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Chapter 11
Quote of the Day
It takes two to speak the truth -- one
to speak and one to hear.
Henry David Thoreau,
American Philosopher
Meeting of the Minds
The parties can form a contract only if they
had a meeting of the minds.
They must understand each other and intend
to reach an agreement.
A judge will make an objective assessment of
any disagreements about whether a contract
was made -- whether or not a reasonable
person would conclude that there was an
agreement, based on the parties conduct.
Problems with Intent
Problems with Definiteness
An offer proposes definite terms and permits the
other party to create a contract by accepting those
The UCC has provisions for supplying some
missing contract terms.
UCC and Open Terms
Open Price
The UCC establishes a price, based on market value
or valuation by a neutral party.
Output and Requirements Provisions
An output contract obligates a seller to sell all of his
output to one buyer, who agrees to buy it.
A requirements contract obligates a buyer to obtain
all of his needed goods from the seller.
UCC and Open Terms (contd)
Delivery, Time and Payment

Termination of Offers
Termination by Revocation
Effective when the offeree receives it.
Firm Offers and Revocability
Common Law Rule
Revocation of a firm offer is effective if the offeree
receives it before he accepts.
Option Contract
The offeror may not revoke an offer during the option
Sale of Goods
A writing signed by a merchant, offering to hold an offer
open, may not be revoked.
Termination of Offers (contd)
Termination by Rejection

Termination by Expiration

Termination by Operation of Law
The offeree must say or do something to
In a bilateral contract, the offeree generally must
accept by making a promise.
In a unilateral contract, the offeree must accept by
If the offer is ambiguous, the offeree may accept by
either a promise or performance.
Mirror Image Rule (Common Law)
Requires that acceptance be on precisely the same
terms as the offer.

Can a person form a binding agreement if he
or she is intoxicated?
UCC and the Battle of Forms
An offeree may include in the acceptance
terms that are additional to or different from
those in the offer.
Additional terms are those that bring up new
If both parties are merchants, the additional terms will
generally become part of the contract.
Different terms are those that contradict terms
in the offer.
The majority of states hold that different
(contradictory) terms cancel each other out.
Communication of Acceptance
Medium and Manner of Acceptance
If an offer demands acceptance in a particular
medium or manner, the offeree must follow
those requirements.
If the offer does not specify a type of
acceptance, the offeree may accept in any
reasonable manner and medium.
Time of Acceptance: The Mailbox Rule
An acceptance is generally effective upon
dispatch, meaning the moment it is out of the
offerees control.
Promissory Estoppel
Under the doctrine of 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 reply,
The offeree does in fact reply, and
The only way to avoid injustice is to enforce the
Things That Are Not Offers

Sending a letter to friends and neighbors
expressing interest in selling a home is not a
binding offer.
Letters of Intent

A letter of intent is between two parties
Letters of intent can indicate areas of
agreement and expose open terms
Lawyers protect clients from the other sides
undue reliance on the letter of intent
Evergreen Investments, LLC v.
FCL Graphics, Inc
Was the letter of intent a binding agreement
in this case?
What is financial due diligence?
Do lawyers like to use letters of intent?
An Offer Permits the Other Party
to Create a Contract
Nationwide Mutual Insurance Company
wanted to energize a regional meeting
When is a promise simply funny and when is
it binding?
What is n.o.v.?
Vagueness or ambiguity in an offer
or acceptance guarantees problems
and may lead to litigation. The
executive or consumer who articulates
to herself precisely what she wants
and then bargains clearly for it, is likely
to spend more time doing business
and less time in court.