Objective Test
Question 1 for Chapter 1 dealt with Margaret, a consumer, who booked and paid for an expensive all-inclusive cruise on the website of Sailing Sales, Inc. The booking was subject to Sailing’s standard terms that were accessible by clicking on a link on Sailing’s website. One of those terms stated that all bookings were final and non-refundable, but Margaret did not know about it because she did not click on the link. Two weeks after booking the cruise, Margaret changed her mind and wished to cancel her booking. Sailing refused to refund her payment and Margaret sued to recover it.
The question for Chapter 1 focused on the doctrine of precedent, and indicated two contrary court decisions on the substantive issue of whether Margaret should be bound by the no-refund term. The focus of this question is to consider which result is better under the principles introduced in Chapter 3.
(A) Margaret should be able to recover her payment despite the no-refund term. The standard terms of the website should not be enforceable against Margaret because the website was not set up in a way that gave her adequate notice of the standard terms.
(B) Margaret may be able to recover her payment despite the no-refund term. To decide this issue we must determine if the link to the terms would give adequate notice of the terms to a reasonable person in Margaret’s position.
(C) Margaret should not be able to recover her payment because she is bound by the no-refund term. The link was visible on the webpage and she had a duty to click on it to read the standard terms.
(D) Margaret should be able to recover her payment despite the no-refund term because the term is unfair and one-sided.
(B) is correct. To determine whether Margaret had a duty to read the term and should be bound by it despite not knowing about it, a court would apply the objective test to decide if the link to the term was exhibited in such a way that it would have given notice of the term to a reasonable person in Margaret’s position. Answers (A) and (C) might ultimately be correct, but they are conclusory and we cannot reach those conclusions without applying the objective test. (D) is also wrong because it is conclusory. As the notes following James indicate, the doctrine of unconscionability may allow a court to avoid a term that is unfair and one-sided. However, there is no indication in the facts that the no-refund term is unfair under the circumstances, and we would need more information to make this determination.
Buyer operates a factory. One of its machines needed replacement, so Buyer sent a letter to several manufacturers setting out the technical specifications of the machine and requesting bids on its price. Seller, one of the manufacturers who received this letter, replied by sending an email to Buyer with the subject heading, “Your request for a bid.” The body of the message stated, “Thank you for requesting a bid from us. We have a machine that meets your specifications in stock and can supply it for $100,000, including delivery and installation. We would be able to deliver and install the machine on any date convenient to you after receiving your order. We hope that you find this acceptable and we look forward to doing business with you.”
(A) Buyer made an offer to Seller by sending the letter requesting a bid.
(B) Seller made an offer to Buyer in its email.
(C) No offer has been made yet by either party because the terms of the transaction have not been settled.
(D) No offer has been made yet by either party because neither a request for bids nor a price quotation can constitute an offer.
(B) is the best answer. An offer is a manifestation of willingness to enter a bargain which would justify a reasonable recipient in understanding that its assent to the proposed bargain is invited and would result in the formation of a contract. The question of whether a communication constitutes an offer is determined by interpreting the language of the communication in context. Although the language of the email does not use the word “offer,” it sets out the terms on which Seller is willing to deal with Buyer and can be reasonably understood to give Buyer the power to bind Seller to a contract. (A) is wrong. A letter to a manufacturer requesting a bid would not qualify as an offer because it is clear that Buyer is calling for price information before ordering the machine and does not manifest an intent to be bound in a contract by Seller’s response to the letter. (C) is probably incorrect as well. On its face, the email does set out the terms on which Buyer is willing to enter the contract. To the extent that it does not specify certain terms (such as the time for payment or whether the machine is warranted) these terms could probably be supplied by trade usage or by default terms recognized in law. (D) is wrong. Either a request for a bid or a price quote can be an offer if expressed in a way that manifests intent to a reasonable recipient that an offer is intended.
Factory had imported a new machine and needed to have it installed. On May 1, Factory wrote a letter to Engineering Co., setting out the technical specifications of the machine and requesting a bid for its installation. Engineering Co. responded by sending an email to Factory on May 2 with the subject heading “Offer.” The body of the message stated, “Thank you for requesting a bid from us. We are happy to offer to install your machine for the price of $100,000. We would be able to do the installation on any date convenient to you after receiving your order. We hope that you find this acceptable and look forward to doing business with you.” On May 3, Factory responded by sending an email with the subject heading “Acceptance of your Offer.” The body of the message stated, “We do wish to have you install the machine for $10,000. Can you do the installation this week?” The price of $10,000 written in Factory’s email was a typographical error. Factory had meant to write “$100,000.”
