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Chapter 12: The Agreement-Offers and Acceptances

12/5/17 10:47 PM
Lack of clarity in agreements means that disputes are likely and lawsuits are
possible
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Offer- an act or statement that proposes definite terms and permits
the other party to create a contract by accepting these terms
Offeror- the person who makes an offer
Offeree- the person to whom an offer is made

Two questions determine whether a statement is an offer:
• Do the offeror’s words and actions indicate an intention to make a bargain?
• Are the terms of the offer reasonably definite?
Ex
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I’ll pay you
$800 per week for a 35 hour week, for the six months starting Monday
...

There are two statements that usually do not amount to offers:
• Invitations to Bargain
• Price Quotes
Invitations to Bargain:
Ex
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Joe faxed Martha saying, “I won’t
sell my house for less than $150,000
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Joe is indicating he might be happy to negotiate with Martha, but he is not
promising to sell her the condo
...
If Imperial Textile sends a list of fabric prices for the new year to its regular
customers, the list is not an offer
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Ralph is making the offer, and Imperial may
decline to sell at $40, or at any price, for that matter
...

Because each party wants to protect itself during the discussions, without
binding itself to premature commitments, people negotiate with a letter of
intent
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• Ex
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The notice contained an order form
stating: All sales are final and not subject to refund
...

• Mesaros lost on the note that all sales were final
• Advertisers should be careful not to bee too specific in their adds
Ex
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Carbolic Smoke Ball Company
• In the early 1890s, English citizens feared the Russian flu
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$1,000 is deposited to the
Alliance Bank, showing our sincerity
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It is yours
...
This is legal
...
”
• Example of indefinite offer: “We will work out a fair wage once we see
how busy things get
...

Baer v
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He decided to write a show about
mob boss in therapy which he developed into the Sopranos
...
He
sent in a copy of a script to Chase, who then agreed to meet with
Baer
...
Baer
arranged for meetings for Chase with detectives and prosecutors, who
provided the producer with material
...
When the
Sopranos became a hit tv show, Baer sued Chase
...

• The district court dismissed the case, holding that the alleged promise
was too vague to be enforced
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Albany College of Pharmacy and Health Services:

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Gabriel was a student in Pumo’s class
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After grading the first assignment, Pumo realized many sentences had
been copied from other sources without citations
...
Gabriel’s paper contained many
sentences, so he failed
...
He argued a
syllabus is a contract, and once Pumo broke her promise, there was no
longer a “deal
...


The UCC and Open Terms
-modifies common-law rule in some major way
- we have seen that, under common law, the terms of an offer must be definite,
but under the UCC many indefinite contracts are allowed to stand
-even though one or more terms of a contract are left open, a contract does
not fail for indefiniteness if the parties have intended to make a contract and
there is a certain basis for a remedy
-in come cases, the contract will state how the missing term is to be determined

Gap-Filler Provisions
UCC rules for supplying missing terms
...

• Open Price- if parties do not settle on price, Code establishes that a
good will be sold reasonably
• Output contract- obligates the seller to sell all of his output to the
buyer, who agrees to sell it
• Requirements contract- obligates buyer to obtain all his needed goods
from the seller
o Neither party may suddenly demand an amount of goods that is
disproportionate to their past dealings
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Termination of Offers

Offers can be terminated in four ways: revocation, rejection, expiration, and by
operation of law
• Revocation- when offeror “takes it back” before the offeree accepts
o Making Contracts Temporarily Irrevocable- some offers cannot
be revoked, for a time
§ Open contract- interest purchaser buys the rights to have
the offer held open, offeror may not revoke an offer during
the option period
§ Firm Offers- if a promise is made in writing signed by a
merchant, and he agrees to hold an offer for a stated
period, then the offer may not be revoked
•

Rejection- if offeree indicates he does not want the offer, then he has
rejected it, immediately terminates the offer
o Counter offer- when it responds to an offer with a new and
different proposal, counteroffer is still rejection

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Expiration- when offer specifies a time limit for acceptance, the period
is binding, if offer has no time limit, the offeree has a reasonable time to
accept

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Termination by Operation of Law- if offer dies or becomes mentally
incapacitated, the offer terminates immediately
o Destruction of the subject matter terminates the offer
o

Acceptance
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the offeree must say or do something to accept

Mirror Image Rule
• requires that acceptance be on precisely the same terms as the offer
• Ex
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His
position was to begin July 1, and he had until June 2 to accept the job
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Later, Foster thought better of it and wrote to the university, accepting
the school’s starting date of July 1
...

The court held that since his acceptance varied the starting date, it
was a counteroffer, which is a rejection
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There are different
acceptance terms
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A wholesaler writes to a manufacturer, offering to buy “10,000
wheelbarrows at $50 per unit
...
” Manufacturor writes back, “We accept your offer of 10,000
wheelbarrows at $50 per unit, payable on delivery
...
” The company added a new term,
but the contract is still valid
If offeree states that her acceptance is conditioned on the offeror’s
assent to the new terms, there is no contract
Additional terms are those that bring up new issues
Different terms are those that contradict terms in the offer, majority of
states hold that different terms cancel each other out

Clickwraps and Shrinkwraps
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Packaged inside electronic products
Requires that before inserting a cd, or downloading a file, you must
read and agree to all terms
Contains arbitration clauses
Limits seller’s liability if anything goes wrong
Courts have concluded that majority of these are binding, however
not all are

Specht v Netscape Communications Corporation (2002)
• A group of plaintiffs sued Netscape, claiming two products illegally
captured private info about files they downloaded from the internet
...

The plaintiffs had downloaded SmartDownload, a software that made
it where they were able to download the Communicator software
...
” If
instead of downloading, they had scrolled down further, they would
have seen a link to “review and agree to the terms of the Download
software license
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Communication of Acceptance
Method and Manner of Acceptance
• Method- refers to whether acceptance is done in person or by mail,
telephone, email, or fax
• Manner- refers to whether the offeree accepts by promising, by
making a down payment, and by performing
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Time of Acceptance: The Mailbox Rule
- An acceptance is effective the minute it is out of the offeree’s control
-ex
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Eric mails his acceptance, and the contract is
binding the moment he puts the letter into the mail
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Organon, Inc
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The company sent to him a letter offering to pay
him double the normal severance pay, provided he would sign a full
release that gave up any and all claims he might have against

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Organon
...
Soldau signed,
dated, and took it to the nearest post office where he deposited it
...
He ran back to the post office where he
persuaded the clerk to return the letter to him
...

The federal district court ruled that Soldau’s acceptance of the
proposed release was accepted when he put it in the mail
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