justifiable reliance sufficient to make the offeror's promise binding under § 87(2). In many cases what is invited depends on what is a reasonable mode of acceptance. See § 30. The distinction between preparing for performance and beginning performance in such cases may turn on many factors: the extent to which the offeree's conduct is clearly referable to the offer, the definite and substantial character of that conduct, and the extent to which it is of actual or prospective benefit to the offeror rather than the offeree, as well as the terms of the communications between the parties, their prior course of dealing, and any relevant usages of trade.

Illustration: 9. A makes a written promise to pay $5000 to B, a hospital, "to aid B in its humanitarian work." Relying upon this and other like promises, B proceeds in its humanitarian work, expending large sums of money and incurring large liabilities. Performance by B has begun, and A's offer is irrevocable.

§ 21 Intention to Be Legally Bound Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract.

Illustrations: 1. A draws a check for $300 payable to B and delivers it to B in return for an old silver watch worth about $15. Both A and B understand the transaction as a frolic and a banter, but each believes that he would be legally bound if the other dishonestly so asserted. There is no contract. 2. A orally promises to sell B a book in return for B's promise to pay $5. A and B both think such promises are not binding unless in writing. Nevertheless there is a contract, unless one of them intends not to be legally bound and the other knows or has reason to know of that intention.

Topic 5. Acceptance of Offers § 56 Acceptance by Promise; Necessity of Notification to Offeror a. Necessity of notification. Where the offeree has performed in whole or in part, notification to the offeror is not essential to acceptance, although failure to notify may discharge the offeror's duty of performance. See § 54. Similarly, where the offeror has rendered a performance and the offeree has taken the benefit of that performance, the offeree may be bound without notification to the offeror. See § 69. In such cases the enforcement of the promise rests in part on a change of position in justifiable reliance on a promise, often reinforced by a corresponding benefit received by the promisor. Section 69 also provides for some cases of offers which manifest an intention to dispense with notification. In other cases of the exchange of promises which are entirely executory on both sides, the offeror is entitled to notification of acceptance unless the offer manifests a contrary intention.

Illustrations: 1. A gives an order to B Company's traveling salesman for a $2000 machine "to purify water of the character shown by sample to be submitted," shipment to be made in one month. The order provides: "This proposal becomes a contract when approved by an executive officer of B Company at its home office." Notation of such approval on the order is an acceptance by promise without any notification, but A's duty to perform is conditional on reasonable notification to send the sample. 2. A makes written application for life insurance through an agent for B Insurance Company, pays the first premium, and is given a receipt stating that the insurance "shall take effect as of the date of approval of the application" at B's home office. Approval at the home office in accordance with B's usual practice is an acceptance of A's offer even though no steps are taken to notify A.

§ 41 Lapse of Time c. Time for acceptance by act; rewards. Where the offeree is invited to accept by performing or refraining from performing an act, a reasonable time for so doing is ordinarily a reasonable time for accepting. But the purposes of the offeror, if the offeree knows or has reason to know of them, must also be taken into account. Thus an offer of reward for the capture of the person guilty of a specific crime cannot ordinarily be accepted after the statute of limitations has barred prosecution.

Illustrations: 1. A publishes an offer of reward for information leading to the arrest and conviction of the person guilty of a specified murder. B, intending to obtain the reward, gives the requested information a year after the publication of the offer. The acceptance is timely. 2. After a series of incendiary attempts, a city publishes each day for a week an offer of reward for information leading to the arrest and conviction of any person who shall set fire to any building within the city. The responsible city officials serve for one year terms. A fire set three years after the last publication is not within the terms of the offer. 3. A bank posts in its office an offer of reward for information leading to the arrest and conviction of any person who robs any bank which is a member of an association of banks in the same county. After several years the poster is removed. A robbery three years after the removal may be found to be within the terms of the offer.

Topic 3. Making of Offers § 32 Invitation of Promise or Performance a. Promise or performance. In the ordinary commercial bargain a party expects to be bound only if the other party either renders the return performance or binds himself to do so either by express words or by part performance or other conduct. Unless the language or the circumstances indicate that one party is to have an option, therefore, the usual offer invites an acceptance which either amounts to performance or constitutes a promise. The act of acceptance may be merely symbolic of assent and promise, or it may also be part or all of the performance bargained for. See §§ 2, 4, 18, 19. In either case notification of the offeror may be necessary. See §§ 54, 56. The rule of this Section is a particular application of the rule stated in § 30(2). The offeror is often indifferent as to whether acceptance takes the form of words of promise or acts of performance, and his words literally referring to one are often intended and understood to refer to either. Where performance takes time, however, the beginning of performance may constitute a promise to complete it. See § 62.

