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Quote of the Day

“It takes two to speak the truth -- one to speak and one to

hear.”Henry David Thoreau, American Philosopher

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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.

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Offer

Problems with Intent Invitation to bargain is not an offer. Price quote is generally not an offer. An advertisement is generally not an offer. Placing an item up for auction is not an offer, it is

merely a request for an offer. Problems with Definiteness

The term of the offer must be definite.

An offer is an act or statement that proposes definite terms and permits the other party to create a contract by accepting those terms.

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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.

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UCC and Open Terms (cont’d)

Delivery, Time, and Payment Usually, delivery is at the seller’s business, time

must be reasonable and payment is due upon receipt of goods.

Warranties An implied warranty of merchantability, means that

the goods must be of at least average, passable quality in the trade.

An implied warranty of fitness means the goods are suitable for a particular purpose.

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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 period.

Sale of Goods A writing signed by a merchant, offering to hold an offer

open, may not be revoked.

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Termination of Offers (cont’d)

Termination by Rejection If an offeree rejects an offer, the rejection immediately

terminates the offer.

Termination by Expiration When an offer specifies a time limit for acceptance, that

period if binding. If the offer specified no time limit, the offeree has a

reasonable period in which to accept.

Termination by Operation of Law Death or mental incapacity of the offeror terminates an offer. Destruction of subject matter terminates offer.

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Acceptance

The offeree must say or do something to accept. In a bilateral contract, the offeree generally must

accept by making a promise. In a unilateral contract, the offeree must accept by

performing. 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.

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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 issues.

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.

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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 accceptance is generally effective upon dispatch,

meaning the moment it is out of the offeree’s control.

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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

promise.

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“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.”