CHAPTER 9

1. CHAPTER 9 Creating a Contract: Offers

2. What is an Valid Offer? • Offer = the manifestation of a willingness to enter into a contract if the other party agrees to the terms • Offeror makes the offer • Offeree receives (may accept) the offer

3. What is an Valid Offer? • Question 5 at end of chapter • No. A promise is a manifestation of intent by the promisor to be bound. Mere predictions or statements of opinion are not promises that will support a contract. Fleck’s statement was a mere expression of opinion or prediction concerning the future availability of S-54 remnants. No one could predict exactly how much excess Monsanto would have because Monsanto milled S-54 in January for installation during the summer. Fleck did not guarantee a never-ending supply; he made a prediction of future sales of S-54 at $1.75/square foot. Major Mat Co. v. Monsanto, 969 F.2d 579 (7th Cir. 1992).

4. What is an Valid Offer? • Intent? • Present • Definite • Communicated • Considers all the circumstances

5. What is an Valid Offer? • Intent? • Question 10 at end of chapter • Mears v. Nationwide Mutual Ins. Co. • An offer of “His and Hers Mercedes” to the person who came up with the best theme for a regional convention is enforced. • Sufficient objective evidence of intent. • Whether the company really intended to give away two Mercedes for a slogan for a regional convention is irrelevant. The fact that the offer was made by a major employer as part of a convention designed to boost morale and recognize employee achievements was an important objective fact. • This is a unilateral contract

6. What is an Valid Offer? • Definiteness? • The more specific the proposal the more likely the court is to call it an offer • Behavior, acting as though a contract, may lead to finding a contract • Question 11 at end of chapter • Mears v. Nationwide Mutual Ins. Co. • This is the same case as the one discussed above. The issue before the court in this part is whether the offer was sufficiently definite. The court found it was. • The Code generally requires less definiteness than the common law. Generally, courts do not like for contracts to fail for indefiniteness. • Mears testified that the least expensive new Mercedes cost $31,450. He was awarded $60,000.

7. What is an Valid Offer? • Definiteness? • Key v. Coryell, p. 165. • The court found that the terms of the education agreement were too indefinite to form the basis of a contract. The Code generally requires less definiteness than the common law. However, unlike contract law interpretation earlier in the century, courts using either system generally do not like contracts to fail for indefiniteness.

8. What is an Valid Offer? • Definiteness? • Question 7 at end of chapter • Yes. A court cannot enforce a contract unless it can determine what it is. There is no evidence from which to determine the parameters of the promise alleged here. The vagueness as to material details such as the form, frequency, and amount of payments render the assertion of a contract meaningless. The promise, if made, is unenforceable. Saunder v. Baryshnikov, 487 N.Y.S. 2d 51 (Sup. Ct. N.Y. 1985).

9. What is an Valid Offer? • Communication? • ProCD, Inc. v. Zeidenberg, p. 166, “Shrink Wrap License” • The 7th Circuit finds that contract terms appearing on the inside of a software box are adequately communicated. • License becomes effective as soon as the customer takes the wrapping off. The court finds that allowing payment first serves buyers’ interests by accelerating effectiveness and reducing transaction costs. The court also cites insurance sales, and sales of consumer goods in boxes as instances where full contract terms are not disclosed until after the transaction in completed. UCC Section 2-204 allows a contract to be made “in any manner sufficient to show agreement.” The offeror may set the terms of acceptance, which ProCD did. Since the initially undisclosed terms were not unreasonable, they are enforceable.

10. What is an Valid Offer? • Solicitations of Offers? • Advertisements • Courts have generally held that ads for the sale of goods at a specified price are not offers, but invitations to negotiate • Under certain circumstances courts have found highly specific ads to be offers

11. What is an Valid Offer? • Advertisements • Leonard v. Pepsico, Inc., p.168 • An ad which showed a teenager flying a Harrier Jet he had purchased with “Pepsi points” is found by the court to clearly not be a serious offer. • The cost of a Harrier Jet is roughly $23 million. The court notes that Leonard should have concluded that this was too good a deal to be true. The court explains the commercial was meant to evoke military and espionage thrillers, and the implication was that Pepsi Stuff merchandise will inject drama and moment into hitherto unexceptional lives. A reasonable viewer would view the ad as mere puffery. Also, the court said the callow youth featured in the ad, “is a highly improbable pilot, one who could barely be trusted with the keys to his parents’ car, much less the prize aircraft of the United States Marine Corps.” The notion of traveling to school in a Harrier Jet “is an exaggerated adolescent fantasy.” The number of points would require someone to drink 7,000,000 Pepsis, or roughly 190 a day for the next hundred years – an unlikely proposition. The situation did contain the elements the court usually looks for when treating an ad as an offer: a highly specific statement about what is offered and expected in return; the person doing something extraordinary to accept; and, the number of people accepting will be limited. The potential for unfairness, though, is limited.