(A)Factory has accepted Engineering Co.’s offer despite the typographical error.
(B)Factory has not accepted Engineering Co.’s offer because of the typographical error.
(C)Factory has not accepted Engineering Co.’s offer because of the request to install the machine this week.
(D)Factory has not accepted Engineering Co.’s offer because of the typographical error and the request to install the machine this week.
(B) is correct. In context, Engineering Co.’s emailed price quote probably constitutes an offer. Even though Factory unintentionally misstated the price, this error prevents the email from being a manifestation of assent to the offer, much in the same way that the buyer’s signature in the “counter to counteroffer” space in Roth prevented the buyer’s response in that case from being an acceptance. (C) and (D) are wrong because the request to install the machine this week would not have precluded contract formation — the offer contemplates that Factory would select the installation date.
Bella Buyer bought a skateboard online from Bonebreak Boards, Inc., a skateboard manufacturer. The skateboard was delivered to Bella in a box a few days later. When Bella opened the box, there was a single piece of paper attached to the skateboard. Bella discarded it without reading it. Had she read it she would have seen that it contained two terms:
1. The use of a skateboard can result in serious injury. You use this skateboard at your own risk. By using this skateboard you agree to absolve Bonebreak Boards of all responsibility and liability for any injury that you may suffer as a result of your use of the skateboard.
2. Return policy: An unused skateboard may be returned for a refund within 30 days of purchase.
These terms were not set out anywhere on Bonebreak’s website or otherwise revealed to Bella at the time that she placed her order. Bella is subsequently injured while using the skateboard, and Bonebreak claims it is not liable on the basis of the first term quoted above. In a jurisdiction that has adopted the reasoning of ProCD, Inc. v. Zeidenberg and Dye v. Tamko Building Products, Inc., which of the following is the most persuasive?
(A)This term does not bind Bella. She is not a merchant and the term therefore does not become part of the contract under UCC 2-207.
(B)This term does not bind Bella because it was not printed on the outside of the box, and was only visible after she had opened the package.
(C)This term is binding on Bella because it is a reasonable limitation of liability for injury caused by Bella’s negligent use of the skateboard.
(D)This term may be binding on Bella if she doesn’t return the skateboard within 30 days.
(D) accords with ProCD, Inc. v. Zeidenberg and is generally consistent with the reasoning in Dye v. Tamko Building Products, Inc. Although some courts have declined to follow ProCD, and would reach the conclusion reflected in (A), the question notes that this dispute is being heard in a jurisdiction that has adopted the reasoning of ProCD. The facts of the question are not directly parallel to those of ProCD, because the right to reject the terms by returning the goods is vaguely stated. It must be inferred from the statement in the liability disclaimer that tells customers that use of the skateboard constitutes agreement to the disclaimer, read in conjunction with the return policy in the second clause. So (D) is appropriately hedged in that it implies that the holding is plausible but not certain. (B) is not the best answer because it creates an overly broad negative inference from the holding in Dye v. Tamko Building Products, Inc. In that case, the homeowners were bound to terms that were included on the outside of the shingle packages. But it doesn’t necessarily follow that terms must be included on the outside of a package to become part of the parties’ agreement. The Dye court cites with approval several cases where the terms at issue were held to become part of the contract under circumstances where they were included inside the product packaging and the customer had a right to return the goods for a refund. (C) is not the best answer because it disregards the issue of whether Buyer manifested assent to the term and focuses only on the issue of whether the disclaimer is reasonable. Unless the customer otherwise had adequate notice of the term and the right to reject it, the mere fact that the term may be reasonable does not, by itself, make it part of the contract.
A letter of intent:
(A)Is a binding contract expressed in the form of a letter.
(B)May or may not be a binding contract.
(C)Is an offer.
(D)Is a Type II preliminary agreement.
(B) is correct. A letter of intent is a form of preliminary agreement. It usually sketches out the terms on which the parties are willing to transact business but contemplates execution of a more formal writing in the future and possibly also further negotiations to settle terms that have not been addressed. The letter would have to be interpreted under all the relevant circumstances to decide if the parties intended it to be a binding Type I preliminary agreement, a Type II preliminary agreement committing them to negotiate in good faith, or merely a non-binding preliminary understanding, that is, a Type III preliminary agreement.
