Chapter 11 - Agreement (pp. 261 - 279)

communication - between offerer and offeree

*third requirement for an effective offer - offer must be communicated to the offeree* an effective offer: (1) must be communicated to the offeree (2) by the offeror or an agent or representative of the offeror ex. 11.7- Tolson advertises a reward for the return of her lost cat. Dirk, not knowing of the reward, finds the cat and returns it to Tolson. ordinarily, Dirk can't recover the reward, because an essential element of a reward contract is that the one who claims the reward must have known it was offered. few states would allow recovery of the reward, but not on contract principles. Dirk would be allowed to recover on the basis that it would be unfair to deny him the reward just because he didn't know about it.

examples of statements that are not considered offers

*no valid contracts result from:* (1) *preliminary negotiations* - it's an invitation and so terms are not certain enough, they're still up in the air (2) *expressions of opinion* - looking for people's statements to how they will enjoy/benefit from transaction but this can't be determined (JUST OPINIONS) (3) *offers made in jest, anger, or undue excitement* (various case examples on this) (4) *statements of future intent* - usually offeree is not certain about what they want to and they are the ones that need to pull the trigger...saying they'll come back, not necessarily being serious (5) * advertisements, catalogues, and circulars* - essentially invitations to negotiate, not legit (6) *auctions* - owner of goods being willing to release them, similar to preliminary negotiations..."come see what I have" (7) *agreements to agree* - "let's delay agreement to dispute other things

definiteness....when are terms of a contract considered reasonably certain or definite?

*second requirement for an effective offer involves the definiteness of its terms* an offer must include the following terms, either expressed or implied (1) identification of the parties (2) identification of the object or subject matter of the contract (3) consideration to be paid (4) time of payment, delivery, or performance ex. 11.6 - Nintendo of America, Inc. contracts your Pay 2 Win Games store and offers to sell "from one of the 25 Nintendo 3Ds gaming systems for $75 each. state number desired in acceptance." you agree to buy 20 systems and because the quantity is specified in the acceptance, the terms are definite, and the contract is enforceable.

ex. 11.3 - statements of future intent

*a statement of an intention to do something in the future is not an offer* if Samir says, "I plan to sell my stock in Novation, Inc. for $150 per share" - no contract is created if John accepts and gives Samir $150 per share offer the stock Samir has merely expressed his intention to enter into a future contract for the sale of stock. if John accepts and hands over the $150 per share, no contract formed, reasonable person would say Samir was only THINKING about selling his stock, not PROMISING to sell it

federal law on e-signatures and e-documents

*e-signature*: an electronic sound, symbol or process attached to or logically associated with a record and adopted by a person with the intent to sign the record *the e-sign act*: no contract, record, or signature may be denied legal effect solely because it is in an electronic form -e-signature just as valid as a signature on paper, and e-doc is enforceable as a paper on -for e-signature to be enforceable, however, the contracting parties must have agreed to use electronic signatures -for an e-doc to be valid, must be in form that can be retained and accurately reproduced *the fair and accurate credit transactions (FACT) act*: protocols to prevent identity theft and project customers' personal information - how credit-card receipts should be handled...in case of online transactions, these receipts take on the form of e-docs

ex. 11.5 - agreements to agree

*modern view - agreements to agree may be enforceable agreements (contracts) if it is clear that the parties intended to be bound by the agreements - emphasis on the parties' intent rather than form* after a customer nearly drowned on a water ride at one of its amusement parks, Six Flags, Inc. filed a lawsuit against the manufacturer that had designed the ride manufacturer claimed that the parties did not have a binding contract but had only engaged in preliminary negotiations that were never formalized into a contract to construct the ride court, however, held that a faxed document specifying the details of the ride, along with parties subsequent actions (having begun construction and written notes on the faxed doc) was sufficient to show an intent to be bound because of the court's finding, the manufacture was required to provide insurance to water rise at Six Flags, and its insurer was required to defend Six Flags in the personal-injury lawsuit that arose out of the incident

agreement

a mutual understanding or meeting of the minds between two or more individuals regarding the terms of a contract parties must agree on the terms of the contract the offeror offers a certain bargain to offeree, who then accepts the bargain

