1. 1 George Mason School of Law Contracts I F.Offer and Acceptance F.H. Buckley fbuckley@gmu.edu

2. Two kinds of contracts  Face to face: inter praesentes Mere puffs? Uncertainty “agreements to agree” 2

3. Two kinds of contracts  At a distance: inter absentes Mere puffs? Offers to the world Invitations to treat Bilateral and unilateral 3

4. The need for a “meeting of the minds” 4  Quinn J. in Williams v. Walker- Thomas at 53  Otherwise, how could we assume a Paretian improvement?

5. What is a Meeting of the Minds?  Rest. § 3 An agreement is a manifestation of mutual assent on the part of two or more persons. 5

6. What is a Meeting of the Minds?  Rest. § 22(1) The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties. 6

7. What is a Meeting of the Minds?  Rest. § 23 It is essential to a bargain that each party manifest assent with reference to the manifestation of the other.” 7

8. Offer and Acceptance  What should be the law of offer and acceptance seek to do? 8

9. The Goals of Offer and Acceptance Rules: Coordination  The parties need to know how to coordinate their attempts at agreement 9

10. The Goals of Offer and Acceptance Rules: Efficiency  They would want to do so without waste 10

11. Acceptances  What constitutes an acceptance?  When and how could an offeror revoke an offer  When an how could an offeree revoke an acceptance? 11

12. Rights and Powers  Restatement § 35. An offer gives to the offeree a continuing power to accept the offer or not, as he chooses. If he accepts, both parties have the right to the other’s performance, and the duty to perform 12

13. What constitutes an acceptance 13  Whatever the offeror wants…

14. What constitutes an acceptance 14  Whatever the offeror wants… Restatement 30(1) An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance.

15. Ever-Tite at 217  Was there a contract between the parties on June 10? 15

16. Ever-Tite at 217  Was there a contract between the parties on June 10? What about the signature by Ever-Tite sales rep?  Actual and apparent authority 16

17. Ever-Tite  Was there a contract between the parties on June 10? Who then was the offeror and who was the offeree? 17

18. Ever-Tite  Was there a contract between the parties on June 10? Who was the offeror and who was the offeree? Did Ever-Tite commence performance? 18

19. Ever-Tite  Did Ever-Tite commence performance? 19

20. Ever-Tite  Did Ever-Tite commence performance? What if Green had revoked by phone the day before? 20

21. Ever-Tite at 216  What if Green had revoked by phone the day before?  §42. REVOCATION BY COMMUNICATION FROM OFFEROR RECEIVED BY OFFEREE. An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract. 21

22. Ever-Tite  Did the offer fail for lapse of time?  41. LAPSE OF TIME. (1) An offeree's power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time.  (2) What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made. 22

23. The Offeror as the Master of the Form of Acceptance  Ciaramella at 220 23

24. Ciaramella at 220 Who made the offer? 24

25. Ciaramella Did Eisenberg accept? 25

26. Ciaramella Did Eisenberg accept? “We have a deal” 26

27. Ciaramella Did Eisenberg accept? This … Agreement shall not be effective … until it is signed…”  Agreements to agree 27

28. Ciaramella Did Eisenberg accept? Paragraph 13: Merger Clause 28

29. Ciaramella Did Eisenberg accept? Omitted terms? 29

30. Preliminary Agreements  Can you reconcile Ciaramella with Adjustrite (228)? The Leval test in Tribune 30

31. Preliminary Agreements  Can you reconcile Ciaramella with Adjustrite (227)? What is the difference between Leval’s three kinds of preliminary agreements? 31

32. Preliminary Agreements  Can you reconcile Ciaramella with Adjustrite (227)? What is the nature of the duty under the “binding preliminary commitment”? 32

33. Preliminary Agreements  Suppose the parties orally agree on a supply contract for oil at $100/barrel and settle on all material terms. The agreement specifies it is to be reduced to writing. Before this happens the price of oil rises to $200/barrel and seller refuses to go forward. What result? 33