Illustrations: 1. A writes B, "If you will mow my lawn next week, I will pay you $10." B can accept A's offer either by promptly promising to mow the lawn or by mowing it as requested. 2. A says to B: "If you finish that table you are making and deliver it to my house today, I will give you $100 for it." B replies, "I'll do it." There is a contract. B could also accept by delivering the table as requested.

Topic 5. Acceptance of Offers § 62 Effect of Performance by Offeree Where Offer Invites Either Performance or Promise d. Preparations for performance. As under § 45, what is begun or tendered must be part of the actual performance invited, rather than preparation for performance, in order to make the rule of this Section applicable. See Comment f to § 45. But preparations to perform may bring the case within § 87(2) on justifiable reliance.

Illustrations: 1. A, a merchant, mails B, a carpenter in the same city, an offer to employ B to fit up A's office in accordance with A's specifications and B's estimate previously submitted, the work to be completed in two weeks. The offer says, "You may begin at once," and B immediately buys lumber and begins to work on it in his own shop. The next day, before B has sent a notice of acceptance or begun work at A's office or rendered the lumber unfit for other jobs, A revokes the offer. The revocation is timely, since B has not begun to perform. 2. A, a regular customer of B, orders fragile goods from B which B carries in stock and ships in his own trucks. Following his usual practice, B selects the goods ordered, tags them as A's, crates them and loads them on a truck at substantial expense. Performance has begun, and A's offer is irrevocable. See Uniform Commercial Code § 2-206 and Comment 2.

§ 50 Acceptance of Offer Defined; Acceptance by Performance; Acceptance by Promise (2) Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise. b. Acceptance by performance. Where the offer requires acceptance by performance and does not invite a return promise, as in the ordinary case of an offer of a reward, a contract can be created only by the offeree's performance. In such cases the act requested and performed as consideration for the offeror's promise ordinarily also constitutes acceptance; under § 45 the beginning of performance or the tender of part performance of what is requested may both indicate assent and furnish consideration for an option contract. In some other cases the offeree may choose to create a contract either by making a promise or by rendering or tendering performance; in most such cases the beginning of performance or a tender of part performance operates as a promise to render complete performance. Mere preparation to perform, however, is not acceptance, although in some cases preparation may make the offeror's promise binding under § 87(2).

Illustrations: 1. A, who is about to leave on a month's vacation, tells B that A will pay B $50 if B will paint A's porch while A is away. B says he may not have time, and A says B may decide after A leaves. If B begins the painting, there is an acceptance by performance which operates as a promise to complete the job. 2. In Illustration 1, B also expresses doubt whether he will be able to finish the job, and it is agreed that B may quit at any time but will be paid only if he finishes the job during A's vacation. If B begins the painting, there is an acceptance by performance creating an option contract. See § 45.

Topic 5. Acceptance of Offers § 54 Acceptance by Performance; Necessity of Notification to Offeror c. Where no return promise is contemplated. Performance may be invited as an alternative mode of acceptance or as the exclusive mode of acceptance. See §§ 30, 32. Where no return commitment is involved, the only notification of acceptance called for is often that necessarily involved in performance by the offeree, or that which accompanies the offeree's request for performance by the offeror. Performance itself both manifests assent and furnishes consideration. Notification is requisite only where the offeror has no convenient means of ascertaining whether the requisite performance has taken place. Even then, it is not the notification which creates the contract, but lack of notification which ends the duty. Moreover, the offeror may effectively waive notification either before or after the time when it would otherwise be due.

Illustrations: 2. A, the proprietor of a medical preparation, offers $100 to anyone who contracts a certain disease after using the preparation as directed. B uses it as directed. B has accepted the offer, and is entitled to the $100 if she later contracts the disease. No notification to A is required until after B has contracted the disease. 3. A, a newspaper, requests B to discontinue distribution of a rival newspaper, and offers to pay B $10 per week as long as B abstains from such distribution. B discontinues the distribution. B has accepted the offer, and no notification to A is required.

§ 33 Certainty d. Uncertain time of performance. Valid contracts are often made which do not specify the time for performance. Where the contract calls for a single performance such as the rendering of a service or the delivery of goods, the time for performance is a "reasonable time."

