Contracts Fall 2008

1. Contracts Fall 2008 Class 10

2. Offer and Acceptance (Present-Day): When can offeror revoke offer? • At any time, UNLESS • there’s been consideration for it to stay open (R.2d §87(1)(a)) (option contract) • (in some contexts, esp. construction /in some courts) there’s been (reasonable) reliance on its staying open (R. 2d. §87(2)) (option contract) • where acceptance by performance invited, performance has begun (R 2d. § 45) (option contract) • a statute provides that it’s still open (such as UCC 2-205, firm offer (offeror must be merchant and offer must be in writing) (also, R. 2d §87(1)(b))

3. Firm Offer, UCC §2-205 • Offer made by merchant • To buy or sell goods • Writing is signed • Writing states offer is irrevocable for x period of time offer is irrevocable for lesser of (time stated) or (reasonable time not to exceed 3 months)

4. Firm offers • Smith, a toothpaste merchant, makes an offer in a signed writing: • “For the next five months, the price of toothpaste is $1 tube. This offer is irrevocable” • Is the offer irrevocable? For how long? • Same offer made, not in writing. One week after the offer is made, Jones turns up trying to accept the offer. Smith’s store is in a very obscure part of town, and the only way to get there involves multiple boats and trains. What result if Smith doesn’t want to honor the offer?

5. When and how can an offer be accepted? • Offer remains open (discussed in prev. class) • Incl, hasn’t been revoked • Acceptance is a ‘mirror image’ of the offer, unless contrary rule (most notably, UCC Art. 2) applies • Acceptance is in manner specified in the offer or in ‘reasonable manner’ • Acceptance is effective when sent (“mailbox rule”), unless offer provides (expressly or implicitly) otherwise • BUT: at least under Restatement rule, acceptance under option K is only effective upon receipt by offeror.

6. Determining Terms of Contracts: Different Approaches • Common law • mirror image • “last shot” • UCC approach for merchants • Some combination of parties’ terms • UCC approach for non-merchants • Knock-out • Other • Largely based on conduct

7. UCC §2-207(2) In all these cases, but especially in the cases with the question marks, what a court does will likely differ depending on parties’ conduct (performance? Particulars?)

8. UCC 2-207: Examples • A and B are both merchants: • A: “I’ll sell you 20 grade A containers of dental floss for $1/each. You can return them if you tell me you’re going to do so in 5 days, and you return them in another 5 days.” • B: “I accept, but I get to tell you 6 days afterwards that I’m going to return them, so long as I actually return them by the 10th day.

9. Answers • B gets the 6 days. (UCC 2-207 (2)(a), (b) and (c) don’t apply) • [what if A notifies of objection?] • B doesn’t get the 6 days. 2-207(2)(c) applies • Common law? • B gets the 6 days. (last shot) (if A notifies, probably counteroffer, and A’s terms govern…)

10. UCC 2-207 Examples (continued) A: “I’ll sell you 20 grade A containers of dental floss for $1/each. You can return them if you tell me you’re going to do so in 5 days, and you return them in another 5 days. This offer is expressly limited to the terms hereof, and additional or different terms don’t become part of the offer unless I agree in writing.” B: “I accept, but I get to tell you 6 days afterwards that I’m going to return them, so long as I actually return them by the 10th day.

11. UCC 2-207 Examples (continued) • B doesn’t get the 6 days. (Does, at common law, because his is ‘last shot’)

12. UCC 2-207 A: “I’ll sell you 20 grade A containers of dental floss for $1/each. You can return them if you tell me you’re going to do so in 5 days, and you return them in another 5 days.” B: “I accept, but I get one year to return them.” Does B get the year? Why or why not? Does it make a difference if A notifies B that A objects to B’s proposed new term?

13. UCC 2-207 Examples (continued) • (B doesn’t get the 6 days- it’s materially different. A’s notification doesn’t change result) • (At common law, B gets the year. Last shot. But if A notifies, A may be deemed to be making a counteroffer, which could then govern.)

14. UCC 2-207 Examples (continued) • A: “I’ll sell you 20 grade A containers of dental floss for $1/each. You can return them if you tell me you’re going to do so in 5 days, and you return them in another 5 days.” • B: “I accept but I get to tell you 6 days afterwards that I’m going to return them, so long as I actually return them by the 10th day. If you don’t agree to all my terms, we have no deal.”

15. UCC 2-207 Examples (continued) • B’s terms govern? • What if A’s offer was expressly conditioned on B’s acceptance of all the terms?

16. Acceptance: Possible Approaches • Common law: • Mirror Image • “Last shot” • Caveat: deal terms can be determined via course of performance, course of dealings, usage of trade • UCC §2-207Battle of the forms: • Different terms in acceptance can form a contract if acceptance isn’t made expressly conditional on assent to the different terms. UCC § 2-207 (1)

17. UCC §2-207 (cont) • Additional terms are proposals to addition to K, and, if parties are merchants, become part of K unless, UCC §2-207 (2) • offer expressly limits acceptance to its terms • terms materially alter K, or • notification of objection to new terms given. • If parties aren’t merchants, 2-207 (3) applies • what parties agreed on AND • Supplementary terms incorporated under Code sections

18. Revised UCC 2-207 (not yet enacted) • If: • conduct indicates existence of contract • Offer and acceptance OR • “record” (includes electronic records) contains additional/different terms than ‘contract’ • Terms: • Those in both parties’ records • Those both parties agree to • Those supplied or incorporated under Code