Chapter 10

Agreement
1

Meeting of the Minds

Requires: (1) they understood each other AND (2) they intended to reach an agreement Viewed objectively (reasonable person)

Offer
an act or statement that proposes definite terms (offeror ) and permits the other party to create a contract by accepting those terms (offeree) Analysis of an offer: (1) Did offeror intend to make a bargain? (2) Are the terms of the offer definite?

Intent to make an offer

Invitations to bargain NOT an offer Price quote NOT an offer Letter of intent NOT an offer or contract Advertisements NOT an offer
Unless false advertising under statute

Auctions NOT an offer

Unless without reserve

Are the terms definite?

If terms of the offer are too vague, may not be a valid offer

Common law and UCC treat open terms differently.

Baer v. Chase
Summary of facts How did the trial court rule? Whats the issue? How did the appellate court rule and why?

UCC 2-204(3) Open Terms

focuses on intent of parties to make a contract and whether there is a reasonably certain basis for giving an appropriate remedy
If contract does not provide method for determining missing terms, UCC supplies gap fillers.

Examples of UCC gap-fillers

Open price = reasonable price (market value) Open quantity (output contract or requirements contract) = both parties must act in good faith Open delivery = sellers place of business Open time for delivery = reasonable time, based on normal trade practice Open payment = due when and where buyer receives the goods Open warranties = two implied warranties

UCC Implied warranties

Merchantability = the goods must be of at least average, passable quality in the trade Fitness for a particular purpose= if the seller knows that the buyer plans to use the goods for a particular purpose, the goods must be fit for that purpose

1. revocation - effective upon receipt (except Calif is upon dispatch). But see firm offers (next slide) 2. rejection terminates the offer. A counteroffer is a rejection. Rejection effective upon receipt). 3. expiration if offer specifies time limit, that period is binding. If no time limit specified, offeree has a reasonable period of time to accept. 4. operation of law death or mental incapacity of the offeror; destruction of the subject matter; supervening illegality

Termination of Offers

Firm offer = valid for certain period of time. common law rule revocation of firm offer effective upon receipt option contract if right to have offer held open is purchased, then it cannot be revoked

Firm offers & revocability

UCC a writing signed by a merchant cannot be revoked. Open period cannot exceed 3 months.

Acceptance if offer is for:

Bilateral contract offeree generally must accept by making a promise Unilateral contract offeree must accept by performing

Ambiguous offeree may accept by either a promise or performance

Mirror Image Rule

common law acceptance must be on exactly the same terms as the offer UCC and battle of the forms created new rules for sale of goods so that mirror image is no longer required

UCC 2-207 Additional Or Different Terms

An acceptance may contain additional or different terms than the offer, and a contract is still created, unless acceptance of different or new terms is conditioned on offerors agreement to those terms.

Additional terms (UCC)

The additional terms are construed as proposals for addition to the contract & if not accepted are not part of contract (see exception for merchants).

Additional terms (UCC) (merchants exception)

If both parties are merchants the additional terms become part of the contract unless: 1. original offer insisted on its own terms. 2. The additional terms materially alter original offer. 3. Offeror promptly rejects them

Different Terms (UCC)

Majority of states: the different terms cancel each other out

Minority of states: the terms in the offer control

Few states: terms in acceptance should control

Bayway Refining Co. v. Tosco Corp.

Summary of facts What did trial court do? Whats the issue? How did court decide and why?

18

Specht v. Netscape Communications Corp.

Summary of facts How did the trial court rule? Whats the issue?

How did the appellate court rule and why?

Communication of Acceptance
If offer specifies medium or manner, offeree must follow those requirements If offer does not specify medium or manner, than it may be done so reasonably. THE MAILBOX RULE An acceptance is generally effective upon dispatch, meaning the moment it is out of the offerees control.

Soldau v. Organon, Inc.

Summary of facts

What did the federal district court decide? Whats the issue? What did the U.S. Court of Appeals decide? Why?

21

Promissory Estoppel
Even if there is no contract, a promise may be enforceable if:
The offeror makes a promise knowing the offeree is likely to rely The offeree does in fact rely; and The only way to avoid injustice is to enforce the promise.