Illustrations: 3. A and B promise that certain performances shall be mutually rendered by them "immediately" or "at once," or "promptly," or "as soon as possible," or "in about one month." All these promises are sufficiently definite to form contracts. 5. A offers to employ B for a stated compensation as long as B is able to do specified work, or as long as a specified business is carried on, and B accepts the terms offered. The length of the engagement is sufficiently definite for the formation of a contract. 6. A promises B to serve B as chauffeur, and B promises to pay him $100 a month. Nothing further is stated as to the duration of the employment. There is at once a contract for one month's service. At the end of the first month, in the absence of revocation, there is a contract for a second month. But circumstances may show that such an agreement merely specifies the rate of compensation for an employment at will.

Topic 3. Making of Offers § 30 Form of Acceptance Invited d. Form not specified. Interpretation of the offer is necessary in order to determine whether there is any limitation on the mode of acceptance. The meaning given the offer by the offeree controls if it is a meaning of which the offeror knew or had reason to know. See §§ 19, 20. Since limitation is not customary, the offeror has reason to know that the offeree may understand that the offer can be accepted in any reasonable manner, and a contrary intention is not operative unless manifested. See Uniform Commercial Code § 2-206(1).

Illustrations: 3. A orally offers to sell and deliver to B 100 tons of coal at $20 a ton payable 30 days after delivery. B replies, "I accept your offer." B has manifested assent in a sufficient form, even though A neither suggested nor required that form. 4. A makes a bid at an auction sale. By the usual custom at auctions, the auctioneer may accept by letting the hammer fall, by saying "Sold", or by any words manifesting acceptance.

Topic 3. Making of Offers § 32 Invitation of Promise or Performance b. Offer limited to acceptance by performance only. Language or circumstances sometimes make it clear that the offeree is not to bind himself in advance of performance. His promise may be worthless to the offeror, or the circumstances may make it unreasonable for the offeror to expect a firm commitment from the offeree. In such cases, the offer does not invite a promissory acceptance, and a promise is ineffective as an acceptance. Examples are found in offers of reward or of prizes in a contest, made to a large number of people but to be accepted by only one. See § 29. Non-commercial arrangements among relatives and friends (see Comment a to § 19, Comment c to § 21) and offers which leave important terms to be fixed by the offeree in the course of performance (see §§ 33, 34) provide other examples. It is a separate question whether the offeree undertakes any responsibility to complete performance once begun, or whether he takes any responsibility for the quality of the performance when completed.

Illustrations: 3. A publishes the following offer: "I will pay $50 for the return of my diamond bracelet lost yesterday on State Street." B sees this advertisement and at once sends a letter to A, saying "I accept your offer and will search for this bracelet." There is no acceptance. 4. A writes to B, his nephew aged 16, that if B will refrain from drinking, using tobacco, swearing, and playing cards or billiards for money until he becomes 21 years of age, A will pay B $5,000. B makes a written reply promising so to refrain. There is probably no contract. But if B begins to refrain, A may be bound by an option contract under § 45; and if B refrains until he becomes 21, A is bound to pay him $5,000.

Topic 4. Duration of the Offeree's Power of Acceptance § 45 Option Contract Created by Part Performance or Tender d. Beginning to perform. If the invited performance takes time, the invitation to perform necessarily includes an invitation to begin performance. In most such cases the beginning of performance carries with it an express or implied promise to complete performance. See § 62. In the less common case where the offer does not contemplate or invite a promise by the offeree, the beginning of performance nevertheless completes the manifestation of mutual assent and furnishes consideration for an option contract. See § 25. If the beginning of performance requires the cooperation of the offeror, tender of part performance has the same effect. Part performance or tender may also create an option contract in a situation where the offeree is invited to take up the option by making a promise, if the offer invites a preliminary performance before the time for the offeree's final commitment.