Super Market, Inc. is conducting a promotion under which its customers get stickers each time they buy products from the store. The customer then places these stickers on matching spaces on game cards and when all the spaces on the card are full, the customer can submit the card to Super Market for a prize. The back of the game card states, “To see the rules of this game, ask any cashier for a copy of them or go to our website, www.supermarket.com/games.” The rules are the usual rules that commonly govern promotions of this kind and they are in fact available in print form from cashiers or on the webpage and may be accessed from either of those two sources by a customer who goes to the trouble of finding out what they are. However, a poll of customers has shown that only 5% of customers who play the game have done either of these things. While most customers assume that the game is governed by rules, the great majority have never seen the rules and have no idea what those rules are.
(A) Nevertheless, the customers are bound by the rules.
(B) Because 95% of customers do not take the opportunity to access the rules, it must be concluded that Super Market’s notice of the rules is inadequate and the rules will not bind customers.
(C) The rules will bind the 5% of customers who took the opportunity to access them, but not the 95% of customers who did not.
(D) This question cannot be answered because the facts do not state what the rules are.
(A) is the best answer. Because all promotions are subject to rules and the rules governing this game are common and unexceptional, a reasonable customer would expect that the game is subject to rules of this kind. Therefore, the notice at the back of the game card that informs customers of the existence of the rules and of the simple means of accessing them should be enough to make the rules binding on all customers. (B) suggests that because 95% of customers do not read the rules, a reasonable customer would not know of them. However, the mere fact that a huge majority of customers do not bother to read the rules does not mean that a reasonable customer would not know that the game is subject to rules. (C) is based on the general principle that even if standard terms are not adequately noticed, they will still bind a person who has actual knowledge of them. However, if we conclude that there is adequate notice, (C) is too restrictive. (D) suggests that the content and nature of the rules is relevant to the question of whether they are binding. This may be true if the rule in question is so unusual that it is contrary to the reasonable expectations of customers. However, there is nothing in the facts to indicate that such a rule is included in the standard terms governing this game.
Hal Homeowner invited Home Cleaning Services, Inc. to visit his home and give him a quote on how much it would charge to clean his house every two weeks. p. 955The HCS representative came over to his house, inspected it, told him it would charge $150 for each cleaning, detailed the tasks that would be performed for that price, and indicated when it could schedule the services. Homeowner said that he would think about it and let HCS know.
(A) HCS has made an offer to Homeowner.
(B) Homeowner has made an offer to HCS.
(C) No offer has been made because there has not been any formal written proposal.
(D) No offer has been made because a price quotation cannot be an offer.
(A) is the best answer. As noted in the answer to Question 1, a price quote can be an offer, so (D) is wrong. Based on the test of an offer set out in Question 1, Homeowner could reasonably understand that the price quote invited him to form a contract upon acceptance. The facts do not support (B) because a mere request for information on the cost of a service cannot create the reasonable understanding that HCS could bind Homeowner to a contract merely by giving a price quote. (C) is wrong because an offer to provide services can be oral and does not need any formalities.
The facts are as stated in Question 1. On May 7 (five days after receiving Engineering Co.’s email), Factory wrote a letter to Engineering Co. stating, “Thanks for your email. We do wish to have you install the machine for $100,000. We need it installed by May 30.”
(A)This is likely an effective acceptance.
(B)This is not likely an effective acceptance because Factory should have responded by email, not by mail.
(C)This is not likely an effective acceptance because Factory apparently varied the terms of the offer with its demand for installation by May 30.
(D)This is not likely an effective acceptance because Factory waited too long to respond.
Although an argument can be made for (D), (A) is the best answer. Again, Engineering Co.’s email probably constitutes an offer. The offer does not specify a time for acceptance, so it must occur within a reasonable time. Although the determination of a reasonable time is a question of fact, to be determined under all the circumstances, there is no indication in the facts that the transaction is one in which a response would have to be made sooner than five days after the offer. Therefore, the conclusion in (D) does not seem to be justified. There is no basis for (B) because the mode of acceptance is not specified and the communications began with a letter, so there is no convincing basis for arguing that mail is not impliedly authorized. (C) is wrong. As stated in the answer to Question 1, this is not a variation of the offer, which contemplates that Factory will select the delivery date.
