Chapter 10
Contracts: Agreement
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Introduction
Agreement = offer and acceptance.
Parties must show mutual assent to terms of
contract.
Once an agreement is reached, if the other
elements of a contract are present, a valid
contract is formed.
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§1: Requirements of the Offer
Offeror’s serious intention.
Definiteness of terms.
Communication to Offeree.
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Offeror’s Serious Intention
 Contract is judged by what a reasonable person in the
Offeree’s position would conclude about the offer.
 Case 10.1: Lucy v. Zehmer (1954).
 Offers made in anger, jest, or undue excitement are
usually not offers.
 Expressions of opinion are not offers.
 Statements of Intention or preliminary negotiations are
are not offers.
 Advertisements, Catalogues, Price Lists, and Circular
are treated as Invitations to negotiate and not as offers.
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Offer-Definiteness of Terms
 Terms (Expressed or Implied).




Identification of the parties.
Object or subject matter of the contract.
Consideration to be paid.
Time of payment, Delivery, or Performance.
Case 10.2: Satellite Entertainment Center v.
Keaton (1997).
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Offer-Communication
Offeree’s knowledge of the offer:
 Directly by the Offeror.
 Use of Agents.
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§2: Termination of the Offer
An offer may be terminated prior to acceptance
by either:
 Action of the Parties; or by
 Operation of Law.
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Termination by
Action of the Parties [1]
Revocation of the offer by the Offeror:
 Offer can be withdrawn anytime before Offeree
accepts the offer.
 Effective when the Offeree or Offeree’s agent
receive it.
 Exceptions:
• Irrevocable Offers.
• Option Contract: Promise to hold an offer open for a
specified period of time in return of consideration.
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Termination by
Action of the Parties [2]
 Exceptions (Cont’d):
• Detrimental Reliance or Promissory Estoppel where
Offeree relies on offer to his or her detriment, thus
Offeror is barred from revoking the offer.
Rejection of the offer by the Offeree:
 Rejection by the Offeree (expressed or implied)
terminates the offer.
 Effective only when it is received by the
Offeror or Offeror’s agent.
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Termination by
Action of the Parties [3]
 Rejection by Offeree (Cont’d).
 A counteroffer by the Offeree is a rejection of the
original offer and making of a new offer.
 Mirror Image Rule.
 Offeree’s acceptance to match the the Offeror’s offer
exactly.
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Termination by
Operation of Law
Lapse of Time.
 Offer terminates by law when the period of
time specified in the offer has passed.
 If no time period for acceptance is specified,
the offer terminates at the end of a reasonable
period of time.
Destruction of the Subject Matter.
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Termination by
Operation of Law [2]
Death or Incompetence of the Offeror or Offeree.
Supervening Illegality of the Proposed Contract.
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§3: Acceptance
Acceptance is the




Voluntary act (expressed or implied),
by the Offeree that,
shows assent (agreement),
to the terms of an offer.
“Mirror Image” Rule.
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Silence as Acceptance
Acceptance of Services by Silence.
 Sometimes Offeree has a duty to speak.
Prior Dealings and Acceptance.
 Silence can be acceptance if there are prior dealings.
Solicited Offers.
 Offeree has a duty to reject.
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Mode and
Timeliness of Acceptance
Mail Box Rule - Acceptance becomes effective
on dispatch, providing that authorized means of
communication is used. Offeree accepts by using
the stipulated means of acceptance.
 Offeror specifies (expressly or impliedly) how
acceptance should be made.
 Effective when dispatched (mailed, shipped).
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Means of Acceptance
 Exceptions:
 If acceptance is not properly dispatched by the Offeree.
 If Offeror specifies that acceptance will not be effective
until it is received.
 If acceptance is sent after rejection, whichever is
received first is given effect.
 Unauthorized Means of Acceptance.
 Not effective until it is received by the Offeror. If
timely sent and dispatched it is considered to have been
effective on its dispatch.
 Case 10.3: Osprey LLC v. Kelly-Moore Paint
Company (1999).
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§ 4: Technology and Acceptance
Traditional rules provide framework for digital
age.
But traditional rules may not apply to
acceptances via Fed Ex, email, or fax.
Generally, ‘mailbox rule’ does not apply to
online offers.
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Law on the Web
Law Office’s Website.
Findlaw.com Contracts Site.
 Legal Research Exercises on the Web.
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