Offer
An objective manifestation of a present intent to contract
- Demonstrated by a promise, undertaking, or commitment; definite and certain terms; and communication to an offeree
Objective manifestation of intent - offer must give offeree a reasonable expectationthat offeror is willing to enter into a K
- Would a reasonable person believe the communication is an offer inviting acceptance?
Definite and certain terms - terms included must be sufficient to allow a court to enforce the K (e.g. quantity, time for performance, price, etc.)
- Vague terms or terms of negotiation are insufficient
Communication to an identified offeree - offeree must know of the offer and have the power to accept it
- Advertisements - generally not offers, unless highly specific as to quantity and clearly indicate who may accept
UCC offers - quantity must be certain or capable of being made certain
- Requirement & Output Ks - no unreasonably disproportionate increase in quantity allowed
- Missing terms OK, particularly price, if parties clearly intended to make a K and there is a reasonably certain basis for giving a remedy
Termination of Offer
An offer may be terminated by an act of a party or by operation of law
Acts of parties:
- Revocation by offeror
- Rejection by offeree
- Lapse of time
- Offeror can set a time limit for acceptance, at the end of which offeree’s power of acceptance automatically terminates
Operation of law:
- Death or insanity of either party
- Destruction of proposed K’s subject matter
- Supervening illegality
Revoking Offers & Irrevocable Offers
An offeror may revoke her offer, which effectively terminates the offer and the offeree’s power of acceptance
Methods of revocation:
- Unambiguous statement by the offeror to the offeree
- Offeree becomes aware of offeror’s unambiguous conduct or statement indicating an unwillingness or inablity to contract
Limitations on revocation:
- Revocation is only effective upon receipt by offeree
- Offer cannot be revoked once it has been accepted
- Unilateral Ks - start of performance makes the offer irrevocable for a reasonable time to complete performance
- Start of performance must go beyond mere preparation
Irrevocable offers - offer is irrevocable if:
- Option K - promise to keep an offer open
- Common law - consideration required in exchange for option
- UCC - no consideration required
- UCC firm offers - a mercant’s offer made in a signed writing that assures the offer will be held open is irrevocable for the time stated; no consideration required
- if no time stated, irrevocable for up to three months
- Detrimental reliance by offeree - reliance must be reasonable
Rejection of Offer
Rejection by offeree terminates the offer and the offeree’s power of acceptance
Methods of rejection:
- Express rejection - effective when received
- Counteroffer - terminates the original offer and becomes a new offer; bargaining is not a counteroffer
- Conditional acceptance - terminates the original offer and becomes a new offer (look for terms such as “if,” “only if,” “but,” “provided,” “so long as,” “on condition that,” etc.)
- E.g. offer for lawn mowing service; offeree says “I’ll accept if you also trim the hedges”; this is a new offer and original offeree is now the offeror
- Acceptance with additional terms
- Common law - acceptance must mirror the offer; acceptance with additional terms creates a rejection and counteroffer
- UCC - depends on whether both parties are merchants
- K involing non-merchant - terms of offer govern; K is formed, but additional terms are excluded and considered mere proposals to modify the K
- Both parties are merchants - additional terms become part of the K unless certain exceptions apply
Acceptance
Acceptance arises upon offeree’s clear expression of assent to the terms of the offer
- Offeror controls method - offeror is the master of the offer and can dictate the manner by which an offer is accepted
Mirror Image Rule (common law) - acceptance msut mirror the offer’s terms; it cannot add, omit, or change terms of the offer
UCC Acceptance - two issues often arise:
- Acceptance with additional terms - are both parties merchants?
- Yes - K is formed with additional terms unless either:
- Additional terms materially change the offer,
- Offer expressly limits acceptance to the offer’s terms, or
- Offeror objects within a reasonable time
- No - K is formed, but without additional terms
- Yes - K is formed with additional terms unless either:
- Acceptance by shipment - a merchant may accept an offer to buy goods by either:
- Providing a promise to ship goods (usually by written confirmation), or
- Promptly shipping conforming goods
- Shipment of nonconforming goods - acts as an acceptance, but may give rise to breach
Mailbox Rules
Offers and acceptance transmitted via mail or other similar methods become effective upon either dispatch or receipt
Offers - effective upon receipt
Acceptance - effective upon dispatch
Method of communication - unless otherwise provided, offers invite acceptance in any reasonable manner under the circumstances
- E.g. A sends offer to B via e-mail and B accepts via text message; valid K has been formed
- If acceptance is via instantaneous two-way communication (e.g. phone), it is treated as if the parties are in each other’s presence
Limitations:
- If the offer stipulates acceptance is not effective until received, the offer controls (i.e. offeror can opt out of mailbox rules)
- If offeree sends both a rejection and acceptance, first to arrive controls
- Option Ks - acceptance is effective upon receipt
Revocation - revocation is effective only upon receipt
- i.e., mailbox rules do not apply
Acceptance by Performance
Unless acceptance is limited by terms of the offer, offeree may accept by partial performance (for bilateral Ks) or complete performance (for unilateral Ks)
Unilateral Ks - complete performance required
- Offeree is not obligated to start or complete performance
- Failure to perform does not give rise to breach b/c no K is formed absent complete performance
- Revocability - offer may become irrevocable upon the start of performance until completion
- Notice only required upon completion - offeree is not required to give notice upon start of performance, but must notify offeror within a reasonable time upon completion
Bilateral Ks - partial performance gives rise to acceptance
- Offeree must make offeror aware of acceptance
Offers requiring acceptance by promise - an offer requiring acceptance by promise may still be accepted by performance if:
- Offeree begins to perform; and
- Offeror knows offeree has begun performance and acquiesces
Note - an offer may always limit methods of acceptance
Consideration & Substitutes for Consideration
Consideration is a bargained-for exchange of legal value between parties; there must be a benefit to promisor or detriment to promisee
- A required element of every K
“Bargained-for exchange” - the promise must induce the detriment and the detriment must induce the promise
- Detriment = an obligation to do or refrain from doing something one would otherwise not be obligated to do or refrain from doing
- Past or moral consideration - a promise to perform a pre-existing duty or obligation generally does not constitute consideration
Invalid consideration - the following do not constitute consideration
- Promises of gifts or conditional gifts
- Illusory promises - a promise where there is no obligation to perform (e.g. A promises to do B’s chores if he has time; A is not actually obligated to do anything, thus no consideration)
Promissory estoppel - consideration substute
- Requirements - courts may enforce a promise if:
- Promisor reasonably expects reliance by promisee;
- Promisee acts or refrains from acting such that his reliance is detrimental; and
- Injustice will occur without enforcement of the promise
