Chapter 10
Mutual Assent- Offer and Acceptance
Objective Theory of Contracts
• What the party said when entering into the
contract
• How the party acted or appeared
• The circumstances surrounding the
transaction
• As interpreted by a reasonable person,
rather than by the party’s own secret,
subjective intentions.
Three Elements of an Offer
• A serious, objective intent
• The terms of the offer must be reasonably
certain and definite so that the parties can
ascertain the terms of the contract
• The offer must be communicated to the
offeree
Intention
• Concept of objective intent
• Expressions of Opinion do NOT evidence
an intent to enter into a binding agreement
• Statements of Intention, or “thinking about”
something, is not indicate intention.
• Preliminary Negotiations/Invitations to Deal
are NOT offers
– Advertisements, Catalogs, Circulars are
Invitations to Deal (exception if clear, definite
promise with nothing left to negotiate OR Ads
offering a Reward
Auctions - Offer of sale through
an Auctioneer
• With Reserve - A
right to withdraw the
goods. Seller does not
have to accept the
final bid. All auctions
assumed “with
reserve” unless stated
otherwise
• Without Reserve Goods can’t be
withdrawn and must
be sold to highest
bidder
Definiteness of Terms
• Terms must be reasonably certain and
unambiguous to allow the court to
determine the parties intent.
• However, missing terms may be filled in
under the Code (open price, absence of date
for payment; absence of specified place for
delivery, time for performance)
• Output and Requirement contracts do NOT
fail for lack of definite terms
Output & Requirement Contracts
• Output Contracts • RequirementContracts
Buyer agrees to
Buyer agrees to
purchase Seller’s
purchase, and Seller
entire output (e.g.,
agrees to sell, all that
Farmers Market agrees
the Buyer needs or
to buy ALL of the
requires (e.g., Pizza
eggs Mr. Smith’s hens
Store agrees to buy all
produce.
the soda products it
needs from CocaCola)
Communication
• A person must know about an offer in order
to accept an offer.
• Generally, a failure to reply (silence) will
not be an acceptance of an offer
(UNLESS, prior dealings, OR silence
which is evidence of a positive and
unequivocal acceptance)
• Unordered merchandise is not deemed
accepted (unless it was solicited)
Duration Of
Offers
o
• Lapse of Time
• Revocation - Offer can be revoked anytime
before acceptance, even if there is a promise
to keep it open (except option K’s; Firm
offers
• Rejection
• Counteroffer
• Death/incompetency of offeror or offeree
• Subsequent illegality of the contract
• Destruction of Subject Matter
Mail Box Rule
• Acceptances are Valid upon Dispatch
(unless the offeree states otherwise or the
offeree uses an unauthorized means of
communication)
Firm Offer
• Must be made by a Merchant
• Merchant agrees not to revoke offer for a
stated period of time
• Must be a SIGNED WRITING