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

Termination of Offers

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

Firm offers & revocability

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

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.