BLS 111 ch 10
Termination of Offers
- Their own terms ∙ Rejection ∙ Lapse of time ∙ Intervening illegality ∙ Death or insanity of offeror or offeree ∙ Revocation ∙ Destruction of subject matter 1. Terms of the Offer -General Rule: Offerees are bound by the terms of which they have actual or reasonable notice 2. Lapse of Time -Fail to specify time limit - only open for reasonable time if not clearly stated 3. Revocation -General rule: offeror can revoke at any time prior to acceptance even if not promised to revoke exceptions: -when offerers cannot revoke- Options - someone pays money for an option to keep an offer open Offers for Unilateral Contracts - cant revoke an offer while it's in progress Promissory Estoppel - you make an offer and someone relies on it. -Example: general contractors bid and then you use those to subcontract to a home builders, cant revoke because they rely on your promise to do that deal/work Firm Offer - UCC; for sale of products; limit 3 months -Offeror is a merchant -Contained in signed writing -Gives assurances offer will be kept open 4. Time of Effectiveness 5. Rejection -Can expressly reject an offer by just saying it -Counteroffer is a rejection (terms materially different) Revocations and Rejections General Rules -Revocations/rejection effective when received (sometimes sent depends) -Offeree who rejects offer, cant accept it later -Counter Offer - a rejection. Terminates ability to accept 6. Destruction of subject matter
summary: what terminates an offer
- Their own terms ∙ Rejection ∙ Intervening illegality ∙ Lapse of time ∙ Death or insanity of offeror or offeree ∙ Revocation ∙ Destruction of subject matter
Special Offer Problem Areas (summary)
1. Advertisements - not offers; invitations to negotiate; customer attempting to accept is an offer and an intent to contract 2. Bids and Auctions 3. Rewards - offer for unilateral contract. If offeree performs requested act, its accepted
Requirements for an Offer (summary)
1. Offer - if you accept, we have a deal -Offeror - makes offer -Offeree - recieves offer 2. Intent to Contract - intent to enter into a contract if accepted Objective Standard of Intent: -Early America subjective intent- Objective: what do your words, actions, etc say about intent 3. Definiteness of Terms -Standards under Common Law - more specificity -Standards under UCC - more flexibility. Filling in of terms because it tries to support the way we do business. Not always negotiating on every single point, sometimes oral, price quantity, etc 4. Communication of Terms to Offeree
(Requirement for an offer: Determine whether a given proposal is likely to be considered to be an offer:) Definiteness of Terms
A proposal that fails to state specifically what the offeror is willing to do and what he asks in return for his performance is unlikely to be considered an offer. -One reason for the requirement of definiteness: is that definiteness and specificity in an offer tend to indicate an intent to contract, whereas indefiniteness and lack of specificity tend to indicate that the parties are still negotiating and have not yet reached agreement. ex. If Smith says to Ford, "I'd like to buy your house," and Ford responds, "You've got a deal," has a contract been formed? An obvious problem here is lack of specificity. In the conversation between Smith and Ford, Smith's statement that he'd like to buy Ford's house is merely an invitation to offer or an invitation to negotiate. It indicates a willingness to contract in the future if the parties can reach agreement on mutually acceptable terms, but not a present intent to contract. If, however, Smith sends Ford a detailed and specific written document stating all of the material terms and conditions on which he is willing to buy the house and Ford writes back agreeing to Smith's terms, the parties' intent to contract would be objectively indicated and a contract probably would be created. -A second reason definiteness is important is : that courts need to know the terms on which the parties agreed in order to determine if a breach of contract has occurred and calculate a remedy if it has
(Distinguish advertisements that are considered to be offers from those that are merely invitations to negotiate) Special Offer Problem Areas : Rewards
Advertisements offering rewards for lost property, for information, or for the capture of criminals are generally treated as offers for unilateral contracts. To accept the offer and be entitled to the stated reward, offerees must perform the requested act—return the lost property, supply the requested information, or capture the wanted criminal. Some courts have held that only offerees who started performance with knowledge of the offer are entitled to the reward. Other courts, however, have indicated the only requirement is that the offeree know of the reward before completing performance. In reality, the result in most such cases probably reflects the court's perception of what is fairer given the facts involved in the particular case at hand.
(Distinguish advertisements that are considered to be offers from those that are merely invitations to negotiate) Special Offer Problem Areas : Which Terms Are Included in the Offer?
After making a determination that an offer existed, a court must decide which terms were included in the offer so that it can determine the terms of the parties' contract. Modern courts tend to recognize this fact (people sign contracts without full knowledge of what theyre signing) by saying that offerees are bound only by terms of which they had actual or reasonable notice. If the offeree actually read the term in question, or if a reasonable person should have been aware of it, it will probably become part of the parties' contract. A fine-print provision on the back of a theater ticket would probably not be binding on a theater patron, however, because a reasonable person would not normally expect such a ticket to contain contractual terms.
