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Acing Contracts Outline
Offer and Acceptance Checklist
I. (^) Common Law I.A. Offer – has the offeror made an offer? Has a manifestation of willingness to enter a bargain been made so as to justify the offeree in understanding that her assent to the bargain is invited and, if given, would conclude it? To determine whether an offer capable of acceptance has been made, consider the following: I.1. Intent – was there intent to make an offer? The words or conduct used in the proposal must be words of offer and not just words of preliminary negotiation. I.a. (^) Language – what words were used? Were they words of promise and commitment or invitations to negotiate? “I bid,” suggests an offer whereas “are you interested?” suggests preliminary negotiations. I.b. Surrounding circumstances – what were surrounding circumstances? Were the parties intoxicated or at a party? Words may sound like an offer but clearly be made in jest. Surrounding circumstances may alter the normal meaning of words I.c. Advertisements to the Public – to whom were the offer made? Proposals made ot the public or a large group of person (such as advertisements, circulars, price quotations) are more likely to be considered in invitations to make an offer I.2. Definite and Certain Terms – are the terms sufficiently clear and definite so that a court could determine what the parties intended and fix damages in the event of breach? I.d. (^) Yes. If such significant terms as the parties to the contract the subject matter of the contract,
the time for performance, and the price to be paid are identified, then it is more likely to be an offer. I.e. No. If essential terms are missing or vague, then the offer may fail for indefiniteness unless it can be cured. Even if some terms have been left open, it may still be possible to meet the requirement for definiteness by the time for performance arrives. Ask the following: I.i. Indefinite Term Cured – can the indefinite term be cured by the conduct of the parties through full or part performance? Restatement 34 I.ii. Missing Term Implied – can be missing term(s) be implied from the usages of trade to which the parties are subject, by a prior course of dealing between the parties, or by a course of performance between them after the agreement? I.iii. Gap Filler – can the missing term be cured by the court with “gap filler”? I.3. Communicated – has the offer been communicated to one capable of acceptance? I.f. Yes. If so, then the power of acceptance has been created in the offeree. I.g. No. If not, then there is no power of acceptance. I.B. (^) Acceptance – has there been a valid acceptance? Has the offeree manifested assent to the offer? In order for a contract to be formed, there must be an acceptance of the offer on the same terms and in the manner requested or authorized by the offeror. To determine whether there has been a valid acceptance, consider the following: I.4. Who is accepting the Offer – is the proper party accepting the offer? Only the party with the “power of acceptance” can accept the offer. Ask the following:
promisor is seeking and cannot accept by promising the performance. Here, the act requested and performed as consideration for the offeror’s promise also constitutes acceptance. I.viii. No. If the manner of acceptance is not specified, then the offeree can choose whether to accept by promise or by performance I.l. By Silence? Has the offeree accepted by virtue of her silence? I.ix. No. THE GENERAL RULE IS THAT SILENCE IS NOT ACCEPTANCE. I.x. Yes. Silence can act as acceptance but in a very limited set of circumstances. Restatement 69. Ask the following:
- Has the offeree taken the benefit of services when she has had a reasonable opportunity to reject them and reason to know that payment was expected and has not done so? If so, then there is an acceptance.
- Has the offeror stated or given the offeree reason to understand that assent may be manifested by silence or inaction and the offeree in remaining silent or inactive intends to accept? If so, then there is an acceptance.
- Have there been prior dealings between the parties such that it would be reasonable for the offeree to notify the offeror if she did not
intend to accept? If so, then there is an acceptance.
- Has the offeree exercised dominion over the goods or property by acting in a way that inconsistent with the offeror’s ownership? If so, then there is an acceptance. I.m. Manner Not Specified? If the offer does not specify the mode of acceptance, then acceptance may be given in any manner and by any medium reasonable in the circumstances. Restatement 30(2) I.6. Notice of Acceptance – is the offeree required to give notice of acceptance to the offeror? I.n. Acceptance by Promise? Does the offer invite acceptance by promise? I.xi. (^) Yes. Unless the offer indicates otherwise, it is essential to an acceptance by promise either that the offeree “exercise reasonable diligence to notify the offeror that the offer has been accepted or that the offeror receives the acceptance seasonably.” Restatement 56 I.xii. No. If not, then proceed to the next question I.o. Acceptance by Performance? Does the offer invite acceptance by performance? If the offer invites acceptance by providing a performance, then no notification is necessary to make it effective unless one of the following is applicable. Ask: I.xiii. Does the offer request a notification? If so, notification is necessary for a valid acceptance. Restatement 54(1) I.xiv. Does the offeree have reason to know that the offeror will not learn of the