34. Preliminary Agreements  Can you reconcile Ciaramella with Adjustrite (227)? Were there any Leval good faith duties in Ciaramella? 34

35. Silence as acceptance 35

36. Silence as acceptance  I leave my car at your house with a note that I will consider you to have bought it at $5,000 unless within a week you call me to tell me that you have rejected it. You fail to do so. Is there a sale? 36

37. Silence as acceptance  I leave my car at your house with a note that I will consider you to have bought it at $5,000 unless within a week you call me to tell me that you have rejected it. You fail to do so. Is there a sale?  What if you take the car for a spin once? A dozen times? 37

38. Restatement §69. ACCEPTANCE BY SILENCE OR EXERCISE OF DOMINION  (1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only: (a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation. 38

39. Communication of Acceptance  Buyer is in SF and Seller in NYC. Buyer sends an offer to seller and asks him to accept by signing a purchase form. Seller does so and then puts the form in his back pocket for a month. Has he accepted the offer? 39

40. Communication of Acceptance  §56. ACCEPTANCE BY PROMISE; NECESSITY OF NOTIFICATION TO OFFEROR…. It is essential to an acceptance by promise either that the offeree exercise reasonable diligence to notify the offeror of acceptance or that the offeror receive the acceptance seasonably. 40

41. What about Carlill? Or Ever-Tite? 41 Does the offeree have to communicate acceptance in a unilateral contract?

42. §54. ACCEPTANCE BY PERFORMANCE; NECESSITY OF NOTIFICATION TO OFFEROR  (1) Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification. 42

43. §54. ACCEPTANCE BY PERFORMANCE; NECESSITY OF NOTIFICATION TO OFFEROR  (1) Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification.  So can the offeree keep mum? 43

44. §54. ACCEPTANCE BY PERFORMANCE; NECESSITY OF NOTIFICATION TO OFFEROR  54(2) If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged unless (a) the offeree exercises reasonable diligence to notify the offeror of acceptance, or (b) the offeror learns of the performance within a reasonable time, or (c) the offer indicates that notification of acceptance is not required 44

45. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1 45

46. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and mails letter accepting the offer the same day. 46

47. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and mails letter accepting the offer the same day.  Offeror telephones offeree on Sept. 11 to revoke the offer 47

48. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and sends letter accepting the offer the same day.  Offeror telephones offeree on Sept. 11 to revoke the offer  Offeror receives offeree’s acceptance letter Sept. 13 Is there a contract? 48

49. The Mailbox Rule  §63. TIME WHEN ACCEPTANCE TAKES EFFECT. Unless the offer provides otherwise,  (a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree's possession, without regard to whether it ever reaches the offeror 49

50. The Mailbox Rule  §65. REASONABLENESS OF MEDIUM OF ACCEPTANCE. Unless circumstances known to the offeree indicate otherwise, a medium of acceptance is reasonable if it is the one used by the offeror or one customary in similar transactions at the time and place the offer is received. 50

51. Why was the Mailbox Rule adopted 160 years ago?  What was black and white and read all over and first appeared in 1840? 51

52. Why was the Mailbox Rule adopted 160 years ago? 52 The first stamp: The “Penny Black” of 1840

53. And why did that matter? 53

54. And why did that matter? 54

55. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and fedexes letter accepting the offer the same day.  Offeror telephones offeree on Sept. 11 to revoke the offer  Offeror receives offeree’s fedex Sept. 13 Is there a contract? 55

56. The Mailbox Rule  §65. REASONABLENESS OF MEDIUM OF ACCEPTANCE. Unless circumstances known to the offeree indicate otherwise, a medium of acceptance is reasonable if it is the one used by the offeror or one customary in similar transactions at the time and place the offer is received. 56

57. The Mailbox Rule  §65. REASONABLENESS OF MEDIUM OF ACCEPTANCE. Unless circumstances known to the offeree indicate otherwise, a medium of acceptance is reasonable if it is the one used by the offeror or one customary in similar transactions at the time and place the offer is received. Comment: Under §30 an offer invites acceptance by any reasonable medium unless there is contrary indication; under §63 an acceptance so invited is ordinarily effective upon dispatch. 57

