CHAPTER 9
Creating a Contract:
Offers
What is an Valid Offer?
• Offer = the manifestation of a willingness
to enter into a contract if the other party
agrees to the terms
• Offeror makes the offer
• Offeree receives (may accept) the offer
What is an Valid Offer?
• Question 5 at end of chapter
– No. A promise is a manifestation of intent by the promisor to
be bound. Mere predictions or statements of opinion are not
promises that will support a contract. Fleck’s statement was a
mere expression of opinion or prediction concerning the future
availability of S-54 remnants. No one could predict exactly
how much excess Monsanto would have because Monsanto
milled S-54 in January for installation during the summer.
Fleck did not guarantee a never-ending supply; he made a
prediction of future sales of S-54 at $1.75/square foot. Major
Mat Co. v. Monsanto, 969 F.2d 579 (7th Cir. 1992).
What is an Valid Offer?
• Intent?
–
–
–
–
Present
Definite
Communicated
Considers all the circumstances
What is an Valid Offer?
• Intent?
– Question 10 at end of chapter
• Mears v. Nationwide Mutual Ins. Co.
– An offer of “His and Hers Mercedes” to the person who came
up with the best theme for a regional convention is enforced.
– Sufficient objective evidence of intent.
– Whether the company really intended to give away two
Mercedes for a slogan for a regional convention is irrelevant.
The fact that the offer was made by a major employer as part
of a convention designed to boost morale and recognize
employee achievements was an important objective fact.
– This is a unilateral contract
What is an Valid Offer?
• Definiteness?
– The more specific the proposal the more likely the
court is to call it an offer
– Behavior, acting as though a contract, may lead to
finding a contract
– Question 11 at end of chapter
• Mears v. Nationwide Mutual Ins. Co.
– This is the same case as the one discussed above. The issue before
the court in this part is whether the offer was sufficiently definite.
The court found it was.
– The Code generally requires less definiteness than the common law.
Generally, courts do not like for contracts to fail for indefiniteness.
– Mears testified that the least expensive new Mercedes cost $31,450.
He was awarded $60,000.
What is an Valid Offer?
• Definiteness?
– Key v. Coryell, p. 165.
• The court found that the terms of the education
agreement were too indefinite to form the basis
of a contract. The Code generally requires less
definiteness than the common law. However,
unlike contract law interpretation earlier in the
century, courts using either system generally do
not like contracts to fail for indefiniteness.
What is an Valid Offer?
• Definiteness?
• Question 7 at end of chapter
– Yes. A court cannot enforce a contract unless
it can determine what it is. There is no
evidence from which to determine the
parameters of the promise alleged here. The
vagueness as to material details such as the
form, frequency, and amount of payments
render the assertion of a contract meaningless.
The promise, if made, is unenforceable.
Saunder v. Baryshnikov, 487 N.Y.S. 2d 51
(Sup. Ct. N.Y. 1985).
What is an Valid Offer?
• Communication?
– ProCD, Inc. v. Zeidenberg, p. 166, “Shrink Wrap
License”
• The 7th Circuit finds that contract terms appearing on the
inside of a software box are adequately communicated.
• License becomes effective as soon as the customer takes the
wrapping off. The court finds that allowing payment first
serves buyers’ interests by accelerating effectiveness and
reducing transaction costs. The court also cites insurance
sales, and sales of consumer goods in boxes as instances
where full contract terms are not disclosed until after the
transaction in completed. UCC Section 2-204 allows a
contract to be made “in any manner sufficient to show
agreement.” The offeror may set the terms of acceptance,
which ProCD did. Since the initially undisclosed terms were
not unreasonable, they are enforceable.
What is an Valid Offer?
• Solicitations of Offers?
– Advertisements
• Courts have generally held that ads for the sale
of goods at a specified price are not offers, but
invitations to negotiate
• Under certain circumstances courts have found
highly specific ads to be offers
What is an Valid Offer?
– Advertisements
• Leonard v. Pepsico, Inc., p.168
– An ad which showed a teenager flying a Harrier Jet he had purchased with
“Pepsi points” is found by the court to clearly not be a serious offer.
