Chapter 10

Mutual Assent

 

Objectives:

1. Three elements of an offer

2. Seven ways an offer ends

3. Compare traditional and modern theories of definiteness

4. Five situations limiting right to revoke]

5. Rules of when acceptance takes effect

 

I. Offer

          A. Essential elements

                   1. Communication to offeree

                   2. Show an intent to be bound

                   Estate of Sumstad, p. 182.

                   Facts: Couple buy a safe at an estate auction. Both couple and seller knew there was an unopened secret compartment in the safe. When a locksmith opened the compartment, over $32k was in the safe. Police seized funds, and instituted a civil suit to determine ownership.

                   Issue: Who owns the $32k? What was the intent of the sale?

                   Holding: Intent of offer was that auction would be final sale of safe and its contents. Buyers own the property.

                   Why? Terms of sale, and knowledge of secret compartment, indicate seller intended to sell safe and contents.

                             a. Preliminary negotiations are not offers

                             b. Advertisements, generally, are not offers

                    Lekowitz, p. 183.

                   Facts: Coat company advertises that first three buyers can buy a $100 coat for $1. Terms indicated show at 9:00 a.m. sharp on the appointed day. Lefkowitz tried to buy, but seller said only women could buy. Company ran a similar promotion the next week, Lefkowitz shows up again, with similar result.

                   Issue: Was the advertisement an offer which L accepted?

                   Holding: Yes. The terms of the offer were definite enough to be an offer, not just an invitation for offers.

                             c. Auctions. If no reserve, seller must sell to highest bidder. If reserve, then seller can pull out any time before acceptance.

          B. Duration of Offers

                   1. Lapse of time

                   Newman, p. 185.

                   Facts: Tax protestor goes on late night current events show and says, if anyone calls the show with the statute requiring individual to file a tax return, then he will pay $100k. Lawyer hears about the show the next day, finds the statute, and calls it in. He does not get paid, so he sues.

                   Issue: Was the statement and offer, and was it accepted?

                   Holding: Yes, it was an offer. However, it lapsed by its terms when the show ended, so acceptance was too late.

                   2. Revocation. Generally, offeror may revoke any time up to acceptance.

                             a. Option contract. Stays open for term, because offeror was paid to keep offer open.

                             b. Firm offer under UCC. Merchant under code must keep offer open, if it is in writing

                             c. Statutory irrevocability. Some special contracts, like public building Ks, are irrevocable for a time

                             d. Irrevocable offers of unilateral contracts. If performance begins, then offer become irrevocable

                             e. Promissory estoppel. Example, sub submits bid to general contractor. Sub cannot revoke because of reliance general made in submitting bid for general contract.

                   3. Rejection.

                   4. Counteroffer

                   Giannetti, p. 188.

                   Facts: Sale of home.

                   B's Offer 1. $155k, with $2.5k deposit, $124k mortgage.

                   S's Counteroffer. $160k.

                   Inquiry, are certain things included. S says no.

                   B's Acceptance/Offer 2. $160k, with $2.5k deposit, $128k mortgage.

                   Somehow, change in mortgage amount was not communicated. S tries to get out of deal. B sues for specific performance.

                   Issue: Did B accept S's counteroffer?

                   Holding: No. Change in mortgage was a new offer.

                   5. Death or incompetency

                   6. Destruction of subject matter

                   7. Subsequent illegality

 

II. Acceptance

          A. Communication of acceptance

          B. Silence as acceptance (record club cards)

          C. Effective moment (mailbox rule)

          D. Authorized means of communication

          Osprey, p. 192.

          Facts: 15 years lease agreement. Had two five year renewal options. To exercise option, contract said notice "may" go by U.S. mail or personal delivery, six months prior to expiration. On first renewal, tenant timely mailed, no problem. On second renewal, tenant faxed at the last minute, and sent a copy by FedEx.

          Issue: Was the acceptance of the option validly communicated?

          Holding: Yes. "May" does not mean "shall" or "must." Alternative means of delivery was acceptable.

          E. Unauthorized means. Usually OK, if timely received.

          F. Acceptance following rejection. Whichever received first becomes effective.

          G. Late or defective acceptance. Usually, does not create a contract

          H. Variant acceptances

                   1. Common law, mirror image rule

                   2. UCC and the battle of the forms. If B and S send forms back and forth, with their own preprinted terms, whose form controls? Generally, offeror's terms control, offeree's terms effective if they do not directly conflict.