Contractual Assent and the Objective Test
In determining whether an offer has been made, do you use a subjective standard (i.e., what the offeror actually intended) or an objective standard (i.e., what a “reasonable person” would have thought the offeror intended)?
You use an objective standard
Must a statement sufficiently identify the offeree to constitute an offer?
Yes, because it must create in the offeree an immediate power of acceptance
Rock Racer’s Aston Martin luxury sports car is stolen and he offers $20,000 for its return. Suzie Sleuth, an amateur detective, after learning of the reward, locates and retrieves the car, which was abandoned in an alley near the airport, and immediately returns it to Rock. Is Suzie entitled to the reward?
Yes. There is consideration for the promise. Rock’s offer was to the public in general. It is also a typical unilateral contract where the acceptance is the actual performance of the promisee.
Fern owns an antique shop, Junk Is Us. She sends a written offer to Euphrates Antique Wholesalers to buy the latter’s entire inventory of old string, partial shipments to occur monthly, with separate billing for each shipment, over a period of months. Euphrates sends back a confirmation that purports to accept her offer. At the bottom of the confirmation is a sentence providing that Fern must pay 3% annual interest (a reasonable rate under the circumstances) on overdue invoices. Fern receives the confirmation and makes no response. (a) Is there a contract?
Yes. The UCC does not follow the common law “mirror image” rule. So the fact that the “acceptance” contains additional terms does not prevent it from being a true acceptance that concludes the bargain. See rules regarding Battle of the Forms and UCC §2-207(1). Here, nothing in Euphrates’ confirmation made his acceptance expressly conditional on Fern’s acceptance of the interest clause, so the confirmation acted as an acceptance.
Absent fraud, duress or mutual mistake, one having capacity to understand a written document who reads and signs it, or without having read it, signs it, is bound by his signature in law.
Ray v. Eurice
Can offers made in jest ever be the basis of a contract?
It depends. As long as a reasonable person in the offeree’s shoes would believe that the “offer” was intended to create a power of acceptance in him/her, then the offer is effective.
However, if the offeree knows or has reason to know that the offeror is joking, then there’s no offer.
In determining whether an offer to enter into a contract has been made, is the context of the communication relevant?
Yes. Where the language itself is not definite, the relationship between the parties, prior practices, method of communication, and the like frequently can determine whether an offer has been made
Socrates offers to sell his collection of Great Philosophers bubble gum cards to Plato for $20. Plato responds, “I’ll give you $15 for them.” At common law, is Socrates’ offer still valid?
No. The common law on this point is illustrated by the Second Restatement. Rest. 2d §39(1) says that “[a]n offeree’s power of acceptance is terminated by his making of a counteroffer, unless the offeror has manifested a contrary intention or unless the counteroffer manifests a contrary intention of the offeree.”
Fern owns an antique shop, Junk Is Us. She sends a written offer to Euphrates Antique Wholesalers to buy the latter’s entire inventory of old string, partial shipments to occur monthly, with separate billing for each shipment, over a period of months. Euphrates sends back a confirmation that purports to accept her offer. At the bottom of the confirmation is a sentence providing that Fern must pay 3% annual interest (a reasonable rate under the circumstances) on overdue invoices. Fern receives the confirmation and makes no response.(b) If so, is the interest clause part of the contract?
Yes. UCC §2-207(2) controls whose terms are included if a contract is formed. Here, the terms are integrated into the agreement because the two parties are merchants and none of the exceptions apply. The offer doesn’t provide any limits on acceptance. Since we’re told that Fern “makes no response,” this means she didn’t object to the interest term. So the only issue is whether a clause charging a reasonable rate of interest for overdue invoices is a “material alteration” of the contract.
1) An offer for a unilateral contract is accepted when the requested performance is rendered.
2) A promise to pay a bonus in return for an at-will employee's continued employment is an offer for a unilateral contract which becomes enforceable when accepted by the employee's performance.
3) Offeror cannot revoke offer when offeree has rendered substantial performance.
Cook v. Coldwell Banker
Owner owns several ocean-view properties. Friend is a friend of Owner, and has frequently expressed his desire to purchase one of the properties, Suite Sunrise. During dinner one night, the two discuss the Suite Sunrise property, including possible terms for its sale, over several bottles of wine. At the conclusion of the evening, Owner writes the following on an unused dinner napkin: “I agree to sell Suite Sunrise to Friend for $75,000, closing to occur tomorrow.” Signed: Owner. Owner then hands the napkin to Friend and says, “Good luck.” Friend subjectively (and reasonably) believes that Owner intends to be making an offer to sell the property. In fact, Owner, who is somewhat drunk but still lucid, is only joking. Friend responds, “Thanks, I accept.” The next day, Friend presents a check to Owner for $75,000. Owner laughs and says that he was joking and drunk; he refuses to consummate the transaction. Do the parties have a contract?
