Just a Bit More Acceptance; Termination of Offers

Contracts – Prof. Merges

Feb. 14, 2011

Crowdsourcing an M&A Transaction

Deal terms

• 3 purchase options

• Minimums, upside sharing etc.

Corinthian Pharma Systems v. Lederle Labs

Most commonly, bacteria multiply in the throat, where a grayish membrane forms. This membrane can choke the person. Sometimes, the membrane forms in the nose, on the skin, or other parts of the body. The bacteria can release a toxin that spreads through the bloodstream and may cause muscle paralysis, heart and kidney failure, and death. Approximately 5% of people who develop diphtheria (500 out of every 10,000) die from the disease and many more suffer permanent damage.

In the 1920s, before the diphtheria vaccine, there were 100,000 to 200,000 reported cases in the United States each year. Because of the high level of immunization, only one case of diphtheria was reported in the United States in 1999.

Corinthian Pharma v. Lederle

• Facts & Procedural History

What is at stake?

• 950 vials at $171 (instead of $65)

• $100,700–Worth litigating this claim?

Corinthian Pharma v. Lederle

• UCC Review

• UCC § 2-206

Analyzing the communications

• Lederle’s letter to customers

• Top p. 162

Key terms

• “all orders subject to acceptance by Lederle”

• Prices “submitted without offer and subject to change without notice”

Analyzing the communications

• Lederle’s letter to customers

Invitation to offer

Analyzing the communications

• Lederle’s 5/20/86 letter to customers Invitation to offer

• Lederle Price Letter E-48

Analyzing the communications

• Lederle’s 5/20/86 letter to customers Invitation to offer

• Corinthian’s telephone order 5/19/86

• P. 162

Analyzing the communications

• Lederle’s 5/20/86 letter to customers Invitation to offer

• Corinthian’s telephone order 5/19/86

Offer

Analyzing the communications

• Lederle’s 5/20/86 letter to customers Invitation to offer

• Corinthian’s telephone order 5/19/86 Offer

• Telgo system tracking # 5/19/86 No legal significance

• Corinthian’s 2 confirmations attempted acceptance – no legal effect

• Lederle’s shipment of 50 vials of vaccine and letter of 6/3/86

• P. 162, bottom

• Lederle’s shipment of 50 vials of vaccine and letter of 6/3/86

Counteroffer

UCC Analysis

• § 2-206

• Promise or shipment can be acceptance of offer (order)

• But: nonconforming goods may be “accommodation”

Accommodation

• Treated as a counteroffer

• On what terms? On terms stated (here, quantity of 50 at old price, remaining 950 at new price)

Terminating Power of Acceptance

1. Lapse2. Revocation3. Death of Offeror4. Rejection

Lapse

• Recall Ever-Tite Roofing

Lapse: Loring v. City of Boston – p. 173

Dickinson v. Dodds

1. Lapse2. Revocation3. Death of Offeror4. Rejection

Dickinson v. Dodds• Facts; procedural history

6/10/1874 Memorandum

“I hereby agree to sell to Mr. George Dickinson . . . [Signed] John Dodds.

PS: This offer to be left over until Friday 9 o’clock a.m.”

Facts subsequent to 6/10 memo

• The “cast of characters”

–Mr. Berry

–Mr. Allan

–Mrs. Burgess

Facts subsequent to 6/10 memo

Opinion of James, LJ• How does consideration come into it?

Dodds: $$ for land

Dickinson: Convey title to property

The “Underlying” Deal

Dodds: Think about buying land

Dickinson: Refrain from revoking or terminating offer before 9 am 6/12

The Deal About the Offer

DoddsDickinson

DoddsDickinson

¢ -- ?

The sequence of events . . .

[Both thought the agreement to keep offer open was binding, and] “this probably explains a good deal of what afterwards took place” – p. 173, top

Dickinson’s purported acceptance at Mrs. Burgess’s

home

• Why not effective?

• Does it matter that Dodds was not home?

Dickinson’s purported acceptance at Mrs. Burgess’s

home

• Why not effective?

• Does it matter that Dodds was not home?

– Why did Mrs. Burgess conveniently “forget” to give Dickinson’s note to Dodds?

The scene at the Darlington Railway Station . . .

What was each party trying to do?

• Dodds

• Dickinson

What was each party trying to do?

• Dodds

• Dickinson

– Why send Berry?

Darlington

Hello, Mr. Berry!

Mr. Dodds, hiding in the rear

Hello, Mr. Berry!

“I revoke!!”

Mr. Dickinson

“I accept!!”

Dodds/Berry