unequivocal (leaving no doubt, unambiguous) acceptance

an effective acceptance - the offeree must accept unequivocally if the acceptance is subject to new conditions, or if the terms of the acceptance materially change the original offer....the acceptance may be deemed a counteroffer that implicitly rejects the original offer certain terms included in an acceptance will not change the offer sufficiently to constitute rejection ex. 11.13 - in response to an art dealer's offer to sell a painting, the offeree, Ashton, replies, "I accept. Please send a written contract."Ashton is requesting a written contract but is not making it a condition for acceptance...therefore, the acceptance is effective without the written contract. but if Ashton replies, "I accept if you send a written contract," the acceptance is expressly conditioned on the request of a writing, and the statement is not an acceptance but a counteroffer

counteroffer

an offeree's response to an offer in which the offeree rejects the original offer and at the same time makes a new offer ex. 11.11 - Burke offers to sell his home to Lang for $270,000. Lang responds, "your price is too high. i'll offer to purchase your house for $250,000." Lang's response is a counteroffer because it rejects Burke's offer to sell at $270,000 and creates a new offer by Lang to purchase the home at a price of $250,000.

a bilateral contract is a promise for a promise....

and a unilateral contract is performance for a promise

advertisements are not binding...

but they cannot be deceptive

the way in which a response to an offer is phrased...

can determine whether the offer is accepted or rejected

effectiveness of acceptance

communication by offeree: authorized acceptance of offer - effective when *dispatched* by offeree communication by offeree: unauthorized acceptance of offer - effective when *received* by offeror communication by offeree: rejection of offer, then acceptance of offer -effective when *1st* communication received by offeror is given effect

implied term

conduct, that is a proxy for words you can figure this out because of industry standards ex. restaurants are in the business of selling food for money

when is acceptance effective?

Amy offers to sell iPod to Bart for $25, asks him to accept by certified mail post-dated no later than April 1st. (1) Bart mails acceptance letter by regular mail that is post-dated March 15th..it is lost in the mail. - no agreement (acceptance) because she said it's valid when mail is in her hand...lost mail is his fault (2) Bart mails certified acceptance letter post-dated April 1st that is improperly addressed. - no agreement (acceptance)...improperly addressed *improperly addressed and received...effective if she gets it! (3) Bar e-mails rejection on March 15th; then mails acceptance letter by FedEx post-dated March 15th - which ever is received FIRST by offeror is effective

case 11.2 - Basis Technology Corp v. Amazon.com, Inc.

Basis created software and provided technical services for a Japanese-language website operated by Amazon. agreement between the two companies allowed for separately negotiated contracts for additional services that Basis might provide to Amazon. Basis sued Amazon for failure to pay for services not included in original agreement. during trial, the parties appeared to reach an agreement to settle out of court via a series of emails outlining the settlement. when Amazon reneged, Basis served a motion to enforce the proposed settlement. trial judge entered a judgement against Amazon and they appealed. the appeals court confirmed that the agreement that Amazon entered into with Basis via email constituted as a binding settlement contract because they found that Amazon intended to be bounded by the terms of the email exchanges Amazon tried to claim that email terms were incomplete and not definite enough to form an agreement but court noted that "provisions are not ambiguous simply because the parties have developed different interpretations of them." - emails constituted a complete and unambiguous statement of the parties' desire to be bound by the settlement terms.

option contract

created when an offeror promises to hold an offer open for a specified period of time in return for a payment (consideration) given by the offeree this contract takes away the offeror's power to revoke an offer for the period of time specified in the option if no time is specified, then a reasonable period of time is implied typically used in conjunction with the sale of real estate ex. 11.12 - Tyrell agrees to lease a house from Jackson, the property owner. lease contract includes a clause stating that Tyrell is paying an additional $15,000 for an option to purchase the property within a specified period of time. if Tyrell decides not to purchase the house after the specified period has lapsed, he loses the $15,000 - and Jackson is free to sell the property to another buyer

example 11.18 - substitute method of acceptance

Bennion's offer specifies acceptance via FedEx overnight delivery but the offeree accepts instead by overnight delivery from UPS - the substitute method of acceptance will still be effective, but not until the offeror (Bennion) receives it from UPS *sometimes, the offeror authorizes a particular method of acceptance, but the offeree accepts by a different means...the acceptance may still be effective if the substituted method serves the same purpose as the authorized means* -acceptance by a substitute method is not effective in dispatch...no control will be formed until the acceptance is received by the offeror!

case 11.3 - Brown v. Lagrange Development Corp.

