Agreement = offer and acceptance.
Parties must show mutual assent to terms of contract.
Once an agreement is reached, if the other elements of a contract are present, a valid contract is formed.
Requirements of the Offer
Ø Offeror’s serious intention.
Ø Definiteness of terms.Location
Ø Communication to Offeree.
Offeror’s Serious Intention
Contract is judged by what a reasonable person in the Offeree’s position would conclude about the offer.
Case 10.1: Lucy v. Zehmer (1954).
Offers made in anger, jest, or undue excitement are usually not offers.
Expressions of opinion are not offers.
Statements of Intention or preliminary negotiations are are not offers.
Advertisements, Catalogues, Price Lists, and Circular are treated as Invitations to negotiate and not as offers.
Offer-Definiteness of Terms
Terms (Expressed or Implied).
Ø Identification of the parties.
Ø Object or subject matter of the contract.
Ø Consideration to be paid.
Ø Time of payment, Delivery, or Performance.
Case 10.2: Satellite Entertainment Center v. Keaton (1997).
Offeree’s knowledge of the offer:
Ø Directly by the Offeror.
Ø Use of Agents.
Termination of the Offer
An offer may be terminated prior to acceptance by either:
Ø Action of the Parties; or by
Ø Operation of Law.
Termination by Action of the Parties
Revocation of the offer by the Offeror:
Ø Offer can be withdrawn anytime before Offeree accepts the offer.
Ø Effective when the Offeree or Offeree’s agent receive it.
Option Contract: Promise to hold an offer open for a specified period of time in return of consideration.
Termination by Action of the Parties
Ø Detrimental Reliance or Promissory Estoppel where Offeree relies on offer to his or her detriment, thus Offeror is barred from revoking the offer.
Rejection of the offer by the Offeree:
Ø Rejection by the Offeree (expressed or implied) terminates the offer.
ØEffective only when it is received by the Offeror or Offeror’s agent.
Rejection by Offeree (Cont’d).
Ø A counterofferby the Offeree is a rejection of the original offer and making of a new offer.
Mirror Image Rule.
Ø Offeree’s acceptance to match the the Offeror’s offer exactly.
Termination by Operation of Law
Lapse of Time.
Ø Offer terminates by law when the period of time specified in the offer has passed.
Ø If no time period for acceptance is specified, the offer terminates at the end of a reasonable period of time.
Destruction of the Subject Matter.
Death or Incompetence of the Offeror or Offeree.
Supervening Illegality of the Proposed Contract.
Acceptance is the
Ø Voluntary act (expressed or implied),
Ø by the Offeree that,
Ø shows assent (agreement),
Ø To the terms of an offer.
“Mirror Image” Rule.
Silence as Acceptance
Acceptance of Services by Silence.
Ø Sometimes Offeree has a duty to speak.
Prior Dealings and Acceptance.
Ø Silence can be acceptance if there are prior dealings.
Ø Offeree has a duty to reject.\
Mode and Timeliness of Acceptance
Mail Box Rule – Acceptance becomes effective on dispatch, providing that authorized means of communication is used. Offeree accepts by using the stipulated means of acceptance.
Ø Offeror specifies (expressly or impliedly) how acceptance should be made.
Ø Effective when dispatched (mailed, shipped).
Means of Acceptance
Ø If acceptance is not properly dispatched by the Offeree.
Ø If Offeror specifies that acceptance will not be effective until it is received.
Ø If acceptance is sent after rejection, whichever is received first is given effect.
Unauthorized Means of Acceptance.
Ø Not effective until it is received by the Offeror. If timely sent and dispatched it is considered to have been effective on its dispatch.
Case 10.3: Osprey LLC v. Kelly-Moore Paint Company(1999).
Technology and Acceptance
Traditional rules provide framework for digital age.
But traditional rules may not apply to acceptances via Fed Ex, email, or fax.
Generally, ‘mailbox rule’ does not apply to online offers.