Termination of Offers: Intervening Illegality
An offer is terminated if the performance of the contract it proposes becomes illegal before the offer is accepted. So, if a computer man- ufacturer offered to sell sophisticated computer equipment to another country, but two days later, before the offer was accepted, Congress placed an embargo on all sales to this country, the offer was terminated by the embargo.9
(Requirement for an Offer) Explain the elements of an offer under both the UCC and common law.
An offer is the critically important first step in the contract formation process. An offer says, in effect, "This is it—if you agree to these terms, we have a contract." The per- son who makes an offer (the offeror) gives the person to whom she makes the offer (the offeree) the power to bind her to a contract simply by accepting the offer Not every proposal qualifies as an offer. Some propos- als are vague, for example, or made in jest, or thrown out merely as a way of opening negotiations.
Termination of Offers: Rejection
An offeree may expressly reject an offer by indicating that he is unwilling to accept it. He may also impliedly reject it by making a counteroffer, an offer to contract on terms materially different from the terms of the offer. As a general rule, either form of rejection by the offeree terminates his power to accept the offer. This is so because an offeror who receives a rejection may rely on the offeree's expressed desire not to accept the offer by making another offer to a different offeree. Exception: Some courts hold that a rejection does not terminate an option contract and that the offeree who rejects still has the power to accept the offer later, so long as the acceptance is effective within the option period. Time of Effectiveness of Rejections As a general rule, rejections, like revocations, are effective only when actually received by the offeror. Therefore, an offeree who has mailed a rejection could still change her mind and accept if she communicates the acceptance before the offeror receives the rejection
(Requirement for an offer: Explain the elements of an offer under both the UCC and common law.) To distinguish an offer, courts look for three requirements.
First, they look for some objective indication of a present intent to contract on the part of the offeror. Second, they look for specificity, or definiteness, in the terms of the alleged offer. Third, they look to see whether the alleged offer has been communicated to the offeree.
(Requirement for an offer: Determine whether a given proposal is likely to be considered to be an offer:) -Intent to contract:
For a proposal to be considered an offer, the offeror must indicate present intent to contract. Present intent means the intent to enter the contract upon acceptance. It signifies that the offeror is not joking, haggling, or equivocating. It makes sense that intent on the part of the offeror would be required for an offer—otherwise, an unwilling person might wrongly be bound to a contract
(Describe the circumstances that terminate an offer and determine whether a given offer remains "on the table.") Termination of Offers: Revocation
General Rule: Offers Are Revocable The general common law rule on revocations is that offerors may revoke their offers at any time prior to acceptance, even if they have promised to hold the offer open for a stated period of time. Exceptions to the General Rule -Options: Offeror has promised to hold offer open and has received consideration for that promise. - For example, Jones, in exchange for $5,000, agrees to give Dewey Development Co. a six-month option to purchase her farm for $550,000. In this situation, Jones would not be free to revoke the offer during the six-month period of the option. The offeree, Dewey Development, has no obligation to accept Jones's offer. In effect, it has merely purchased the right to consider the offer for the stated time without fear that Jones will revoke it -Unilateral Contract Offers: Offeree has started to perform requested act before offeror revokes. -Promissory Estoppel: Offeree foreseeably and reasonably relies on offer being held open, and will suffer injustice if it is revoked. -Firm Offers: Merchant offeror makes written offer to buy or sell goods, giving assur- ances that the offer will be held open. [Maximum duration is three months or the amount of time in the assurance, whichever is shorter.
(Distinguish advertisements that are considered to be offers from those that are merely invitations to negotiate) Special Offer Problem Areas : Advertisements
Generally speaking, advertisements for the sale of goods at specified prices are not considered to be offers. Rather, they are treated as being invitations to offer or negotiate. The same rule is generally applied to signs, handbills, catalogs, price lists, and price quotations. This rule is based on the presumed intent of the sellers involved. It is not reasonable to conclude that a seller who has a limited number of items to sell intends to give every person who sees her ad, sign, or catalog the power to bind her to contract
Termination of Offers: Destruction of Subject Matter
If, prior to an acceptance of an offer, the subject matter of a proposed contract is destroyed without the knowledge or fault of either party, the offer is terminated.8 So, if Marks offers to sell Wiggins his lakeside cottage and the cottage is destroyed by fire before Wiggins accepts, the offer was terminated on the destruction of the cottage. Subsequent acceptance by Wiggins would not create a contract.
(Describe the circumstances that terminate an ofer and determine whether a given ofer remains "on the table.") Termination of Offers: Lapse of Time
Offers that fail to provide a specific time for acceptance are valid for a reasonable time. What constitutes a reasonable time depends on the circum- stances surrounding the offer The context of the parties' negotiations is another factor relevant to determining the duration of an offer. For example, most courts hold that when parties bargain face-to-face or over the telephone, the normal time for acceptance does not extend past the conclusion of their conversation unless the offeror indicates a contrary intention.