Brown presented Lagrange with a written offer to buy a house for $79,900 and Lagrange's executive director, penciled in modifications to the offer - an increased purchase price of $84,200 and a later date for acceptance...he initialed the changes and signed the document. Brown initialed the date change but not the price increase, and did not sign the revised document. Brown then applied for and obtained a mortgage, agreed to the closing, and received a deed. Brown later filed a suit against Lagrange, claiming that she had not agreed to the proposed changes. the court found the modified terms to be counteroffer, which Brown had accepted by performance - Brown appealed was Brown's conduct sufficient to constitute acceptance of Lagrange's counter offer - yes. appellate court confirmed lower court judgment. Brown may have not singed the counter offer, but her subsequent conduct showed that she had accepted it. Brown initialing the date change wasn't enough to show acceptance of Lagrange's counteroffer but her actions after the fact, indicated an intent to accept it. court explained - not necessary for all of the parties to a contract to sign it for a valid contract to exist conduct sufficient to show agreement, including performance, constitutes acceptance of an offer

the uniform electronic transactions act

UETA removes barriers to e-commerce by giving the same legal effect to electronic records and signatures as given to paper documentation - covers only electronic records and electronic signatures relating to a business, commercial or governmental transaction - not applicable to a transaction unless both parties have agreed to conduct the transaction by electronic means

electronic contracts

e-contracts require the same four elements (A, C, CC, L) to be enforceable subject matter of e-contracts involve the sale of goods or services, and licensing arrangements -for licensing arrangements...the offeror and offeree are known as the licensor and licensee example 11.19 - Lauren wants to obtain software that will allow her to work on spreadsheets on her smartphone. she goes online and purchases GridMagic. during the transaction, she has to click on several on-screen "I agree" boxes to indicate that she understands that she is purchasing only the right to use the software, not ownership rights. after she agrees to these terms the licensing agreement), she can download the software

online offers

entire contract must be available online in a readable format. at minimum, online offers must contain the following 7 provisions (1) acceptance of terms. "I accept" click-on button (2) payment provisions (3) return policy (4) disclaimers of liability for certain uses of good (5) limitation on remedies for defective goods or breach of contract (6) privacy policy regarding seller's use of information gathered from the buyer (7) alternate dispute resolution policy

a "grumbling acceptance" is a legal acceptance....

ex. "okay, I accept, but I wish I could have gotten a better price."

communication of acceptance:

for which type of contract must the offeror be notified of the offeree's acceptance? - in a bilateral contract when is communication not necessary? -in a unilateral contract -offers that say you don't have to respond

an opinion is not an offer and not a contract term....

goods or services can be "perfect" in one party's opinion and "poor" in another's

online acceptances

offeree's assent governed by two principles: (1) *common law*: parties may agree to a contract by written or spoken words or by other action, or by failure to act (limited) (2) *uniform commercial code*: for sale of goods contracts, assent may be made in any manner sufficient to show agreement, including conduct by the parties that recognizes the existence of a contract

termination by operation of law

power of the offeree to transform the offer into a binding, legal obligation can be terminated by operation of law through the occurrence of any of the following events: (1) lapse of time - terminated when period of time *specified in the offer* has passed....if the offerer doesn't specify a time for acceptance, offer terminates at the end of a *reasonable* period of time (2) destruction of the specific matter of the offer - an offer is automatically terminated if the specific object matter of the offer (like a smartphone or a house) is destroyed before the offer is accepted...also an offeree's power of acceptance is also terminated went he offeror or offeree dies or becomes legally incapacitated, *unless offer is irrevocable* (3) death or incompetence of the offeror or the offeree (4) supervening illegality of the proposed contract

agreements to agree

preliminary agreement is a binding contract if the parties have agreed on all essential terms AND no disputed issues remain to be resolved no binding contract where the parties agree to certain major terms, but leave other terms open for future negotiations the parties have only committed themselves to negotiate the remaining terms in good faith towards reaching a binding contract

acceptance

the act of voluntarily agreeing, through words or conduct, to the terms of an offer, thereby creating a contract acceptance must be unequivocal and must be communicated to the offeror generally, only the person to whom the offer is made or that person's agent can accept the offer and create a binding contract

bargain is interpreted under the objective theory of contract....