58. The Mailbox Rule  §63. TIME WHEN ACCEPTANCE TAKES EFFECT. Unless the offer provides otherwise,  (a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree's possession, without regard to whether it ever reaches the offeror 58

59. The Mailbox Rule  Restatement §67. Where an acceptance is seasonably dispatched but the offeree uses means of transmission not invited by the offer or fails to exercise reasonable diligence to insure safe transmission, it is treated as operative upon dispatch if received within the time in which a properly dispatched acceptance would normally have arrived. 59

60. The Mailbox Rule?  Offeror fedexes offer to offeree on Sept. 1  Offeree receives offer on Sept. 3 and mails letter accepting the offer the same day.  Offeror telephones offeree on Sept. 4 to revoke the offer  Offeror receives offeree’s letter on Sept. 5 Is there a contract? 60

61. The Mailbox Rule  Restatement §67. Where an acceptance is seasonably dispatched but the offeree uses means of transmission not invited by the offer or fails to exercise reasonable diligence to insure safe transmission, it is treated as operative upon dispatch if received within the time in which a properly dispatched acceptance would normally have arrived. 61

62. The Mailbox Rule  Restatement §67. Where an acceptance is seasonably dispatched but the offeree uses means of transmission not invited by the offer or fails to exercise reasonable diligence to insure safe transmission, it is treated as operative upon dispatch if received within the time in which a properly dispatched acceptance would normally have arrived.  So when would the Fedex of an acceptance have arrived? 62

63. The Mailbox Rule  Can you think of something better than the mailbox rule? It’s the rule in both common and civil law— why? 63

64. The Mailbox Rule  Compared to a reception rule? Which is employed for revocations 64

65. The Mailbox Rule  Compared to a reception rule? Celerity: under which rule does one party first know he has a contract? 65

66. The Mailbox Rule  Compared to a reception rule? Celerity: under which rule does one party first know he has a contract? Evidentiary: what is easier to prove: emission or reception? 66

67. The Mailbox Rule  Compared to a reception rule? Celerity: under which rule does one party first know he has a contract? Evidentiary: what is easier to prove: emission or reception?  Things ever get lost in the mailroom? Kinda on purpose? 67

68. The Mailbox Rule  Compared to a reception rule? Celerity: under which rule does one party first know he has a contract? Evidentiary: what is easier to prove: emission or reception? Offeror and Offeree Incentives 68

69. The Mailbox Rule  What if the offeree mis-addresses the envelope?  University Emergency at 232  Who takes the risk of misdelivery? 69

70. The Mailbox Rule  §63. TIME WHEN ACCEPTANCE TAKES EFFECT. Unless the offer provides otherwise,  (a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree's possession, without regard to whether it ever reaches the offeror 70

71. Mis-addressed letters?  Restatement §67. Where an acceptance is seasonably dispatched but the offeree uses means of transmission not invited by the offer or fails to exercise reasonable diligence to insure safe transmission, it is treated as operative upon dispatch if received within the time in which a properly dispatched acceptance would normally have arrived. 71

72. The Mailbox Rule  §67. Where an acceptance is seasonably dispatched but the offeree uses means of transmission not invited by the offer or fails to exercise reasonable diligence to insure safe transmission, it is treated as operative upon dispatch if received within the time in which a properly dispatched acceptance would normally have arrived. 72

73. The Mailbox Rule  What if the offeree had communicated his acceptance by email and it ends up in the offeror’s spam folder? 73

74. The Mailbox Rule  §67. EFFECT OF RECEIPT OF ACCEPTANCE IMPROPERLY DISPATCHED. Where an acceptance is seasonably dispatched but the offeree uses means of transmission not invited by the offer or fails to exercise reasonable diligence to insure safe transmission, it is treated as operative upon dispatch if received within the time in which a properly dispatched acceptance would normally have arrived. 74