terminates the power of acceptance, you must consider the question in terms of when a rejection becomes effective: I.xv. Rejection sent before Acceptance? A rejection does not terminate the offeree’s power of acceptance until it is received, but any acceptance dispatched by the offeree after she ahs dispatched the rejection is not effective unless the acceptance is received by the offeror before she receives the rejection. Restatement 40 I.xvi. Acceptance sent before Rejection? The contract is binding as soon as the acceptance is dispatched and the subsequently dispatched revocation of acceptance does not undo the acceptance, whether it is received by the offeror before or after her receipt of the acceptance I.s. Acceptance of Option Contract - - an acceptance of an option is effective upon receipt by the offeror, not upon dispatch. Restatement 63(b) I.8. Termination of the Power of Acceptance – does the offeree have the power of acceptance? For an acceptance to be valid, it must be made while the power of acceptance is still in effect. Does the offeree still have the power of acceptance or ahs the offer terminated? I.t. Lapse of Time – has the offer lapsed either because the time specified in the offer for acceptance has passed or, if no time was specified, then a reasonable time has passed? Ask: I.xvii. Was the Offer sent by mail? If so, then it is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which the offer is received. Restatement 41(3)
I.xviii. Was the offer made during Direct Negotiations? Where the parties bargain face-to-face or over the telephone, the time for acceptance ends with the conversation unless a contrary intention is indicated. Restatement 41 I.u. (^) Rejection – has the offeree failed to accept the offer before it lapsed or has she communicated to the offeror that she does not intend to accept? I.xix. Yes. If so, the power of acceptance is terminated and the offer can no longer be accepted. I.xx. No. If not, then the offeree may still accept unless the power of acceptance has terminated in another way. Proceed to the next question I.v. (^) Counter-offer – has the offeree declined the contract on the terms proposed in the offer and suggested different terms? I.xxi. Yes. If so, then the offeree’s power of acceptance is terminated. A valid acceptance must be the “mirror image” of the offer. However, is it possible it was not a counter-offer but a mere inquiry? A mere inquiry about the possibility of different terms or a comment about the terms is not ordinarily a counter-offer. I.xxii. No. If not, then the offeree still has the power of acceptance unless it has terminated in another way. Proceed to the next question I.w. Death or Mental Disability – has the offeror or offeree died or become mentally incapacitated before the offer has been accepted? Restatement 48
power of acceptance is not terminated I.xxvii. Was it the Revocation of a General Offer? Was it the revocation of an offer made by a newspaper or advertisement? If so, then the revocation should be made in the same manner in which the offer was made so as to give it equal publicity. I.9. Option Contracts and Irrevocable Offers – was there a promise to keep an offer open for a stated period of time? I.y. Was it an Irrevocable Offer? While the general rule is that offers are freely revocable, there are certain conditions, which if met, make the offer irrevocable. Ask the following: I.xxviii. (^) Consideration – did the offeree give consideration in exchange for the promise ot keep the offer open?
- Yes. If so, then the offer is irrevocable. It may also be said that an option contract was formed
- No. If not, an option might be binding even without consideration. Proceed to the next question. I.xxix. Statute – is there a state statute which permits the creation of irrevocable offers without consideration? For the UCC’s “firm offer,” proceed to Section II, Part A.
- Yes. The offer is irrevocable without consideration if it is made in a writing signed by the offeror which states that it is irrevocable
- No. If not, then proceed to the next question
I.xxx. Restatement (Second) of Contracts – does the jurisdiction follow the Restatement view which finds a valid option if the promise is in a writing signed by the offeror, recites a purported consideration, and proposes a fair exchange within a reasonable time? Restatement 87(1)(a)
- Yes. If so, then the offer is binding as an option contract. Even nominal consideration will be sufficient to support a short-time option proposing a fair exchange - Recital and no Consideration? Was there a recital of consideration and no payment was actually made? Courts differ in the effect given to a recital without actual payment. Some have held the recital to have no effect while others have found that the recital makes the offer irrevocable, either as a promise to pay or an acknowledgment of payment. - Gross Disparity between Payment and Value of Option? If so, then this may indicate it was a mere formality, pretense, or sham and will not constitute consideration. Restatement 87
- No. If not, an option contract was not formed in this manner. However, an option might be formed under the rule in the next question
I.xxxii. Bid on Construction Contract
- did a subcontractor submit a bid to a general contractor in connection with a bid on a construction contract? - No. If not, the inquiry ends here - Yes. If so, is the subcontractor’s bid revocable? Unless the parties have agreed otherwise, the subcontractor’s offer is irrevocable until the general contractor has had a reasonable opportunity to notify the subcontractor of the award and accept the offer. This is based on a reliance theory. Restatement 87(2) I.z. Was an Irrevocable Offer Accepted? An acceptance under an option contract is not effective until received by the offeror. Restatement 63(b) I.aa. Was an Irrevocable Offer Terminated? I.xxxiii. Lapse of Time – has the offer lapsed?
- Yes. If so, the irrevocable offer has terminated
- No. If not, then the irrevocable offer has not terminated unless it has terminated in another way. Proceed to the next question I.xxxiv. (^) Revocation – has the offer been revoked? If the offer is irrevocable, then even a purported revocation by the offeror has no effect on the offeree’s power of acceptance. I.xxxv. Death or Incapacity – has the offeror died or become incapacited? The option survives the death or incapacity of the offeror.