As in Question 6, Bella Buyer bought a skateboard online from Bonebreak Boards, Inc., a skateboard manufacturer. The skateboard was delivered to Bella in a box a few days later. The following language was printed on the outside of the box in large letters: “The use of a skateboard can result in serious injury. You use this skateboard at your own risk. By using this skateboard you agree to absolve Bonebreak Boards of all responsibility and liability for any injury that you may suffer as a result of your use of the skateboard.” This statement was not contained on Bonebreak’s website or otherwise revealed to Bella at the time that she placed her order. The website made it clear that the sale of the skateboard was final and Bella could not return it for a refund. Bella was aware that the sale was final when she placed her order. Bella is subsequently injured while using the skateboard, and Bonebreak claims it is not liable on the basis of the quoted disclaimer.
(A)The disclaimer does not bind Bella. She is not a merchant and the term therefore does not become part of the contract under UCC 2-207.
(B)The disclaimer is binding on Bella because it was printed on the outside of the box and Bella accepted it by opening the packaging.
(C)The disclaimer is binding on Bella because it is a reasonable limitation of liability for injury caused by Bella’s negligent use of the skateboard.
(D)The disclaimer is binding on Bella if she doesn’t return the skateboard within 30 days.
With this change of the facts, (A) is the correct answer. (B) and (D) are not correct — Bella has no right to reject the boxtop terms after reading them on the box, delivered after the order was placed. Therefore, Bella and Bonebreak entered the contract at the time that Bella placed her order for the skateboard on the website and the terms on the box must be treated under UCC 2-207(2) as proposals for addition to the contract. Because Bella is a consumer and a casual buyer, not a merchant, the terms do not become part of the contract under UCC 2-207(2) and fall away unless Bella expressly agrees to them. Mere use of the skateboard is not likely to be treated as a signification of assent where Bella has already paid for the goods and has no option of obtaining a refund if she doesn’t like the proposed terms. (This boxtop term would likely have bound Bella had she been given notice of it at the time of contracting.) As noted above, (C) is incorrect because it disregards the issue of whether Bella manifested assent to the term and focuses only on the issue of whether the disclaimer is reasonable.
A Type I preliminary agreement is:
(A)An actual, binding contract.
(B)Not yet a binding contract, but an agreement to enter into a binding contract.
(C)An agreement to agree.
(D)An agreement to negotiate in good faith.
(A) is correct. In Brown v. Cara the court characterized a Type I preliminary agreement as a complete agreement that reflects agreement on all issues perceived to require negotiation and binds them to their ultimate objective. All that remains is for the parties to formalize the agreement in a signed writing.
Which of the following statements is most accurate?
(A) The Federal Arbitration Act requires parties to arbitrate disputes whenever one of the parties demands that the dispute be settled by arbitration.
(B) The Federal Arbitration Act requires parties to arbitrate disputes only when both parties understand that they have agreed to arbitrate the dispute.
(C) The Federal Arbitration Act requires parties to arbitrate disputes only where parties have actually agreed to arbitrate the dispute.
(D) The Federal Arbitration Act requires parties to arbitrate disputes where parties have manifested assent to a valid arbitration provision.
(D) is the most accurate statement. The Federal Arbitration Act upholds the validity of an arbitration agreement unless there are grounds to invalidate it under principles of contract law. Under the objective test, a manifestation of assent to an arbitration provision binds a party provided that there are no other grounds under contract law to invalidate the provision. (C) is incorrect in that it requires actual (subjective) agreement to the provision. (A) is incorrect because there must be an agreement to arbitrate, and (B) is incorrect because it does not recognize the requirement that the arbitration provision be valid under contract law.
A clothing store sent an email advertising a sale to all customer email addresses on its list. The email stated, “Every item in our store will be reduced by 25% from 10 a.m. to 8 p.m. next Saturday, April 28. Quantities are limited to stock on hand, so come in early to avoid disappointment.”
(A) This email cannot be an offer because the reasonable recipient of a mass email must realize that the sender does not intend the advertisement to be an offer.
(B) This email cannot be an offer because the sale is limited to stock on hand.
(C) This email cannot be an offer because it was sent to a large number of recipients.
(D) This email could be an offer provided that a reasonable reader of the email would understand it as such.
(D) is correct. Although courts may operate on the assumption that an advertiser does not usually intend the advertisement to be an offer, it could constitute an offer if its wording and the context (including reasonable expectations in the marketplace) would justify a recipient in understanding it to be one. For this reason, (A) is wrong. (B) is also wrong. Limiting sales to stock on hand does not preclude the email from being an offer, and because it contains words of limitation it may actually point to its being an offer, as was the case in Lefkowitz, where the advertisements stated “first come, first served.” (C) is wrong as well. An advertisement could be an offer if it can be reasonably interpreted as such, even if the advertiser disseminates it widely.
