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Offer And Acceptance Outline

Updated Offer And Acceptance Notes

Contracts Outlines

Contracts

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Offer and Acceptance

1. There is no legally binding agreement until an offer is made and then accepted.

2. The distinction between an offer and an invitation to engage in bargaining and negotiation is important.

A. Offers vs. Solicitations

One benefit of making solicitations non-binding is it persuades risk-averse parties to come together.

In general, courts resolve doubtful cases with presumption that the communication is an invitation to negotiate and not an offer.

Simply quoting prices does not constitute an offer (unless the quotation clearly indicates otherwise..level of detail, etc). This includes public advertisements.

No offer: Dyno Construction Company v. McWane, Inc. (1999) - Price quotes aren’t offers. Where the plaintiff and defendant negotiated iron pipe prices by phone but defendant insisted on plaintiff signing a contract before the pipe could be ordered and delivered, the contract was not formed until the paperwork was signed by the plaintiffs, and the price quotes that, prior to the signing, were exchanged between the two parties did not contain enough information (quantities, times of deliveries, etc) to constitute offers that could be accepted. It’s clear from the layout and the handwritten notes on the quotes that they were merely an invitation to an offer.

Note: As explained in a later section, courts are sometimes willing to fill in contract terms when it’s clear the parties intended to be legally bound, but this is not one of those cases.

Offer: Lefkowitz v. Great Minneapolis Surplus Store, Inc. (1957) – The store’s ad offered a $1 price and said “first come, first served.” This was considered an offer because its terms where clear, definite, and explicit. Whoever arrived at the store early enough to get a coat got a coat. Simply stating a price would not have constituted an offer, but stating a price and promising to serve the first person who arrived did. It set the terms of the agreement, and those terms were met.

B. Acceptance of an Offer

1. An acceptance is a voluntary act of the offeree whereby he exercises the power conferred on him by the offer, and thereby creates the set of legal relations called a contract.

2. The offeror is the creator of the contract and at the time of its creation he has full control over both its existence and its terms.

3. There are a number of ways acceptance can be manifested once an offer has been made. Since the offeror is the creator of the offer, she has the power to invite acceptance by any reasonable means or to limit acceptance to a particular or specified means.

4. The commencement of performance by the offeree is a valid form of acceptance.

5. Section 32 of the Restatement states that when the offeror does not state a specific method of acceptance, it is assumed that the offeree can accept by either promise or actual performance.

Offer cannot be withdrawn: Ever-Tite Roofing Corp. v. Green (1955) - Roofing contract accepted by performance -- Where a roofing company (P) and homeowner (D) signed a contract stipulating that the agreement was binding only upon written acceptance by the principal or authorized officer of the Contractor, or upon commencing performance of the work, the roofing company could accept the offer by packing its trucks and showing up to do the job. The court held the homeowner was liable for damages when Ever-Tite got to the worksite and found another company already undertaking the work. The court also noted that an offer that does not specify a time-limit must remain open for a reasonable time, and given the necessity of a credit check in this case, ten days was reasonable. If he wanted to revoke the offer, he should have let the P know.

6. Silence or Dominion as Acceptance – Only under special circumstances will silence or an act of dominion constitute acceptance of an offer. The practices of a specific business or industry, or the course of dealing between two parties over a period of time may include silence as an established method of acceptance.

7. Notice of Acceptance – To create a unilateral contract, the offeree can simply commence performance. In a bilateral contract, acceptance has to be communicated to the offeror.

8. The Mailbox Rule – Section 63 of the Restatement states that acceptance of an offer by mail takes effect as soon as the acceptance is mailed, whether or not it ever reaches the offeror.

C. Revocation of an Offer

1. An offeror is free to revoke his offer and terminate the offeree’s power to accept, providing that he acts before the offeree has recorded his acceptance (either through communication or performance).

2. However, offeror must let offeree know that the offer has been revoked in order to prevent any wasteful spending on the part of the offeree.

3. If an offer is made during a conversation, without an expression to the contrary, such an offer ends at the conclusion of the conversation.

4. However, if the offeror species that the offer will remain open for a certain period of time, the offer remains open for that time period unless it is explicitly revoked.

5. In the case of bargaining by mail, revocation of an offer does not become effective until the offeree actually receives the letter communicating the withdrawal.

6. It is possible to create offers that cannot be revoked for a specific period of time. Option contracts and certain firm offers and construction bids can operate as irrevocable offers. The most straightforward type of option contract is where one party pays another to make an offer by the latter irrevocable. Apparently, there needs to be some sort of consideration offered by the party to make it legit.

D. Counter-Offer

1. Section 39 of the Restatement defines a counteroffer as “an offer made by an offeree to the offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.”

2. Counteroffers serve as a rejection of the previous offer, rendering the offeree incapable...

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