Yes
Two business acquaintances are talking. The first says, “I’m planning on selling my car for $400.” The second says, “I accept” and then offers $400 cash. Is there a contract?
No, because a reasonable person would conclude that the first person’s statement was merely a statement of intent, not a commitment to enter into a bargain.
Pavlov offers to sell his laboratory equipment to Rover. They argue about terms for a while, during which Rover does not specifically agree to Pavlov’s proposed terms regarding price, warranties, or the time for delivery. Rover then says, “Well, I assume we can iron out the details later, so I accept your proposal in principle.” Is there a contract?
Probably not. A court would likely hold that this is merely an “agreement to agree,” and not a valid contract.
Sarah (a horse breeder) wants to sell a horse to Jack a horse farmer (by trade). She sets the price at 10,000. Jack says he will take the 10,000 and asks if sarah will deliver the horse. Is there acceptance?
Yes. Acceptance with different or additional terms.
1) Letters of intent are binding if parties intend them to be.
2) Factors to consider in determining intent: whether agreement is usually put into writing, number of details, amount of money involved, whether formal writing contemplated, etc.
3) Where letter of intent is ambiguous, parties may present evidenceof intent.
Quake Construction v. American Airlines
Mike and John knew one another socially for many years. John owns an expensive sports car worth over $50,000. Mike has always admired John’s sports car but could not afford such an expensive car. Over the years, Mike had joked with John that he would purchase John’s car for $5. John would laugh and turn Mike down. One evening at a party, Mike repeatedly asked John to sell him the car for $5. As always, John laughed and turned Mike down. Finally, Mike said that he would purchase the car for $10. John laughed again and said, “OK. You finally named the right price.” Is there a contract?
No
A department store puts the following ad in a local newspaper: “Sale — Saturday only — 5 refrigerators. Worth $800, now only $100 each. First come, first served. Will open at 10 A.M.” The ad includes details on the model of refrigerator. Buyer sees the ad, camps out in front of the department store Friday night, and is the first one in on Saturday morning. Buyer says, “I accept your offer for the advertised refrigerator. Here’s my $100.” Is there a binding agreement?
Yes, because the department store’s offer was specific as to subject matter, quantity and price, stated to whom the offer was made (“first come”), and, in general, was worded as a “promise.” As such, it created an immediate power of acceptance in Buyer, and when he accepted, a contract was formed.
Magellan offers to buy the unusual birdbath Pisarro keeps in his front yard for $400, providing Pisarro gets it to Magellan’s house by Saturday. Pisarro says, “Well, I’m not at all fond of your terms, but OK.” Does a contract exist?
Yes. Pisarro’s acceptance is called a grumbling acceptance —he has not offered different terms, but merely expressed his dislike for those Magellan offered. However, because his acceptance is valid apart from the “grumbling,” a contract results.
Sarah (a horse breeder) wants to sell a horse to Jack a horse farmer (by trade). She sets the price at 10,000. Jack says he will pay 10,000 if and only if sarah will deliver the horse. Is there acceptance?
No, this is a conditional acceptance.
1) An enforceable contract requires consideration.
2) Consideration is present where one party suffers detriment or one party receives benefit.
3) Waiver of any legal right is consideration for promise.
Hamer v. Sidway
A seller sends a message stating, "I am quoting you $100 for the widgets." The buyer replies, "I accept your offer." However, the seller meant $100 per unit, while the buyer reasonably understood $100 for the entire bulk lot.
No meeting of minds, so no real mutual assent.
Collector has a large collection of ceramic figurines. One day, Neighbor was visiting, pointed to a particular figurine and asks, “Would you consider selling that ceramic bunny rabbit for $150?” Collector replies, “I accept.” Is there a contract?
No. Neighbor’s question is an invitation for Collector to negotiate (or for him to make an offer), not an offer in and of itself.
Charize Anon, an avant garde artist who designs flower vases with blown glass, sends a letter to an art dealer, Emil Alou, offering to sell her latest piece, entitled, “Sunrise in Bloom,” for $500. At the same time, Emil sends Charize a letter offering to buy “Sunrise in Bloom” for $500. The letters cross in the mail. At a time before either letter has been received, is there a contract?
No, because there is no mutual assent.
Sarah (a horse breeder) wants to sell a horse to Jack a horse farmer (by trade). She sets the price at 10,000. Jack says he will pay 10,000 but will want his moneyback if the horse doesn't win in its next race. Is there acceptance
No, this is material alteration.
1) When there is no established federal or admiralty law, admiralty law may look to common law.
2) In determining whether or not a contract is predominantly for the saleof goods, one considers the contract language, business of supplier,and worth of materials. [Here the primary purpose was inspection,repair, and maintenance services].
3) Under common law, a conditional acceptance is a counteroffer.
4) A counteroffer may be accepted by performance.
Princess Cruises v. General Electric