The facts are as stated in Question 1, except that Engineering Co.’s email contained the additional sentence, “Please note that this price quotation is good for 10 days.” On May 17 (fifteen days after receiving Engineering Co.’s email), Factory responded by letter, “Thanks for your email. We accept your offer to install the machine for $100,000.”
(A)Factory’s letter is an effective acceptance.
(B)Factory’s letter is not an effective acceptance because mail is not a permissible mode of acceptance.
(C)Factory’s letter is too late to be an acceptance, so it operates as an offer.
(D)Factory’s letter lacks sufficient detail to be an acceptance or an offer.
(C) is the best answer. By stating that the price quotation was good for 10 days, Engineering Co. signifies that the offer to install the machine at that price lapses 10 days after the offer was made. Therefore, Factory had lost the power of acceptance when it sought to accept on May 17, so its letter is an offer to revive the transaction which Engineering Co. may choose to accept, if it is still willing to install the machine for the price that it originally quoted. Therefore (A) is wrong. (B) is wrong for the reason stated in the answer to Question 2. (D) is also wrong. The terms of the contract are contained in Engineering Co.’s offer, so Factory’s response needs no detail at all.
Just for fun - more acceptance:
The facts are the same as in Question 5. Assume that the mayor did make an offer in her television interview. Joe had been evicted from his apartment a few days before the mayor made her statement on television, and he has been living in his car since then. Joe knew nothing about the mayor’s statement on the television. However, by coincidence, on the day that the mayor had appointed for people to come to her office, Joe went to the city hall to protest to the mayor about the inadequacy of the city’s efforts to provide enough affordable housing. He saw the mayor and voiced his protest. He later heard of the mayor’s television statement.
(A)Joe has not accepted the offer because there was no meeting of the minds — he had no intent to accept it when he went to the city hall.
(B)Joe manifested apparent intent to accept the offer, so under the objective test, he has accepted the offer even though he did not know about it.
(C)Joe’s action is an inadvertent manifestation of acceptance. Even under the objective test, an action that inadvertently manifests intent to accept an unknown offer can never be treated as an acceptance.
(D)Joe’s action is an inadvertent manifestation of acceptance. Although an offeree cannot be bound if he or she inadvertently manifests intent to accept an unknown offer, a court may allow the offeree to elect to have the action be treated as an acceptance.
(A) is wrong because it suggests that assent is determined subjectively. (B) is wrong because it states the objective test too absolutely and fails to recognize that courts recognize an exception to the objective test where conduct inadvertently manifests acceptance of an offer unknown to the actor. Both (C) and (D) recognize this, but (D) is the better answer because (C) is too absolute in stating that an inadvertent manifestation of acceptance can never be treated as acceptance. The purpose of the doctrine is to protect a person who does not know of an offer from being bound by an action that happens, by chance, to appear to be an acceptance of the offer. Where a person does not know of an offer and cannot reasonably be held accountable for the apparent meaning of the act that seems to manifest of assent, it would be unfair to apply the objective test to bind the party to the unintended acceptance. However, the doctrine makes no sense where someone like Joe, who inadvertently manifested assent, later discovers that he has apparently accepted an offer that serves his interests and he wishes to have the benefit of the contract performance. In such a case, it is better policy to hold the offeror accountable for setting up the situation that gave rise to the apparent contract. Courts are particularly likely to allow inadvertent assent to act as acceptance when the offeror is a public entity or official.
A Type II preliminary agreement is:
(A)An actual, binding contract.
(B)Not yet a binding contract, but an agreement to enter into a binding contract.
(C)An agreement to agree.
(D)An agreement to negotiate in good faith.
(D) is correct. As explained in Brown, a Type II preliminary agreement comes into effect where the parties have not yet entered a binding agreement in their negotiations, but it is clear from the circumstances that they have committed to continue to negotiate in good faith in a genuine effort to reach their ultimate contractual objective.
Carrie Customer orders goods on a website. The vendor has set up the website such that Carrie has to follow a specific procedure to complete her order. First, she places the goods in a virtual shopping cart. When she has finished selecting the goods, she must go to the shopping cart to complete her purchase by submitting the order, entering a delivery address and payment information, and finally confirming that the order and other information are correct. After she completes the first step of submitting the order, a text box appears automatically on the computer screen which contains standard terms governing the transaction. The box contains about half a page of terms and she must scroll down the box to read them all. There is also a button on the box that allows her to read the terms in a full-page format or to print them. She cannot proceed to complete her order until she has clicked on a button on the text box that states “I acknowledge that I have read and understand these terms.” These standard terms are best characterized as:
(A) Shrinkwrap terms.