75. IM’s or text messages? Contracts inter praesentes  §64. ACCEPTANCE BY TELEPHONE OR TELETYPE. Acceptance given by telephone or other medium of substantially instantaneously two-way communication is governed by the principles applicable to acceptances where the parties are in the presence of each other. Cf. Illustration 1 and 2 75

76. IM’s or text messages? Contracts inter praesentes  §64. ACCEPTANCE BY TELEPHONE OR TELETYPE. Acceptance given by telephone or other medium of substantially instantaneously two-way communication is governed by the principles applicable to acceptances where the parties are in the presence of each other. Cf. Illustration 1 and 2 76

77. Revocation  Restatement § 36(1). An offeree’s power of acceptance may be terminated by (c) revocation by the offeror 77

78. Revocation  Offeror mails offer to offeree on Sept. 1 78

79. Revocation  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and sends letter accepting the offer the same day. 79

80. Revocation  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and sends letter accepting the offer the same day.  Offeror telephones on Sept. 9 to revoke the offer. 80

81. Revocation  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and sends letter accepting the offer the same day.  Offeror telephones on Sept. 9 to revoke the offer.  Is there a contract? 81

82. Revocation  Restatement § 42. An offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation of intent not to enter into the proposed contract. 82

83. Revocation  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and sends letter accepting the offer the same day.  Offeror mails revocation letter on Sept. 9 which offeree receives on Sept. 12.  Is there a contract? 83

84. Revocation  Restatement § 42. An offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation of intent not to enter into the proposed contract. 84

85. Revocation  Restatement § 42. An offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation of intent not to enter into the proposed contract.  Can you see why we need a reception rule for offeror revocations if we have an emission rule for offeree acceptances? 85

86. Revocation  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and sends letter accepting the offer the same day.  Offeror mails revocation letter on Sept. 9 which offeree receives on Sept. 12.  Is there a contract? 86

87. Rejection by offeree  Offeror mails offer to offeree on Sept. 1 87

88. Rejection by offeree  Offeror mails offer to offeree on Sept. 1  Offeree receives this on Sept. 8 and mails a rejection letter on Sept. 9. 88

89. Rejection by offeree  Offeror mails offer to offeree on Sept. 1  Offeree receives this on Sept. 8 and mails a rejection letter on Sept. 9.  Offeree accepts the offer by phone on Sept. 11. 89

90. Rejection by offeree  Offeror mails offer to offeree on Sept. 1  Offeree receives this on Sept. 8 and mails a rejection letter on Sept. 9.  Offeree accepts the offer by phone on Sept. 11.  Offeror receives the rejection letter on Sept. 12. Is there a contract? 90

91. Revocation  Restatement § 40. Rejection or counter-offer by mail … does not terminate the power of acceptance until received by the offeror… 91

92. Now…  Offeror mails offer to offeree on Sept. 1 92

93. Now…  Offeror mails offer to offeree on Sept. 1  Offeree mails a rejection letter on Sept. 10. 93

94. Now…  Offeror mails offer to offeree on Sept. 1  Offeree mails a rejection letter on Sept. 10.  Offeree mails acceptance on Sept. 11. 94

95. Now…  Offeror mails offer to offeree on Sept. 1  Offeree mails a rejection letter on Sept. 10.  Offeree mails acceptance on Sept. 11.  Offeror receives the rejection letter on Sept. 12 and the acceptance letter on Sept. 13. Is there a contract? 95

96. Revocation  Restatement § 40. Rejection or counter-offer by mail … does not terminate the power of acceptance until received by the offeror… 96

97. Revocation  Restatement § 40. Rejection or counter-offer by mail … does not terminate the power of acceptance until received by the offeror, but limits the power so that a letter or telegram of acceptance started after the sending of an otherwise effective rejection or counter-offer is only a counter-offer unless the acceptance is received by the offeror before he receives the rejection or counter-offer. So which is received first: the rejection or the acceptance letter? 97