– The cost of a Harrier Jet is roughly $23 million. The court notes that
Leonard should have concluded that this was too good a deal to be true. The
court explains the commercial was meant to evoke military and espionage
thrillers, and the implication was that Pepsi Stuff merchandise will inject
drama and moment into hitherto unexceptional lives. A reasonable viewer
would view the ad as mere puffery. Also, the court said the callow youth
featured in the ad, “is a highly improbable pilot, one who could barely be
trusted with the keys to his parents’ car, much less the prize aircraft of the
United States Marine Corps.” The notion of traveling to school in a Harrier
Jet “is an exaggerated adolescent fantasy.” The number of points would
require someone to drink 7,000,000 Pepsis, or roughly 190 a day for the next
hundred years – an unlikely proposition. The situation did contain the
elements the court usually looks for when treating an ad as an offer: a highly
specific statement about what is offered and expected in return; the person
doing something extraordinary to accept; and, the number of people
accepting will be limited. The potential for unfairness, though, is limited.
What is an Valid Offer?
• Solicitations of Offers?
– Rewards (e.g for the return of lost property)
• Generally held to be offers for unilateral
contracts
– Auctions
• Sellers generally held to be making an invitation
to offer
• Bidders are treated as offerors
– Therefore items can be withdraw prior to acceptance
unless auction is advertised as being “without
reserve”
What is an Valid Offer?
• Solicitations of Offers?
– Bids (e.g. in construction)
• Advertisement for bid generally held to be
invitation to offer
• Bid Submitters = Offerors
What is an Valid Offer?
• Solicitations of Offers?
– Bids (e.g. in construction)
• Question 8 at end of chapter
– No. There can be little doubt there was a contract.
Efficient made its offer by bid to do the electrical work
on the hotel. Blaine-Hays accepted that offer by letter
after Marriott accepted Blaine-Hays bid to build the
hotel. Efficient showed it acquiesced to the contract
when it worked for three months. It cannot now deny
there was a contract to finish the work. Blaine-Hays
Construction Co. v. Efficient Electric Co., 1991 Tenn.
App. LEXIS 961.
What are the Terms of an Offer?
• If actual notice (e.g. offeree read) or reasonable
person should have been put on notice = bound
– Aronson v. University of Mississippi, p.170
• The court finds terms in a university catalog to be
the terms of a scholarship offer to a student.
• Do you view what was in the catalog you got
from Mount Olive College as spelling out terms
of a contract.?
• The court may reach a different conclusion if the
change from the catalog had not been as
important as scholarship terms.
• Some courts in other states have held differently.
Offer Termination
• An offer is terminated by:
– Lapse of time to accept per terms of the offer
(e.g. “this offer expires on 10/24/03”)
• If no time specified = “a reasonable time”
Offer Termination
• An offer is terminated by:
– Revocation
• Offerors generally can revoke offers prior to acceptance
– Exceptions:
» Firm offers
» signed writing
»
»
by a merchant
containing assurances that offer will be held open
» Options
» Where something of value has bee given in exchange
for a promise not to revoke
• Effective upon actual receipt by the offeree
Offer Termination
• An offer is terminated by:
– Revocation
• Question 12 at end of chapter
– No. An offer may be revoked until accepted. Here,
Madaio’s written promise to purchase was not mailed
until two days after McCarthy revoked the offer. Since
the agreement required acceptance by return of the
signed contract, the offer was effectively revoked
before acceptance. Madaio v. McCarthy, 489 A. 2d
1197 (N.J. Super. Ct. 1985).
Offer Termination
• An offer is terminated by:
– Rejection or Counter Offer
• Giovo v. McDonald, p. 173
– The court found that GEICO’s offer worked as a counteroffer,
and thus did not constitute an acceptance of Giovo’s $18/day
request. The appeals court held that the circuit court should
have denied the McDonalds' motion for summary judgment
on their settlement defense and should have granted Giovo's
motion. The lower court felt that all the “essential elements”
of the agreement had been met, and that the parties could
not be expected to anticipate every contingency or spell out
every incidental detail. The appeals court rejected this
reasoning, holding that an acceptance is effective only if it is
“absolute, unconditional, and identical to the terms of the
offer.”
Offer Termination
• An offer is terminated by:
– Rejection or Counter Offer
• Question 6 at end of chapter
– Estate of Chosnyka v. Meyer
» Two conditions on the acceptance are deemed not to be
material changes and therefore a contract for the sale of the
land was formed when Chosnyka sent back the copy.
» The court does not discuss Chosnyka’s condition regarding
closing within sixty days. Is this a material change?
» Meyer took steps to protect himself regarding the receipt and
form of the acceptance. Perhaps he should also have been as
careful in his examination of the property before making the
offer. There was a marker on the land indicating the gas line; he
did not see it until his subsequent visit to the land.
Offer Termination
• An offer is terminated by:
– Operation of Law
• Death/Insanity
• Destruction of Subject Matter
• Intervening Illegality