(B) Boxtop terms.
(C) Browsewrap terms.
(D) Clickwrap terms.
(E) None of the above.
(E) is the best characterization, based on the definitions of these terms in Sections B.3 and B.4 of Chapter 3. Courts usually use the word “shrinkwrap” to describe terms that are within the packaging (whether of a physical object or software) so that they are not seen by the buyer until the package is opened. “Boxtop” refers to terms visible on the packaging itself. Terms that are set out on a website are called “browsewrap” if the customer has to click on a link to see them, but need not manifest assent to them before completing the transaction, and “clickwrap” if the terms are presented on the website in a way that the customer must signify assent to them before completing the transaction. The terms here would clearly be clickwrap if the customer manifested assent to them by clicking on the button. However, clicking on the button on this website is merely the customer’s acknowledgment of having read and understood the terms. This process does not neatly fit into the definition of “browsewrap” either because the terms are presented automatically to the customer, who does not have to click on a link to see them. Probably the best characterization is that website design creates something between clickwrap and browsewrap that allows the website operator to establish that the terms were well-noticed to the customer, but not to establish that the customer expressly manifested assent to them. Although some courts may conclude that a customer manifested assent to the terms by placing an order under these circumstances, this result is not certain. As a practical matter, once the website operator has gone to the trouble of including a button for the customer to click, it makes no sense to fall short of having the button operate as an “I agree” button that expressly and specifically manifests the customer’s assent to the terms.
During her campaign for re-election, the mayor of the city claimed in an interview with a television reporter that she had completely eliminated the problem of a lack of affordable housing in the city. The reporter expressed skepticism and said that he had often seen people sleeping in their cars, under bridges and in parks. The mayor declared, “No, you are wrong. I will state again that there are no longer any people experiencing homelessness in our city. To show how confident I am in saying this, I will give $100 to anyone who comes to my office tomorrow and who has been unable to afford housing in our city so lives in a car or on the streets.” The next day 200 people showed up at the mayor’s office, all of whom proved that they met the mayor’s criteria.
(A) The mayor did not make an offer because a reasonable person would understand her statement to be mere political puffery and would not take it seriously.
(B) The mayor did not make an offer because no reasonable person would understand a statement made during a television interview to be an offer.
(C) The mayor made an offer which was accepted by all 200 people. The mayor is therefore obliged to pay $100 to each of them.
(D) The mayor made an offer which was accepted by the first person to show up at her office on the following day. The mayor is therefore obliged to pay $100 to that person.
(C) is the most persuasive answer. The mayor was foolish enough to make a statement that could be reasonably understood by viewers of the TV interview to give the power of acceptance to all people in the city who met her criteria and who showed up at her office on the appointed day. The mayor may have intended her statement to be rhetorical or political puffery, but (A) is too dogmatic in asserting that a reasonable person would understand it as such. (B) is wrong. The statement is not disqualified from being an offer merely because it was made in a TV interview. (D) is not as plausible an interpretation as (C) because the mayor did not confine her offer to the first person to show up at her office, but extended it to all people who met her criteria.
The facts are as stated in Question 1, except that Engineering Co.’s email contained the additional statement, “This offer, with its complete terms, is contained in the attached document. To accept this offer, please print out the document, sign it, and mail it to us by May 10.” Which of the following responses is most likely to be an effective acceptance?
(A)Factory responded by email on May 4, stating, “Thanks for your offer. We accept.”
(B)Factory responded by email on May 11, stating, “We read the attachment to your email, which is acceptable to us, so we accept your offer.”
(C)Factory printed out the attachment, scratched out an arbitration provision, initialed the change, and signed the document, which Factory mailed to Engineering Co. on May 4. Engineering Co. received it on May 6.
(D)Factory printed out the attachment, signed it, and mailed it to Engineering Co. on May 10. Engineering Co. received it on May 12.
