Chapter 10

Mutual Assent- Offer and Acceptance

Objective Theory of Contracts

• What the party said when entering into the contract

• How the party acted or appeared

• The circumstances surrounding the transaction

• As interpreted by a reasonable person, rather than by the party’s own secret, subjective intentions.

Three Elements of an Offer

• A serious, objective intent

• The terms of the offer must be reasonably certain and definite so that the parties can ascertain the terms of the contract

• The offer must be communicated to the offeree

Intention• Concept of objective intent

• Expressions of Opinion do NOT evidence an intent to enter into a binding agreement

• Statements of Intention, or “thinking about” something, is not indicate intention.

• Preliminary Negotiations/Invitations to Deal are NOT offers– Advertisements, Catalogs, Circulars are Invitations

to Deal (exception if clear, definite promise with nothing left to negotiate OR Ads offering a Reward

Auctions - Offer of sale through an Auctioneer

• With Reserve - A right to withdraw the goods. Seller does not have to accept the final bid. All auctions assumed “with reserve” unless stated otherwise

• Without Reserve - Goods can’t be withdrawn and must be sold to highest bidder

Definiteness of Terms

• Terms must be reasonably certain and unambiguous to allow the court to determine the parties intent.

• However, missing terms may be filled in under the Code (open price, absence of date for payment; absence of specified place for delivery, time for performance)

• Output and Requirement contracts do NOT fail for lack of definite terms

Output & Requirement Contracts

• Output Contracts - Buyer agrees to purchase Seller’s entire output (e.g., Farmers Market agrees to buy ALL of the eggs Mr. Smith’s hens produce.

• RequirementContracts Buyer agrees to purchase, and Seller agrees to sell, all that the Buyer needs or requires (e.g., Pizza Store agrees to buy all the soda products it needs from Coca-Cola)

Communication

• A person must know about an offer in order to accept an offer.

• Generally, a failure to reply (silence) will not be an acceptance of an offer (UNLESS, prior dealings, OR silence which is evidence of a positive and unequivocal acceptance)

• Unordered merchandise is not deemed accepted (unless it was solicited)

Duration Of Offers• Lapse of Time• Revocation - Offer can be revoked anytime

before acceptance, even if there is a promise to keep it open (except option K’s; Firm offers

• Rejection• Counteroffer• Death/incompetency of offeror or offeree• Subsequent illegality of the contract• Destruction of Subject Matter

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Mail Box Rule

• Acceptances are Valid upon Dispatch (unless the offeree states otherwise or the offeree uses an unauthorized means of communication)

Firm Offer

• Must be made by a Merchant

• Merchant agrees not to revoke offer for a stated period of time

• Must be a SIGNED WRITING