the parties' word and conduct are whatever a reasonable person in the other party's position would think they meant

revocation

the withdrawal of a contract offer by the offeror unless an offer is irrevocable, it can be revoked at any time prior to acceptance without liability revocation may be accomplished by an express repudiation of the offer (such as "I withdraw my previous offer of Oct. 17") or by the performance of acts that are inconsistent with the existence of the offer and that are made known to the offeree ex. 11. 8 - Misha offers to sell land to Gary. month passes, and Gary, who has not accepted the offer, learns that Misha has sold property to Liam. b/c Misha's sale of the land to Liam is inconsistent with the continued existence of the offer to Gary, the offer to Gary is effectively revoked. general rule: revocation becomes effective when the offeree or the offeree's agent (a person acting on behalf of the offeree) actually receives it - *a statement of revocation sent via FedEx on April 1 and delivered at the offeree's residence or place of business on April 2 becomes effective on April 2.*

requirements of an offer

there elements are necessary for an offer to be effective: (1) offeror must OBJECTIVELY INTEND to be bound by the offer (serious intentions) (2) the TERMS of the offer must be DEFINITE or REASONABLY CERTAIN (3) the offer must be COMMUNICATED TO the offeree *serious intentions, terms certain, and communicated*

advertisements, catalogues, and circulars

treated as invitations to negotiate, not as offers to form a contract responses to an ad are not acceptances - instead, the responses are the offers

case 11.1 - Lucy v. Zehmer

Lucy had wanted to buy Zehmer's farm but Zehmer always said he wasn't interested in selling. one night, Lucy stopped and visited the Zehmers at dinner and Lucy said to Zehmer.. "I bet you wouldn't have $50,000 for that place" and Zehmer said, "Yes, I would, too; you wouldn't give fifty." and throughout the night, the convo returned to sale of farm while they parties were drinking whiskey Zehmer writes up an agreement on back of restaurant check for sale of farm and asked his wife, Ida, to sign it and she did in court, Zehmer argued that he was drunk and that convo was all just to see how could talk the biggest and say the most. Lucy claimed that he had not been intoxicated and did not think Zehmer was, given the way Zehmer handled the transaction - court rules in favor of Zehmers and Lucy appealed later, court held that given evidence about the nature of the convo, appearance and completeness of the agreement and signing - all showed serious business transaction court said that the serious-intent requirement was met despite claim of intoxication and the agreement to sell the farm was binding

when is silence deemed acceptance?

(1) the *offeree* takes benefit of goods or services even though s/he... - has the opportunity to reject the goods or services, but does not do so;and - knows that the offeror expects to be compensated (like a quasi contract...remedy to receive is unjust enrichment...offeree is in control even though not using words) (2) prior dealings between the parties indicate that silence means acceptance -ex. commercial contracts like JustFab, Blue Apron, etc. -have been in business before and prior dealings...know that silence means acceptance (typically you have to indicate that you don't want goods/services and silence means that you do) (3) the *offeree* fails to reject a solicited offer that specifies that certain terms and conditions are acceptable -ex. sending an original Barbie in mint condition -if terms and conditions not acceptable, don't have to accept -but if terms and conditions are met, NEED to send back so you don't need to accept price

more on online acceptances

(1) click-on agreements: the act of clicking the "I accept" or "I agree" box indicates acceptance of an online offer - is this principle true even if the offeree has not read the entire contract....YES. (2) shrink-wrap agreements: an agreement whose terms are expressed in a document located inside a box in which goods are packaged -may not be enforceable if contract was formed over phone and at that time, the seller doesn't mention terms such as arbitration clause and so clearly buyer has not agreed to terms -if clauses are in shrink-wrap, court may conclude that those terms were only proposals for additional terms, and not part of the original contract -buyer did not discover them until AFTER the contract was formed (3) browse-wrap terms: term or condition of use that is presented when the licensee downloads a product. the licensee *does not have to agree* before installing or using the product - often unenforceable because they do not satisfy the agreement requirement of contract formation

process of reaching an agreement:

(1) parties engage in PRELIMINARY NEGOTIATIONS about price, time of performance, etc. (2) someone makes an offer during negotiations - OFFEROR (3) offer sets forth with terms under which the offeror is willing to enter into the contract (4) OFFEREE has power to create an agreement by accepting the offer *formation of a contract happens BEFORE the writing (ex. marriage certificate is evidence that a marriage HAPPENED - just because you have writing, doesn't mean you have a contract*

example in class - NJ Lottery issue

2 men sue the NJ Lottery of $1 million prize men throw tickets away, thinking number were wrong (looked at wrong ones) but realized that they actually won can prove they bought the ticket, but can't produce the ticket -if you don't have ticket, you don't get prize -ticket says not responsible for lost or stolen tickets ruled in favor of NJ Lottery

class example : Adam and Bonnie

Adam owns a golf clothing store, and belongs to a golf club he wants to sell his golf store to one of the members of the golf club he puts the offer in writing, but does not send it to the club's members Adam's friend, Bonnie, comes to visit and sees the offer in his study can Bonnie accept offer - no, Adam cannot be compelled to sell, offeror has the power

ex. 11. 2 - expressions of opinion

Hawkins took his son to McGee, a surgeon, and asked McGee to operate on son's hand. McGee said that boy would be in hospital for 3 or 4 days and that the hand would PROBABLY heal a few days later.... son's hand did not heal for a month, father suited but didn't win for breach of contract. court held that McGee did not make an offer to heal the son's hand in 3 or 4 days...merely expressed an opinion as to when the hand would heal

example 11.16 - authorized means of communication

Motorola offers to sell 144 Atrix 4G smartphones and 72 Lapdocks to Call Me Plus phone stores...the offer states that Call Me Plus must accept the offer via FedEx overnight delivery. acceptance is effective (and a binding contract is formed) the moment that Call me Plus gives the overnight envelope containing the acceptance to the FedEx driver. *if the offeror does not expressly authorize a certain mode of acceptance, then acceptance can be made by ANY REASONABLE MEANS* -usually, the offeror's choice of a particular means in making the offer implies that the offeree an use the SAME OR A FASTER means for acceptance example 11.17 - if the offer is made via Priority U.S. mail, it would be reasonable to accept the offer via Priority mail or by a faster method, like signed scanned documents sent as attachments via e-mail or overnight delivery

case example 11.5 - Powerhouse Custom Homes, Inc. (communication of acceptance)

Powerhouse owed $95,2600.42 to 84 Lumber under a credit agreement. when they failed to pay, 84 Lumber filed a suit to collect - during mediation - the parties agreed to a deadline for objections to whatever agreement they might reach. if there were no objections, the agreement would be binding. Powerhouse offered to pay less than the amount owed, but 84 Lumber did not respond. Powerhouse argued that 84 Lumber had accepted the offer by not objecting to it within the deadline. court ruled in 84 Lumber's favorite for the entire amount of the debt. to form a contract, an offer must be accepted unequivocally. Powerhouse made an offer, but 84 Lumber did not communicate acceptance. therefore, the parties did not reach an agreement on settlement.

ex. 11.1 - Spencer and his car

Spencer's car has a market value of $25,000. one cold morning, the car will not start and Spencer yells in anger, "I'll sell this car to anyone for $500!" you give him $500. a reasonable person, taking into consideration Spencer's frustration and the obvious difference in market value and purchase price - would realize that Spencer's offer was not made with serious intent...no agreement is formed

mailbox rule

a common law rule that acceptance takes effect, and thus completes formation of the contract, at the time the offeree sends or delivers the acceptance via the communication mode expressly or impliedly authorized by the offeror acceptance of *bilateral* contract occurs when the offeree *dispatches* the acceptance by an authorized means of communication -mailbox rule is *inapplicable* to instantaneous forms of communication.. like when the parties are dealing face to face, by phone, by fax, and usually by e-mail (1) is the acceptance effective, even if it is lost in the mail? -yes it is by dispatch (not received) -acceptance becomes valid when it is dispatched (place in control of U.S. Postal Service)...not when it is received by the offeror (BUT, if the offer stipulates when acceptance will be affective, then the offer will not be effective until the time specified) (2) how can business protect themselves from the risk of lost acceptances? -identify in your offer a term that says it's effective when received (shift the risk of loss) (3) when is acceptance effective if an authorized means of communication is used? -only effective when received -did not give permission to use that method so risk is on offeree...only effective when received...other method used usually because time is money