(D) is the correct answer. Factory has conformed exactly with the method of acceptance specified by Engineering Co. and has accepted in time. The language of the offer does not exclude the mailbox rule, which makes the acceptance effective on its mailing on May 10, even though it was received only on May 12. By contrast, the other methods of acceptance are not the most likely to be effective and some are completely ineffective. Factory’s effort at acceptance by email described in (A) might be effective, but it is not the most likely alternative to be effective. Even though an argument could be made that the offer does not expressly declare its procedure to be the exclusive means of acceptance, an email acceptance does not conform at all to the stated procedure and might therefore be inadequate. The email in (B) is closer to what Engineering Co. has asked for, but still not exactly in compliance with the mode and is too late. In (C), Factory did conform to the mode of acceptance and responded in time, but by striking out the arbitration provision Factory did not accept the terms offered and instead made a counteroffer.
a little more acceptance:
On March 1, Offeror mailed an offer to Offeree. The offer stated, “This offer will lapse at 5 p.m. on March 10 unless a written acceptance is received before that time.” On March 4 at 10 a.m. Offeree mailed a written acceptance to Offeror. At noon on March 5, Offeror sent a text message to Offeree revoking the offer. Offeree received the message immediately. Offeror received Offeree’s acceptance when the mail was delivered to him at 4:30 p.m. on March 5.
(A)The text message was an effective revocation and it terminated the offer because it was received by Offeree before Offeror received the acceptance.
(B)The text message was not an effective revocation because the offer was sent by mail and the revocation must be sent in the same way. The offer had therefore not terminated by the time it was accepted at 4:30 p.m. on March 5.
(C)The text message would have been an effective revocation if it had been received by Offeree before the offer was accepted. However, the revocation only took effect at noon on March 5 and the acceptance took effect on mailing at 10 a.m. on March 4. The offer was therefore accepted before Offeror sought to revoke it.
There is an argument that (A) is correct because it may be reasonable to interpret the offer as excluding the mailbox rule, so the revocation, which was p. 963communicated to Offeree at noon on March 5 took effect before the acceptance was received at 4:30 p.m. on that day. However, there is also a good argument that (C) is correct: The language of the offer specifies only that acceptance must be received by the lapse date to bring the contract into existence. It does not actually say that receipt of the acceptance is required to preclude revocation before that date. Therefore, an acceptance sent before the lapse date, while effective for contract formation only if received by 5 p.m. on March 10, could be effective on mailing for purposes of precluding revocation. This may be a strained interpretation, but not an implausible one, especially given courts’ tendencies to read procedural requirements in offers flexibly. (B) is wrong. A revocation is effective as soon as the offeree knows about it. It need not be sent in the same medium as the offer.
At common law, an agreement to agree is:
(A)An actual, binding contract.
(B)Not yet a binding contract, but an enforceable agreement to enter into a binding contract.
(C)An agreement to negotiate in good faith.
(D)Of no binding legal effect at all.
(D) is correct. Courts use the term “agreement to agree” to refer to an agreement that defers a material term for later resolution and therefore cannot qualify as a contract until that term is settled. Because the parties have not yet resolved this essential term, their agreement is too tentative to be treated as a contract. Sometimes courts will characterize a single clause within a broader, otherwise enforceable contract as an “agreement to agree,” and if so, the consequence is that clause will not have any legal effect. Unlike the common law, UCC Article 2 gives effect to “agreements to agree” under some circumstances, especially if a court is persuaded that the parties intended to be bound and, through use of UCC gap-fillers or otherwise, there is a reasonably certain basis for a remedy.
Say that in Leonard v. PepsiCo the commercial featured a Ferrari Berlinetta rather than a Harrier jet. Apart from this, the commercial was exactly the same as described in the case except that the student arrived at the school in the Ferrari, the military music was replaced by loud pop music, and the words that appeared after the drum roll were “FERRARI BERLINETTA, 2,000,000 PEPSI POINTS.” The retail price of the Ferrari is about $300,000. Leonard, who has no sense of humor, genuinely believed that the Ferrari was offered as a real prize and he therefore spent $200,000 to buy the needed Pepsi drinks and additional Pepsi points.
(A) This should change the result of the case because the joke is no longer obvious to a reasonable viewer — although a student would not be likely to fly a military jet to school, driving to school in a Ferrari is somewhat plausible.
(B) This should change the result of the case because Leonard honestly believed that the offer of the Ferrari was genuine and it misled him into spending $200,000 to buy the necessary Pepsi points.
(C) This should not change the result of the case. Even with these changed facts, there is sufficient indication that a reasonable person would have understood the commercial to be a joke.
(D)This should not change the result of the case because Pepsi intended the inclusion of the Ferrari in the commercial to be humorous and not to be taken seriously.