(Distinguish advertisements that are considered to be offers from those that are merely invitations to negotiate) Special Offer Problem Areas : Auctions
Sellers at auctions are generally treated as making an invitation to offer. Those who bid on offered goods are, therefore, treated as making offers that the owner of the goods may accept or reject. Acceptance occurs only when the auctioneer strikes the goods off to the highest bidder; the auctioneer may withdraw the goods at any time before acceptance. However, when an auction is advertised as being "without reserve," the seller is treated as having made an offer to sell the goods to the highest bidder and the goods cannot be withdrawn after a call for bids has been made un- less no bids are made within a reasonable time
(Distinguish advertisements that are considered to be offers from those that are merely invitations to negotiate) Special Offer Problem Areas : Bids
The bidding process is a fertile source of contract disputes. Advertisements for bids are generally treated as invitations to offer. Those who submit bids are treated as offerors. According to general contract principles, bidders can withdraw their bids at any time prior to acceptance by the offeree inviting the bids and the offeree is free to accept or reject any bid. The previously announced terms of the bidding may alter these rules, however Bids for governmental contracts are generally covered by specific statutes rather than by general contract principles. Such statutes ordinarily establish the rules governing the bidding process, often require that the contract be awarded to the lowest bidder, and frequently establish special rules or penalties governing the withdrawal of bids.
Termination of Offers: Death or Insanity of Either Party
The death or insanity of either party to an offer automatically terminates the offer without notice. A meeting of the minds is obviously im- possible when one of the parties has died or become insane.7
(Requirement for an offer: Determine whether a given proposal is likely to be considered to be an offer:) Definiteness Standards under the Common Law:
The definiteness standard, like much of contract law, is constantly evolving. The trend of modern contract law is to tolerate a lower degree of specificity in agreements than classical contract law would have tolerated, although it is still unlikely that an agreement that leaves open important aspects of a transaction will be en- forced. The traditional insistence on definiteness can serve useful ends. It can prevent a person from being held to an agreement when none was reached or from being bound by a contract term to which he never assented. Often, however, it can operate to frustrate the expectations of parties who intend to contract but, for whatever reason, fail to procure an agreement that specifies all the terms of the contract.
(Describe the circumstances that terminate an ofer and determine whether a given ofer remains "on the table.") Termination of Offers: Terms of the Offer
The offeror is often said to be "the master of the offer." This means that offerors have the power to determine the terms and conditions under which they are bound to a contract. An offeror may include terms in the offer that limit its effective life. These may be specific terms, such as "you must ac- cept by December 5, 2010," or "this offer is good for five days," or more general terms such as "for immedi- ate acceptance," "prompt wire acceptance," or "by return mail."
Communication to Offeree
When an offeror communicates the terms of an offer to an offeree, he objectively indicates an intent to be bound by those terms. The fact that an offer has not been communicated, on the other hand, may be evidence that the offeror has not yet decided to enter into a binding agreement. -For example, assume that Stevens and Meyer have been negotiating over the sale of Meyer's restaurant. Stevens confides in his friend Reilly that he plans to offer Meyer $150,000 for the restaurant. Reilly goes to Meyer and tells Meyer that Stevens has decided to offer him $150,000 for the restaurant and has drawn up a written offer to that effect. After learning the details of the offer from Reilly, Meyer telephones Stevens and says, "I accept your offer." Is Stevens now contractually obligated to buy the restaurant? No. Because Stevens did not communicate the proposal to Meyer, there was no offer for Meyer to accept.
Definiteness Standards under the UCC
sales contracts under article 2 can be created IN ANY MANNER SUFFICIENT TO SHOW AGREEMENT, INCLUDING CONDUCT WHICH RECOGNIZES THE EXISTENCE OF A CONTRACT (if parties act as though they have a contract by delivering or accepting goods or payment, that may be enough to create a binding contract) *important difference between Code and classical common law standards for definiteness: the fact that the parties left open one or more terms of their agreement does not necessarily mean that their agreement is too indefinite to enforce a sales contract is created if the court finds that there is A REASONABLY CERTAIN BASIS FOR GIVING AN APPROPRIATE REMEDY ->if a term is left open in a contract meeting these standards, the open term or GAP can be FILLED by inserting a presumption found in the Code's GAP-FILLING rules (allow courts to fill contract terms left open on matters of price, quantity, delivery, and time for payment) ->if a term was left out because parties were UNABLE to reach agreement, intent to contract is absent ->INTENTION IS STILL AT THE HEART OF THESE MODERN CONTRACT RULES; difference: courts applying Code principles seek to further the parties' UNDERLYING intent to contract
(Requirement for an offer: Determine whether a given proposal is likely to be considered to be an offer:) The Objective Standard of Intent
shift towards objective theory of contracts. By the middle of the 19th century, the objective approach to contract formation, which judges agreement by looking at the parties' outward manifestations of intent, was firmly established in American law. an offeror's intent will be judged by an objective standard—that is, what his words, acts, and the circumstances signify about his intent. If a reasonable person familiar with all the circumstances would be justified in believing that the offeror intended to contract, a court would find that the intent requirement of an offer was satisfied even if the of- feror himself says that he did not intend to contract.