Illustrations: 4. A offers a reward for the return of lost property. In response to the offer, B searches for the property and finds it. A then notifies B that the offer is revoked. B makes a tender of the property to A conditional on payment of the reward, and A refuses. There is a breach of contract by A. 5. A, a magazine, offers prizes in a subscription contest. At a time when B has submitted the largest number of subscriptions, A cancels the contest. A has broken its contract with B. 6. A writes to her daughter B, living in another state, an offer to leave A's farm to B if B gives up her home and cares for A during A's life, B remaining free to terminate the arrangement at any time. B gives up her home, moves to A's farm, and begins caring for A. A is bound by an option contract. 7. A offers to sell a piece of land to B, and promises that if B incurs expense in employing experts to appraise the property the offer will be irrevocable for 30 days. B hires experts and pays for their transportation to the land. A is bound by an option contract. 8. In January A, an employer, publishes a notice to his employees, promising a stated Christmas bonus to any employee who is continuously in A's employ from January to Christmas. B, an employee hired by the week, reads the notice and continues at work beyond the expiration of the current week. A is bound by an option contract, and if B is continuously in A's employ until Christmas a notice of revocation of the bonus is ineffective.

Topic 5. Acceptance of Offers § 54 Acceptance by Performance; Necessity of Notification to Offeror d. Notice to guarantor. This Section has an important application in the field of suretyship. See Restatement of Security § 86. An offer to become guarantor for another commonly invites the offeree to accept by advancing money, goods, or services on credit. See Comment b to § 31. Notification is not essential to acceptance of such an offer, and often is not necessary at all. But Subsection (2) may apply to require notification unless the terms of the offer in the circumstances manifest a contrary intention. An offer of guaranty which does not require notification is often called an "absolute guaranty," while an offer requiring notification is referred to as a "mere offer to guarantee." Where an offer of a continuing guaranty requires notification, a single notice of intention to act is ordinarily sufficient, and notice of individual transactions is not required. In guaranty cases, notification may be dispensed with if the offer uses language of completed contractual assent, or is under seal, or recites a nominal consideration, or contains an express waiver, or provides for termination by notification of revocation. Facts other than the written terms may have the same effect: a request for the offer made by the offeree, the offeror's knowledge of a particular intended credit transaction or participation in it, a prior course of dealing, a prior or subsequent waiver, or a close relationship between the offeror and the principal obligor.

Illustrations: 4. A, the president of a corporation, agrees to guarantee payment for goods to be sold to the corporation by B. B sells and delivers the goods. B has accepted A's offer, and no notification of acceptance is necessary. 5. A writes an informal letter to B, a friend in another country, saying, "If you will let my brother C have $100, I will guarantee its repayment." Promptly on receiving the letter, B advances the money to C, but B takes no steps to notify A, and A does not learn of the advance for a year. B cannot enforce the guaranty if C fails to pay the debt. 6. The facts being otherwise as stated in Illustration 5, B receives a letter of revocation from A an hour after advancing the money. B promptly mails a letter notifying A of the advance. The guaranty is binding even though the letter never arrives.

Topic 3. Making of Offers § 32 Invitation of Promise or Performance c. Shipment of goods. An order or other offer to buy goods for prompt or current shipment normally invites acceptance either by a prompt promise to ship or by prompt or current shipment. Uniform Commercial Code § 2-206(1)(b). If non-conforming goods are shipped, the shipment may be an acceptance and at the same time a breach. But there is no acceptance if the offeror has reason to know that none is intended, as where the offeree promptly notifies him that non-conforming goods are being shipped and are offered only as an accommodation to him.

Illustrations: 5. A mails a written order to B, offering to buy specified machinery on specified terms. The order provides, "Ship at once." B immediately mails a letter to A, saying "I accept your offer and will ship at once." This is a sufficient acceptance to form a contract. See Uniform Commercial Code § 2-206(1). 6. In Illustration 5, instead of mailing a letter of acceptance, B immediately ships the machinery as requested. This is a sufficient acceptance to form a contract. If the machinery is defective, the shipment is both an acceptance forming a contract and a breach of that contract, unless B promptly notifies A that the shipment is offered only as an accommodation to A. See Uniform Commercial Code § 2-206(1).

§ 41 Lapse of Time f. Speculative transactions. The rule that an offer becomes irrevocable when an acceptance is mailed (§§ 42, 63) in effect imposes a risk of commitment on the offeror during the period required for communication of the acceptance, although during that period the offeror has no assurance that the bargain has been concluded. The rule that the power of acceptance is terminated by the lapse of a reasonable time serves to limit this risk. The more significant the risk, the greater is the need for limitation, and hence the shorter is the time which is reasonable. These considerations have their principal application in the sale of property which may be subject to rapid fluctuation in value, such as commodities, securities or land. The value of such property, however, may be stable for substantial periods of time, particularly in the case of land. Absence of actual fluctuation during the period before acceptance is a factor tending to indicate that acceptance occurred within a reasonable time. Similarly, delay in acceptance of an offer to insure may not be unreasonable if there is no change in the risk or in the applicable insurance rates. The reasonable time for acceptance in a speculative transaction is brief not only because the offeror does not ordinarily intend to assume an extended risk without compensation but also because he does not intend to give the offeree an extended opportunity for speculation at the offeror's expense. If the offeree makes use for speculative purposes of time allowed for communication, there may be a lack of good faith, and an acceptance may not be timely even though it arrives within the time contemplated by the offeror.