12. What is an Valid Offer? • Solicitations of Offers? • Rewards (e.g for the return of lost property) • Generally held to be offers for unilateral contracts • Auctions • Sellers generally held to be making an invitation to offer • Bidders are treated as offerors • Therefore items can be withdraw prior to acceptance unless auction is advertised as being “without reserve”

13. What is an Valid Offer? • Solicitations of Offers? • Bids (e.g. in construction) • Advertisement for bid generally held to be invitation to offer • Bid Submitters = Offerors

14. What is an Valid Offer? • Solicitations of Offers? • Bids (e.g. in construction) • Question 8 at end of chapter • No. There can be little doubt there was a contract. Efficient made its offer by bid to do the electrical work on the hotel. Blaine-Hays accepted that offer by letter after Marriott accepted Blaine-Hays bid to build the hotel. Efficient showed it acquiesced to the contract when it worked for three months. It cannot now deny there was a contract to finish the work. Blaine-Hays Construction Co. v. Efficient Electric Co., 1991 Tenn. App. LEXIS 961.

15. What are the Terms of an Offer? • If actual notice (e.g. offeree read) or reasonable person should have been put on notice = bound • Aronson v. University of Mississippi, p.170 • The court finds terms in a university catalog to be the terms of a scholarship offer to a student. • Do you view what was in the catalog you got from Mount Olive College as spelling out terms of a contract.? • The court may reach a different conclusion if the change from the catalog had not been as important as scholarship terms. • Some courts in other states have held differently.

16. Offer Termination • An offer is terminated by: • Lapse of time to accept per terms of the offer (e.g. “this offer expires on 10/24/03”) • If no time specified = “a reasonable time”

17. Offer Termination • An offer is terminated by: • Revocation • Offerors generally can revoke offers prior to acceptance • Exceptions: • Firm offers • signed writing • by a merchant • containing assurances that offer will be held open • Options • Where something of value has bee given in exchange for a promise not to revoke • Effective upon actual receipt by the offeree

18. Offer Termination • An offer is terminated by: • Revocation • Question 12 at end of chapter • No. An offer may be revoked until accepted. Here, Madaio’s written promise to purchase was not mailed until two days after McCarthy revoked the offer. Since the agreement required acceptance by return of the signed contract, the offer was effectively revoked before acceptance. Madaio v. McCarthy, 489 A. 2d 1197 (N.J. Super. Ct. 1985).

19. Offer Termination • An offer is terminated by: • Rejection or Counter Offer • Giovo v. McDonald, p. 173 • The court found that GEICO’s offer worked as a counteroffer, and thus did not constitute an acceptance of Giovo’s $18/day request. The appeals court held that the circuit court should have denied the McDonalds' motion for summary judgment on their settlement defense and should have granted Giovo's motion. The lower court felt that all the “essential elements” of the agreement had been met, and that the parties could not be expected to anticipate every contingency or spell out every incidental detail. The appeals court rejected this reasoning, holding that an acceptance is effective only if it is “absolute, unconditional, and identical to the terms of the offer.”

20. Offer Termination • An offer is terminated by: • Rejection or Counter Offer • Question 6 at end of chapter • Estate of Chosnyka v. Meyer • Two conditions on the acceptance are deemed not to be material changes and therefore a contract for the sale of the land was formed when Chosnyka sent back the copy. • The court does not discuss Chosnyka’s condition regarding closing within sixty days. Is this a material change? • Meyer took steps to protect himself regarding the receipt and form of the acceptance. Perhaps he should also have been as careful in his examination of the property before making the offer. There was a marker on the land indicating the gas line; he did not see it until his subsequent visit to the land.

21. Offer Termination • An offer is terminated by: • Operation of Law • Death/Insanity • Destruction of Subject Matter • Intervening Illegality