Business Law Chapter 8: Offer and Acceptance
Acceptance
A clear expression of assent in reply to an offer
Counteroffer
A reply to an offer in which the offeree makes a new proposal as to the terms of the contract.
Offer
An expression of a willingness to do something in exchange for something else provided by another person.
An offer may terminate by rejection or counteroffer
Any manifestation of rejection or a counteroffer terminates the offer.
UCC: UCC vs Common Law - Common Law
Applies to employment and sales of land, services or insurance.
Offer and Acceptance
Both offer and acceptance are viewed objectively
Firm Offer
If a merchant in a signed writing promises an offer will be kept open, the merchant is bound to hold the offer open for stated time or reasonable time no greater than 3 months (Missouri Rule; UCC - 90 days)
Non-Offer: Preliminary Negotiations
Inquiries or general discussions of potential contract terms. Ex: Are you interested in...; would you take $1,000 for your son's Grand Am
UCC: Goods vs. Services
Look at the primary purpose of the contract. Ex: Going to dentist to get diamond capped teeth, you are going to the dentist for the sale of the service not for the diamond
Non-Offer: Auctions
Not offers unless they are advertised without reserve. Ex: opposite of eBay
Unilateral Contract Acceptance: Awareness
Offeree must know of offer before acceptance by performance - offer must have been received by the offeree.
Unilateral Contract Acceptance: Acceptance IS by...
Performance. Partial performance typically makes the offer irrevocable for a reasonable time to complete performance. Ex: I hire someone to paint house for $3000 and almost done, I can't revoke the offer
Offeree
The person to whom the offer is made.
Offeror
The person who makes the offer
UCC = ...
Uniform Commercial Code
UCC: UCC vs Common Law
You must distinguish whether the common law or the UCC applies in every contract
UCC: Three things that make a Merchant
1. A dealer in goods of the type contracted for 2. A person who holds himself out as having special knowledge as to the goods of the type contracted for 3. A person who employs a merchant as an agent
Requirements for Valid Acceptance
1. Acceptance by whom 2. Terms of acceptance - three requirements 3. Must be communicated
UCC Acceptance - Sale of Goods: Qualifies the Mirror Image Rule
1. An acceptance is valid despite additional terms 2. Additional terms are considered proposals for new additions to the contract 3. Exception: an acceptance made conditional on new term is a rejection and counteroffer
5 Ways an offer is terminated
1. An offer may terminate by revocation of offeror 2. An offer may terminate by lapse of time 3. An offer may terminate by rejection or counteroffer 4. An offer by terminate by Operation of Law 5. An offer may terminate by terms of the offer
An offer may terminate by Operation of Law
1. Death or by incompetence of either party 2. Intervening illegality (performance becomes after the offer but before acceptance), illegal e.g. zoning change 3. Destruction of the subject matter of the contract
Five Non-Offers
1. Expressions of Opinion 2. Statements of Intention 3. Preliminary Negotiations 4. Certain Advertisements 5. Auctions
Three Requirements for Valid Offer
1. Intention 2. Definiteness 3. Communication
Unilateral Contracts Acceptance
1. Must be made by performance 2. Offeree must be aware of the offer prior to performance 3. Offer is irrevocable for a reasonable time to allow complete performance when only partial performance is done
Variations Under the UCC
1. Parties to a contract have higher duties than under the common law 2. Requirements for a valid offer are changed 3. Consideration requirement is modified by the firm offer rule 3. Qualifies the mirror image rule for sales of goods
Requirements for Valid Offer: Intention
A serious and objective intention by the offeror to be bound. Offers made in obvious anger, jest, or excitement are not binding.
Valid Offer
A serious specific offer and a specific demand in a contract setting
Non-Offer: Expression of Opinion
A statement as to general quality or a prediction. Maybe when someone starts a statement with "I believe". Ex: My car's worth $10,000; Surgeon says a boy's leg will heal in a few days; contractor's estimate versus a bid
Non-Offer: Statements of Intention
A statement of what one may do in the future. Ex: I plan on selling my son's Grand Am for $1,000; I may; I'm going to; I'm considering etc.