Illustrations: 6. A sends B an offer by mail to sell a piece of farm land. B does not reply for three days and then mails an acceptance. It is a question of fact under the circumstances of the particular case whether the delay is unreasonable. 7. A sends B a telegraphic offer to sell oil which at the time is subject to rapid fluctuations in price. The offer is received near the close of business hours, and a telegraphic acceptance is sent the next day, after the offeree has learned of a sharp price rise. The acceptance is too late if a fixed price was offered, but may be timely if the price is market price at time of delivery. 8. A sends B an offer by mail to sell at a fixed price corporate stock not listed on an exchange. B waits two days after receiving the offer and then sends a telegraphic acceptance after learning of a sharp rise in the price bid over-the-counter. The acceptance may be too late even though it arrives before a prompt acceptance by mail would have arrived.

Topic 3. Making of Offers § 32 Invitation of Promise or Performance

In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.

Academy Chicago Publishers v. Cheever

In order for a contract to exist an offer must be so definite as to its material terms or require such definite terms in the acceptance that the promises and performance is to be rendered by each party a reasonably certain. ''A contract may be enforced even though some contract terms may be missing or left to be agreed upon, but if the essential terms are so uncertain that there is no basis for deciding whether the agreement has been kept or broken, there is no contract."

1) Indefinite Purported Agreement If A says to B, ―If you work for me for one year, I will pay you a fair share of the profits,‖ it has been held that the promise is too vague and indefinite to be enforced.199 If, however, B performs under the agreement, B may recover the reasonable value of services rather than a share of the profits.200 This recovery, known as ―quantum meruit,‖ is sometimes described as quasi-contractual (implied-in-law) and sometimes as a contract ―implied-in-fact.‖201 A promise to make a tailor-made suit for $2000, where the fabric is not specified, also suffers from indefiniteness. Indefiniteness of this kind can be cured by the subsequent conduct of the parties. If the tailor commences making the suit with a certain type of woolen cloth and the customer acquiesces in this, the indefiniteness is cured.

Indefiniteness can also be cured by agreement rather than by conduct. In Perreault v. Hall, the defendant promised to provide the plaintiff a pension that would be ―well and enough.‖ Later, on retirement, the defendant promised to give plaintiff $20 per week, an offer which plaintiff accepted. Thus, the indefiniteness was cured by the new agreement. In the ―fair share of the profits‖ case, in contrast, theindefiniteness was never cured and plaintiff was limited to recovery in quantum meruit.

§ 18 MANIFESTATION OF MUTUAL ASSENT

Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance. In essence, an "offer" is a commitment by one party to an exchange of future performances and an "acceptance" is a commitment by the other party to that same exchange.

§ 27 Existence of Contract Where Written Memorial is Contemplated

Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations.

Missing terms

Missing terms: The parties might omit some terms because they could not come to agreement on them, or because the parties did not foresee an issue arising, or simply because of the parties' haste. Or the parties may specify that omitted terms can be supplied by one of the parties or may be filled in by later agreement of the parties. When is a contract not formed for lack of assent to the core of the transaction? How much can or should the court fill in? Which terms must the parties agree to for a court to find the promise(s) enforceable?

The offeree's attempted acceptance will occur in a particular manner (by communication of a promise or by the beginning of performance) and, if by communicating a promise, by using a particular method (e.g., verbally, by letter, by telegram, by email).

No matter how acceptance is signified, however, what the offeror typically wants from the offeree at the moment of acceptance is a promise to perform.

Olivia and Beatrice were discussing the sale of Olivia's car over drinks at a local bar. On a bar napkin, Olivia wrote, "I agree to sell my car to Beatrice for $1000." Olivia and Beatrice signed the napkin. Which additional fact, if true, would cause a court to conclude the parties formed a contract during the conversation?

