The Agreement: Offer

1. The Agreement: Offer 10 C H E A P T R “There is nothing more likely to start disagreement among people or countries than an agreement.” E.B. White

2. Learning Objectives • Requirements for an offer • Intent • Definiteness of Terms • Special Problems • Termination of an offer 10 - 2

3. Requirements for an Offer • An offer is a promise conditional on an act, return promise, or forbearance (refraining from doing something) • Parties to a contract must have intent to enter binding agreement, terms must be definite, and the offer must be communicated to the offeree 10 - 3

4. Intent • An offeror must indicate present intent to contract, or the intent to meet the contract obligation upon acceptance • Courts use the objective theory of contracts: • Would a reasonable person judge the offeror’s words and acts in the context of the circumstances to signify intent? 10 - 4

5. Definiteness of Terms • Offer and resulting contract must be definite and certain • Offer cannot be vague about major points • Example: • “I’ll paint your house until I’m tired” is vague, but “I’ll finish painting your house in three days” is definite • Armstrong v. Rohm and Haas Company, Inc. 10 - 5

6. Armstrong v. Rohm and Haas Company, Inc. • Facts: • Plaintiffs worked at a manufacturing plant closed by RH, which gave employees a choice: accept a severance package or transfer to another facility • Plant manager told plaintiffs to accept severance and begin a company, stating that RH “would like to” give plaintiffs “all [outsourced] work” • Plaintiffs followed manager’s suggestions, but there was little work since RH still outsourced elsewhere, so plaintiffs sued for breach of contract 10 - 6

7. Armstrong v. Rohm and Haas Company, Inc. • Court’s Decision: • Defendant’s alleged promise is too vague to ascertain a reasonably certain basis for providing an appropriate remedy • Court listed issues about the alleged “contract” • The lack of definiteness is fatal because the court cannot supply these terms • RH’s alleged promise is therefore unenforceable as a matter of law 10 - 7

8. Definiteness Under the UCC • UCC often creates contractual liability where no contract would result under common law • Article 2 sales contracts can be created “in any manner sufficient to show agreement, including conduct…” [2–204(1)] • A price, quantity, delivery, and time for payment term left open in a contract can be filled by inserting a presumption found in the Code’s rules 10 - 8

9. Advertisements • Advertisements for the sale of goods at specified prices generally are not considered offers, but are invitations to offer or negotiate • Examples: flyers, handbills, catalogs listing prices, “for sale” ads in newspaper or yard • Sales puffery is not an offer • Example: Leonard v. Pepsico, Inc. (the Harrier jet case) 10 - 9

10. Rewards, Auctions, and Bids • Advertisements offering rewards for lost property, information, or capture of criminals are treated as offers for unilateral contracts • To accept the offer and receive the reward, an offeree must perform the requested act • Sellers at auctions and advertisements for bids are generally treated as making an invitation to offer, so those who bid are making an offer that the seller may accept or reject 10 - 10

11. Termination by Revocation • An offer may be terminated by revocation: • if revoked & communicated to offeree before the offer is accepted • Exceptions: • Option contract in which an offeror agrees not to revoke the offer for a stated time in exchange for some valuable consideration • Offers for unilateral contracts (e.g., rewards) • Promissory estoppel circumstances • Firm offers for sale of goods 10 - 11

12. Other Methods of Termination • Rejection: Offeree expressly rejects (unwilling to accept) offer or impliedly rejects the offer by making a counteroffer • an offer to contract on terms materially different from the terms of the original offer • Lapse of time and expiration of offer • Death or disability of either party • Destruction of subject matter • Subsequent illegality 10 - 12

13. The Agreement: Acceptance 11 C H E A P T R “Make your bargain before beginning to plow.” Arab proverb

14. Learning Objectives • Basics of Acceptance • Intent • Communication • Special Problems 11 - 14

15. Requirements for Acceptance • Acceptance must be by clear expression by offeree of intent to be bound by terms of offer and communicated to offeror • Only offeree may accept offer • If offer calls for performance, then performance is acceptance • Offeror may specify manner of accepting offer • Example: “notify of your acceptance in writing” 11 - 15

16. Specht v. Netscape Communications Corp. • Facts & Procedural History: • Plaintiffs offered or downloaded Netscape software • Netscape included a licensing agreement in its “SmartDownload” process • Plaintiffs sued Netscape, alleging that download process transmitted private information • Netscape moved to compel arbitration per their online licensing agreement 8 - 16

17. Specht v. Netscape Communications Corp. • Issue: Under what circumstances does the act of downloading create a contract? • Reasoning and Holding: • Promises become binding when there is a meeting of the minds and consideration is exchanged • Netscape’s “browse-wrap” license merely invited plaintiffs to agree to the license • Plaintiffs did not assent to the license, thus are not subject to arbitration clause in the contract 8 - 17

18. Requirements for Acceptance • Silence may be acceptance • General rule is that an offeree’s silence, without more, is not an acceptance • Circumstances may impose a duty on offeree to reject the offer affirmatively or be bound • Includes cases in which offeree’s silence objectively indicates an intent to accept • Example: McGurn v. Bell Microproducts, Inc. 11 - 18

19. McGurn v. Bell Microproducts • Facts: • Bell extended offer of employment to plaintiff • Plaintiff altered written offer to include severance package, signed and returned • Bell silent regarding alteration and plaintiff worked for more than a year • Bell fired plaintiff and refused to pay severance • Plaintiff won summary judgment for breach of contract 11 - 19

20. McGurn v. Bell Microproducts • Reasoning & Ruling: • Silence in response to an offer does not constitute acceptance unless offeree takes benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation • Restatement (Second) of Contracts §69 • Whether Bell accepted plaintiff’s alteration of the contract by its silence and conduct is a matter of fact, thus a matter for the jury; case remanded 11 - 20

21. Mirror Image Rule • Traditional contract law rule required acceptance to be the mirror image of the offer • Currently, judges hold that only material variances between an offer and an alleged acceptance result in an implied rejection of the offer 11 - 21

22. Mirror Image Rule & The UCC • UCC 2–207 allows contract formation even when there is some variance between terms of offer and terms of the acceptance • A definite and timely expression of acceptance creates a contract, even if it includes terms that are different from those stated in the offer or even if it states additional terms that the offer did not address [2–207(1)] • Example: Standard Bent Glass Corporation v. Glassrobots Oy 11 - 22

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24. Communicating Acceptance • With instantaneous forms of communication, knowing when acceptance occurs is easy • Complicated by non-instantanesous forms (e.g., mail) • Mailbox rule makes acceptance effective upon dispatch when the offeree used a manner of communication expressly or impliedly authorized (invited) by the offeror • Courts today allow communication by any reasonable means of communication • See Ellefson v. Megadeth, Inc. 11 - 24

25. Effect of Acceptance OFFER + ACCEPTANCE AGREEMENT 11 - 25