(C) is the best answer. Replacing the jet with the Ferrari eliminates some of the factors that the court identified as signaling to a reasonable person that the jet was included as a joke. Although there are arguments to the contrary, there remain clear indications that would lead a reasonable person to understand that there was no serious offer of a Ferrari for 2,000,000 Pepsi points — the tone of the commercial is still humorous, hyperbolic, and absurd, and the retail price of the car is $100,000 more than the cost of the 2,000,000 Pepsi points. (A) is therefore not a convincing answer. (B) and (D) are both wrong because they both focus on the subjective understanding of one of the parties rather than on the objective meaning of the commercial.
Seller wished to sell his car. He left the car in a parking lot with a sticker on the front windscreen which read, “Offered for sale, as is, $16,000 cash” and included Seller’s phone number.
(A) Seller has made an offer because the sign used the word “offered.”
(B) Seller has made an offer because the sign states all relevant terms and leaves nothing to be negotiated.
(C) Seller has not made an offer. A sign on a car can be nothing more than a solicitation of offers.
(D) Seller might have made an offer, but to answer this question we need more information on the reasonable expectations in the marketplace.
(D) is the best answer. Seller may have made an offer, as indicated in (B), because the sign does appear to state all relevant terms and leaves nothing to be negotiated. However, the reasonable expectations of the marketplace could be crucial to decide if a reasonable person seeing the sign would be justified in concluding that Seller could be bound in contract by a signification of acceptance. The fact that Seller used the word “offered” on the sign could be a factor that points to the sign being an offer, but (A) is too emphatic. Similarly, (C) is also too emphatic. A sign on a car could be an offer if so reasonably understood in the marketplace.
Question 4 for Chapter 4 described a television interview in which the mayor, running for re-election, claimed that she had completely eliminated the problem of a lack of affordable housing in the city. When the reporter expressed disbelief, the mayor declared, “No, you are wrong. I will state again that there are no longer any people experiencing homelessness in our city. To show how confident I am in saying this, I will give $100 to anyone who comes to my office tomorrow and who lives in a car or on the streets as a result of being unable to afford housing in our city.”
(A)The mayor has made an offer for a bilateral contract.
(B)The mayor has made an offer for a unilateral contract.
(C)The mayor has made an offer that may be accepted either by promise or performance.
(D)The mayor has not made any offer at all.
(B) is correct. As explained in the answer to Question 4 for Chapter 4, the mayor did make an offer, so (D) is incorrect. The offer states that the payment will be made to all people who meet her criteria and who show up at her office at the appointed time. The act of showing up at the office on the date specified is the performance required under the contract. The nature of the contract is such that it would make no sense to see it as calling for contract formation by a promise to show up. Nor does it make sense to conclude that a contract is formed when performance begins because that would bind a person to complete the journey to the mayor’s office once the person embarks on it. It is therefore, by nature, an offer for a unilateral contract, even though it does not state in so many words that it can be accepted only by full performance. Because the offer cannot be accepted by anything less than full performance, both (A) and (C) are incorrect.
who is the best prof?
Blum
Lessee and Lessor entered into a five-year lease, which Lessee had the option to renew for a further five-year period. The rent payable for the first five years of the lease was stated in the lease. The renewal option stated that if Lessee decided to exercise the option, the rent for the option period would be “in an amount to be determined by Lessor in its reasonable discretion.” After Lessee exercised the renewal option, Lessor proposed a rent that Lessee regarded as excessive.
(A)The exercise of the renewal option did not give rise to a valid contract because the parties deferred agreement on the rent for the option period.
(B)The exercise of the renewal option did not give rise to a valid contract because the rent provision is too indefinite.
(C)The exercise of the renewal option did give rise to a valid contract under which Lessor has the right to determine the rent, subject to a standard of reasonableness.
(D)The exercise of the renewal option did give rise to a valid contract. Because the parties dispute the amount of rent to be paid, the court must fix a reasonable rent for the renewal period.
(C) is correct. The parties did not defer agreement, as stated in (A), because they did not leave the rent for future negotiation, but manifested the intent to give Lessor the right to determine the rent. Lessor’s discretion to determine the rent is subject to the requirement that it act reasonably in doing so. Therefore, to resolve the dispute over the rent, the court must determine if Lessor has acted reasonably deciding on what rent to charge. This is not the same as the court fixing the rent, as indicated in (D) because the court’s role is to decide if Lessor is reasonable, not in taking over the function of fixing a reasonable rent itself. (B) is wrong. Although the rent provision is not stated as a concrete figure or formula, which would be clearer, it should not cause the renewal contract to fail for indefiniteness. Because the lessor is given the discretion to set the rent, the mechanism for supplying the omitted term is clear enough to indicate what the parties intended and to allow the court to determine what the rent term should be.