Olivia was joking when she agreed to sell the car to Beatrice, but Beatrice did not know Olivia was joking and was reasonable in her understanding. Correct. While Olivia's assent is required to form a valid contract, a court will look to her words and acts, judged by an objective reasonable person standard. Olivia's undisclosed intent is not relevant. Therefore, the fact that she was joking during her conversation with Beatrice about selling the car will not, without more, negate a contract between the parties.

What is parol evidence?

Parol evidence is, in simplest terms, evidence regarding discussions about what a contractual agreement should contain before entering into the contract. In other words, if you hire someone to paint your house, and in the process of negotiating the contract you also mention that you would like them to caulk around your windows, but the contract you subsequently enter into does not include anything about caulking, those discussions are parol evidence

Like all contract communications, a purported offer is judged by its objective meaning - - -

whether a reasonable person in the position of the offeree would understand the communication to be an offer, which makes a commitment and allows the recipient to form a contract by saying "yes."

Topic 4. Duration of the Offeree's Power of Acceptance § 40 Time When Rejection or Counter-Offer Terminates the Power of Acceptance Illustration: 1. A makes B an offer by mail. B immediately after receiving the offer mails a letter of rejection. Within the time permitted by the offer B accepts. This acceptance creates a contract only if received before the rejection, or if the power of acceptance continues under §§ 37- 39.

Rejection or counter-offer by mail or telegram does not terminate the power of acceptance until received by the offeror, but limits the power so that a letter or telegram of acceptance started after the sending of an otherwise effective rejection or counter-offer is only a counter-offer unless the acceptance is received by the offeror before he receives the rejection or counter-offer.

A court will require certainty with regard to the terms of the contract. To be certain, a contract must provide enough information to determine a breach and award a remedy for a breach.

Remember the mnemonic Q-TPPPS; Certainty is required to terms of the contract such as Quantity, Time for performance, Parties to the contract, Price, Place for performance, and Subject matter. This list is not a bright-line requirement; the most important terms tend to be parties, subject matter, quantity, and price.

Leonard v. Pepsico, Inc. Is an offer judged by the objective reasonable person standard? Yes. Are advertisements not contracts or offers to sell, but rather invitations to negotiate? Yes.

Rule of Law: An offer is judged by the objective reasonable person standard. Advertisements were not contracts or offers to sell, but rather invitations to negotiate. An advertisement can be an offer if it is clear, definite, explicit, and identifies the people who are to except the offer. Here, the ad was a typical advertisement. It reserve the details of the offer to a separate writing in a catalog and it was an obvious joke.

Quake Construction V. Americans Airlines

Rule of Law: a letter of intent is not enforceable per se. If the terms are ambigious or capable of more than one interpretation parol evidence is admissable to ascertain the parties intent Important thing to understand: since we cannot read peoples minds, we look to outward manifestations of their minds by examining their acts. A letter of intent can be an agreement in its own right, an agreement to agree, or merely a memorial to an agreement yet to be put into writing and signed at which point the signed agreement is the done deal. It can also be an agreement to negotiate the final agreement in good faith.

What happens if an offeree neither unequivocally accepts ("I agree to your terms") or unequivocally makes a counter-offer ("I want these terms instead") but instead communicates assent but with some expression of dissatisfaction with the proposed terms?

Some "grumbling" is allowed without undercutting the expression of assent, but if the "grumble" goes too far, then the offeree has not accepted and may have rejected and made a counter-offer.

statements can sometimes appear to be expressing commitment ("I promise to do x") but at the same time contain words that deny a commitment is being made ("unless I later decide not to do x").

Such a statement is sometimes referred to as an "illusory promise"something that appears to be a promise, but does not actually bind or obligate the promisor to anything. An illusory promise is composed of "words in a promissory form that promise nothing." No promise exists if the promisor "retains an unlimited right to decide later the nature or extent of his performance. The unlimited choice in effect destroys the promise and makes it merely illusory."

How to fix termination-at-will clauses so they aren't illusory promises

Termination-at-will clauses are risky because they might lead a court to conclude that either or both of the parties' contract promises are illusory. If a party makes a promise to perform, but has the right to terminate the contract for any reason at any time, including the moment just after contract formation, then the so-called promise is not really a promise because that party has not really made a commitment to do something or refrain from doing something in the future. However, if the agreement otherwise illustrates an intent to enter a contractual relationship, courts will sometimes look for any limitation on the "at-will" aspect of the agreement, no matter how slim, to find that the promise is not illusory. As a result, termination-at-will clauses are sometimes drafted so that, e.g., • they cannot be exercised until a brief period of time has passed, • the terminating party must give some advance notice before termination is effective, or • the right to terminate exists only on the monthly or yearly anniversary of the agreement.