I.xxxvi. Rejection or Counter-offer – has there been a rejection or counter offer? The power of acceptance under an option contract is not terminated by rejection or counter offer
II. Sale of Goods
I.C. “ Bargain of the parties in fact” – is there an agreement between the parties? Have the parties, as a practical matter, reached sufficient agreement for contract liability to arise? I.10. Agreement – has there been an offer and acceptance? A contract for the sale of goods may be made in any manner sufficient to show agreement. Consider the following: I.bb. Conduct – does the conduct of both parties recognize the existence of a contract? UCC 2- (1) I.xxxvii. Yes. If so, then there is a contract even if the moment of its making its undetermined I.xxxviii. No. If not, the parties may not have intended a contract and none will have been created I.cc. Indefiniteness – were one or more terms left open? A contract for the sale of goods does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. UCC 2-204(3) I.dd. Acceptance – has the offeror specified a method of acceptance? I.xxxix. Yes. If so, then the offer may be accepted only in the manner invited by the offer I.xl. No. If not, then the offeror may accept “in any manner and by any medium
forming a contract where the writings exchanged may have been preprinted order and confirmation forms containing standard, boiler-plate terms? If so, then a conflict between them is possible since such standard terms are usually designed to protect the interests of that party. In such cases, the provisions of UCC 2- may be implicated. Ask the following: I.hh. Acceptance – is the response to the offer “a definite and seasonable expression of acceptance” or “a written confirmation” of a prior oral agreement? I.xliii. Yes. If so, proceed to Part A.3.b. I.xliv. No. If not, then no contract has been formed by the writings of the parties. Proceed to Part A.3.c. to determine whether the conduct of the parties recognizes the existence of a contract I.ii. Terms in Acceptance – does the acceptance/confirmation state terms “additional to or different from” the offer? I.xlv. Yes. If so, then ask: is acceptance of the offer “expressly conditional” on the offeror’s assent ot the additional or different terms?
- Yes. If so, then ask, did the offeror expressly assent? - Yes. If so, a contract has been formed. The contract terms are those that are agreed upon. - No. If not, then no contract has been formed by the writings of the parties. Proceed to Part A.3.c. to determine whether the conduct of the parties
recognizes the existence of a contract I.xlvi. No. If the response is a definite and seasonable expression of acceptance and it is not expressly conditional on assent to new terms, it is an acceptance even though it sates terms different from or additional to those in the offer. There is a contract and the next question is to determine its terms. Ask: are both parties merchants?
- Yes. If so, then the agreed upon terms are included and additional terms become part of the contract as well unless: - The offer was expressly limited to its terms; - (^) The additional term(s) materially alters the contract; or - The offeror has already given notice of objection to the additional term(s) or it is given within a reasonable time after notice is received. UCC 2- (2) - No. If not, then the agreed upon terms are included and additional terms are merely proposals for addition to the contract
- No. If not, then there is a contract and it consists of the agreed upon terms
I.jj. Conduct – does the conduct of the parties “recognize the existence of a contract? Has there been a tender and acceptance of performance?
Consideration
A. Consideration – is there consideration to support the promise?
- “ Bargained For” Exchange – has something, either another promise or a performance, been sought by the promisor and given in exchange for that promise? 1.a. Yes. If so, then the parties have bargained for the exchange of promises or performances such that each induces the other and the consideration requirement is met 1.b. No. If the performance or return promise is not sought by the promisor in exchange for her promise and given by the promise in exchange for that promise, then there is no consideration
- Promises that are not “Bargained For” – if the promise is not sought by the promisor and given by the promise in exchange for that promise, then what type of promise is it? 1.c. Gratuitous Promise – is the promise one to make a future gift where the promisor asks for and receives nothing in exchange? If so, then the promise is not legally enforceable. However, it is only the promise to make a gift, not the making of the gift that is unenforceable for lack of consideration. Once made, the promisor cannot rescind the gift for lack of consideration 1.d. Past considerations – has the promise already taken the action before the promise is made? If so, then the promisor cannot be seeking to induce it and it is not consideration. However, there are exceptions for promises to perform what are considered “moral obligations” Ask: is the promise one made under the following circumstances? 2.i. Debt barred by Statute of Limitations – has a debtor promised to
pay a debt that has been barred by the statue of limitations? If so, the promise is enforceable absent the exchange element. Restatement 82(1) 2.ii. Antecedent Indebtedness – has a debtor voluntarily acknowledged an antecedent debt? If so, any action is based on the new promise and recovery is limited to its term. Restatement 82(2) 2.iii. Debt Discharged in Bankruptcy – has a debtor promised to pay a debt that has been discharged in bankruptcy or one that is not yet discharged but is dischargeable in bankruptcy proceedings begun before the promise is made? If the promise is express and voluntary, it is binding Restatement 83 2.iv. Material Benefit – is the promise one made in recognition of a benefit previously received by the promisor from the promise where enforcement is necessary to prevent injustice? If so, the promise is binding. Restatement 86 1.e. Illusory Promise – does the promise by its terms make performance entirely optional with the promisor? If so, then there is no commitment as to future behavior and the promise is illusory. However, if the promisor has limited its discretion in some way, then the promise is not illusory. Ask: are there limits to the party’s discretion? 2.v. Requirements and Output Contracts – is there a term which measures its quantity by the seller’s requirements or the buyer’s output? If so,