mirror image rule

a common law rule that requires the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer for a valid contract to be formed the terms of the acceptance must "mirror" those of the offer - if the acceptance materially changes or adds to the terms of the original offer, it will be considered not an acceptance but a counteroffer...which, of course, need not be accepted. the original offeror can, however, accept the terms of the counteroffer and create a valid contract. for an acceptance to exist, the offeree's acceptance must be *unequivocal* -offeree's acceptance must match the offeror's acceptance exactly any material changes or additions to the offer is not considered a legal acceptance what happens if there are material changes? -material changes are seen as make or break offers...people could walk away from offer if this or that is not included -if material change is wanted...essentially rejection of offer and thus counter offer begins

offer

a promise or commitment to perform or refrain from performing some specified act in the future

what is the contract acceptance?

acceptance is the: (1) voluntary act (words or conduct), (2) by the offeree that, (3) shows assent (agreement), (4) to the terms of an offer who may accept the offer? -offeree or offeree's agent "mirror image" rule - is in place to make sure that terms are certain, that they match

elements of an agreement

agreement requires both OFFER and ACCEPTANCE parties must show MUTUAL ASSENT to terms of contract once an agreement is reached, a valid contract is formed, IF the other elements of a contract are present other elements include - consideration, contractual capacity, lawful objective

termination by action of the offeree

if the offeree rejects the offer, either by words or by conduct, the offer is terminated - any subsequent attempt by the offeree to accept will be construed as a new offer, giving the original offeror (now the offeree) the power of acceptance like revocation, a rejection is effective only when it is actually received by the offeror or the offeror's agent ex. 11.9 - Goldfinch Farms offers to sell specialty Maitake mushrooms to a Japanese buyer, Kinoko Foods. if Kinoko rejects the offer by sending a letter via U.S. mail, the rejection will not be effective (and the offeror will not be terminated) until Goldfinch receives the letter

inquiries about an offer

inquiring about an offer does not constitute rejection. ex. 11.10 - your friend offers to buy your Inkling digital pen for $100. you response, "is that your best offer?" a reasonable person would conclude that you have not rejected the offer but merely made an inquiry. you could still accept and bind your friend to the $100 price.

intention (serious intent)

intent is not determined by the subjective intentions, beliefs, or assumptions of the offeror rather, it is determined by what a REASONABLE PERSON in the offeree's position would conclude that the offeror's words and actions meant offers made in obvious anger jest, or undue excitement DO NOT meet the requirements of serious, objective intent ex. Pepsi Harrier Giveaway - man collected the 7 million points to win the Harrier Jet, sues when he doesn't receive it and Pepsi goes to court to declare his claim frivolous -serious intentions about jet - would a reasonable person believe that ad is legit offer? NO. -man losses case because the first objective of serious intent is not met

objective theory of contracts

intent to contract (coffer's serious intentions) is judged by the reasonable person standard intent to be bound by a contract is *NOT* judged by the SUBJECTIVE INTENT of the parties

when an offer is rejected...

it is terminated

may silence be deemed acceptance?

offeror says, "by your silence and inaction you will be deemed to have accepted this offer." is the offeree's' silence considered acceptance? -NO. offeree has power to create contract through assent...silence is not acceptance -this general rule applies because an offeree should not be put under a burden of liability to act affirmatively in order to reject an offer...no consideration - that is, nothing of value - has passed to the offeree to impose such a liability BUT sometimes, the offeree does have a duty to speak - if so, his or her silence or inaction will operate as an acceptance - silence may be an acceptance when a offeree takes the benefit of offered services even though he or she had an opportunity to reject them and knew that they were offered with the expectation of compensation ex. 11.14 - Juan earns extra income by washing store windows. Juan taps on the window of a store, catches the owner's attention, and points to the window and raises his cleaner - signaling that he will be washing the window...manager does nothing to stop him. in this situation, the owner's silence constitutes as an acceptance, and an implied contract is created - store is bound to pay a reasonable value for Juan's work