Illusory Promises - Restatement comment e

The Restatement explains that "[w]ords of promise which by their terms make performance entirely optional with the 'promisor' whatever may happen, or whatever course of conduct in other respects he may pursue, do not constitute a promise." Restatement (Second) § 2 cmt. e.. Determining whether a promise is illusory thus often requires considering the statement in the context in which the alleged promise was made in order to decide whether the reasonable recipient of the communication would understand it as promising something "real."

Example B: Owen v. Tunison, 158 A. 926 (Maine 1932). A wrote to B: "Will you sell me your [specified] property for $20,000?" B wrote back: "Because of improvements, it would not be possible for me to sell it unless I was to receive $30,000." Did either A or B make an offer?

The court held that A initially made an inquiry, not an offer. "Will you sell" to me at a specified price is different than "I ask you to sell" to me at that price. B made an invitation to an offer ("If you're willing to sell to me, let me know"), but not an offer.

Example A: Mouton v. Kershaw, 18 N.W. 172 (Wis. 1884). A wrote to B: "Dear Sir: We are authorized to offer Michigan fine salt, in full car-load lots of 80 to 95 barrels, delivered at your city, at $90 per barrel, to be shipped per your specified railroad company. Shall be pleased to receive your order." Did A make an offer to sell salt?

The court held that, despite the existence of the word "offer" in the statement, and the specificity as to price and shipment method, it was not an offer, because no quantity was specified and there was no way to fill in a quantity if the parties did not agree to that themselves.

Lefkowitz v. Great Minneapolis Surplus Store RULE OF LAW: If a newspaper advertisement is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete a contract. Advertisements involving transactions in goods are offers when they invite particular action. The test of whether a binding obligation may originate in advertisements addressed to the general public is 'whether the facts show that some performance was promised in positive terms in return for something requested.'

The exception to the rule that advertisements do not create any power of acceptance in potential offerees is where the advertisement is 'clear, definite, and explicit, and leaves nothing open for negotiation,' in that circumstance, 'it constitutes an offer, acceptance of which will complete the contract.'

Uncertain commitment:

The parties' preliminary agreement, such as a "letter of intent" or a "memorandum of understanding," may reflect the parties' commitment to an agreement that they will further define later. But sometimes the preliminary agreement shows that one or both parties intend only to set up a pre-contractual framework for further negotiations, perhaps to enhance the chances of obtaining financing or to discourage competitors. How can a court distinguish between these two intents?

Defining Acceptance Under § 2-207 Just as under the common law, acceptance under § 2-207 may be by communication or by conduct. Acceptance by Conduct: § 2-207(3) UCC § 2-207(3) says that "conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract." Terms of a Contract Formed Under § 2-207 If a contract is formed under § 2-207(1), the contract is created by the writings of the parties but the terms in the offer and acceptance do not match. Similarly, if a contract is created under § 2-207(3), it is created by conduct, after the terms in the offer and counter-offer did not match. So what terms are in those contracts? The two subsections below address this question.

The reference to "the writings of the parties" indicates that § 2-207(3) does not apply unless and until the parties exchanged writings that failed to manifest the parties' assent. The reference to "conduct by both parties" means that action by only one party is not sufficient to create a contract under § 2-207(3). For example, if seller sends an offer, buyer sends a counter-offer, and seller ships the goods, there is conduct only by the seller, and no contract is created under § 2-207(3). A typical sequence of events that does create a contract under § 2-207(3) is (1) one party makes an offer; (2) the other party sends a response that expresses a definite and seasonable expression of acceptance, includes additional terms, and makes acceptance expressly conditional on the offeror's agreement to those additional terms, making it a counter-offer under § 2-207(1); (3) the seller ships the goods; and (4) the buyer accepts delivery of the goods. The parties exchanged writings that failed to create a contract, and then both parties acted as if they had formed a contract.

Ardente v. Horan RULE

To be effective an acceptance must be definite and unequivocal. An acceptance which is equivocal or upon condition or with a limitation is a counteroffer and requires acceptance by the original offeror before a contractual relationship can exist. An acceptance may be valid despite conditional language if the acceptance is clearly independent of the condition.