Requirement for Valid Acceptance: communicated - mailbox rule
An acceptance is effective when correctly mailed, or sent by similar means, even if it is never received. Has no application in e-mail or internet acceptances. Acceptance must be sent by reasonable means to apply. This rule will not apply if the offeror negates it simply by specifying exactly how acceptance is to be made and when it is effective.
Mirror Image Rule
An acceptance which contains new or varying terms is considered a rejection and counteroffer. (The acceptance must be a mirror image of offer or it is invalid)
Requirements for Valid Offer: Definiteness
An offer definite enough to ascertain the terms of the contract. Including: names, description of goods or services, quantity, price, and important delivery terms.
UCC: UCC vs Common Law - the UCC
Applies to sales of goods and has other provisions governing leases of personal property, commercial paper, and mortgages on personal property
An offer may terminate by terms of the offer
Ex: This loan commitment shall be binding upon the bank until the prime interest rate rises by 1/4 of 1% or more.
Variations Under the UCC: Standards of Dealing
Good faith is implied in every contract. There is a higher standard for merchants - they must meet industry standards for dealing in fair trade.
Standard of Objectivity
Look at words spoken or written and conduct and what they would mean to a reasonable person.
Variations Under UCC: Offer
May have open terms including price. Price - reasonable time at delivery. Payment terms - on delivery. Delivery - sellers place of business. Shipment time - Reasonable. The courts will enforce the contract and fill in the missing terms if: The parties and goods are identifiable, the quantity is specified, the court determines the parties intended to make a contract.
Requirement for Valid Acceptance: Acceptance by Whom
Must be made by the offeree: you can't accept an offer made to another person
Requirement for Valid acceptance: Terms of Acceptance
Must be unconditional, unequivocal, and under the same terms. Unconditional - no ifs, ands or buts Unequivocal - Must be I accept, you have a deal, etc. Same terms - must be the mirror image of the offer or it's a rejection
UCC Acceptance - Sale of Goods: Between Merchants
New terms in an acceptance sometimes become part of the contract if: 1. The chance is not material (important) 2. No objection to the change is made by the offeror within 10 days
Requirements for Valid Offer: Communication
Offer must be communicated to the offeree. Requirements - communication by the offeror and receipt by the offeree (did the offeree know about the offer when she accepted?) Ex: Did the rescuer know about the money? If not the offeror don't have to pay it.
Mailbox Rule vs. Offers and Revocations
Offers and revocations must be received to be valid, and with the mailbox rule acceptances don't have to be received to be valid.
An offer may terminate by revocation of offeror
Revocation is typically possible any time up to acceptance, even if the offeror said he would keep it open for a certain period of time. Ex: garage sale offer for lawn mower - seller promises it will be open Exceptions: option contracts (where money is paid to keep the offer open) and merchant's firm offer under the UCC
UCC: Examples of things that aren't goods
Row of chairs permanently attacked to real estate.
Requirement for Valid Acceptance: Must be communicated
Silence is not acceptance absent prior agreement. The offer must have timely acceptance, meaning it must be accepted before offer is terminated by any means
An offer may terminate by lapse of time
Stated time: This offer is open for three days. Reasonable time: If a time is not stated, the offeree has a reasonable time to accept. The amount of time which is reasonable will vary with situation, for example, it will be a short time if it is an offer to buy commodities (like bananas) whose value will decline rapidly.
Non-Offer: Certain Advertisements
The danger is multiple acceptances. These are not offers unless they are: very specific, eliminating multiple acceptances. Ex: Store sells a Mink stole for really cheap, first come first serve. A fur buyer and other store owner wanted to buy it, the store owner said no.
UCC: Definition of Sale
The passage of title from Seller to Buyer for a price (consideration). It cannot be a lease, because there is no passage of title, and cannot be a gift, because there is no price.
UCC: Definition of Goods
Things tangible and movable. Tangible: has physical existence (desk vs. patent) Moveable: Can be carried from place to place (not attached to real estate).
Unilateral Contract Acceptance: Acceptance IS not..
Verbal
UCC: Example of a Good
Wallet, glasses, keyboard.