Rejection of the Mirror Image Rule: UCC § 2-207

UCC § 2-207 expressly rejects the common law mirror image rule, which requires that an acceptance be a manifestation of assent to exactly the terms of the offer.

Courts are reluctant to enforce an indefinite or incomplete agreement because of concerns that the parties did not mean to make a "real" promise or that the parties' agreement is so incomplete or indefinite that the court will be unable to determine how to enforce it. Litigated cases in this area tend to focus on one or more of the following issues:

Uncertain commitment: Vague terms: Missing terms:

Lucy v. Zehmer (1954)

Under contract law, The words and acts of a person are interpreted according to a reasonable person standard. The actual mental assent of the parties is not needed in order to form a contract. Contract formation requires mutual assent. It does not require subjective mental assent. The mental assent of the parties is not requisite for the formation of a contract. Any undisclosed intentions are immaterial. subject intent of the parties is totally irrelevant. So a person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement, 17 C.J.S., Contracts, § 47,

The MIrror Image Rule

Under the common law, an acceptance must be a "mirror image" of the offer, matching the terms of the offer. A typical articulation of the rule says that "acceptance [of an offer] must be 'positive, unconditional, unequivocal and unambiguous, and must not change, add to, or qualify the terms of the offer.' "* The mirror-image rule supports the offeror's traditional role as the "master of the offer": The offeror has made an offer proposing a contract on the offeror's terms, not on the offeree's terms.

Topic 5. Acceptance of Offers § 65 Reasonableness of Medium of Acceptance c. Mail Acceptance by mail is ordinarily reasonable where the parties are negotiating at a distance, unless there is some special reason for speed such as rapid price fluctuation. Compare § 41. The same is true when the parties are located in the same city, if the offer is in writing, even though it is left with the offeree in person or delivered to his messenger. Even though an offer is transmitted by telephone or telegraph, acceptance by mail may well be reasonable.

Unless circumstances known to the offeree indicate otherwise, a medium of acceptance is reasonable if it is the one used by the offeror or one customary in similar transactions at the time and place the offer is received. Illustration: 1. By telegram A in Oklahoma orders two car-loads of potatoes from B in Wisconsin. B wires back an acceptance "if you will give us time to fill." Immediately on receiving B's reply A mails a confirming letter stating "we wish if possible you would ship at once" and giving shipping instructions. A has accepted B's counter-offer by a reasonable medium of acceptance.

Vague terms:

Vague terms: The parties want to do business, but they have a difficult time bridging the gap between their views on one or more terms. Sometimes the parties try to solve that problem by drafting a clause that is intentionally vague. In other situations, the vagueness is unintentional, the result of inattention or sloppy drafting. How much vagueness will a court tolerate before it determines that the vagueness signals the parties have not truly reached agreement or concludes the court has no reliable way to resolve the vagueness and therefore cannot enforce the agreement?

Factors for if a letter of intent is binding

Whether the type of agreement involved is one usually put into writing whether the agreement contains many or few details Whether the agreement involves a large or small amount of money Whether the agreement requires a formal writing for a full expression of the covenants And whether the negotiations indicated that a formal written document was Contemplated at the completion of negotiations

§ 27 Comment c c. Among the circumstances which may be helpful in determining whether a contract has been concluded are the following: (Such circumstances may be shown by oral testimony or by correspondence or other preliminary or partially complete writings.)

the extent to which express agreement has been reached on all the terms to be included, whether the contract is of a type usually put in writing, whether it needs a formal writing for its full expression, whether it has few or many details, whether the amount involved is large or small, whether it is a common or unusual contract, whether a standard form of contract is widely used in similar transactions, and whether either party takes any action in preparation for performance during the negotiations.

should a party's communications be judged by a subjective standard (what the person was thinking at the time) or an objective standard (what a reasonable person would think that the communication meant)?

the objective meaning is most important in analyzing whether a contractual promise exists, with subjective meaning playing a subsidiary role.

The traditional view of advertisements was that they are generally not offers, based on one or more of the following rationales:

• An advertisement is best understood not as a promise to sell but as a general promotion or a statement of present intent or an invitation for customers to come in and begin a bargaining process. • An advertisement usually does not specify any quantity and so could be for any quantity for each customer. • An advertisement usually does not limit the number of possible contracting partners and so cannot reasonably be understood as a commitment to any specific recipients. • Advertisements often omit essential terms or leave them uncertain. • Advertisements are sometimes "too good to be true" or otherwise too promotional to be reasonably considered a commitment.