Common Law Contract: Acceptance

The Study of Offer and Acceptance20. March 2012 Slide 1

Common Law of Contract

Mutual Assent: The Study of Offer and Acceptance, Part II


Nature of Acceptance

Acceptance = offeree's manifestation of assent

Acceptance must be voluntary

Must have intent to enter into K on terms of offer.

Intent to accept is determined objectively

Only the offeree may accept


Valid Acceptance

Remember, offeror has power to set terms of K and requirements for effective acceptance.

Offeree must accept terms

Offeree must accept in manner and within time prescribed.


Formation Interpretation

Contract formation and content are judged using Objective Test

Whether offer was made

propriety of acceptance

performance or nonperformance of terms

TEST – interpret words or conduct as a reasonable person who stands in shoes of parties would.


Three Main Issues

The means of acceptance

Communication of acceptance

Timeliness of acceptance


Means of Acceptance

How must the offer be accepted?

Traditional Approach – Offer dictated that acceptance could be made by:

Performance – unilateral K

Return Promise – bilateral K

Modern Approach – unless otherwise indicated, offer invites acceptance by any reasonable means.


Unilateral Contract

Eddy Rocky

$40 to paintkayak

acceptance bypainting

promise

performance


When is this Important?

Most contracts are bilateral, so this distinction is usually not important.

When is it important?

When there is an argument over whether offeree used proper means of acceptance.


Properly Conforming

More complicated question is whether acceptance conformed to the terms of the offer.

Classic Rule = acceptance must correspond exactly with terms of offer. (Mirror Image Rule, used in U.K.)

Modern Approach = acceptance must materially conform to offer (used in U.S.)

Nonconforming = counteroffer = rejection

The Study of Offer and Acceptance20. March 2012

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Different Meanings

Outright rejection with an explanation = rejection

vs.

Request for information = possibility of acceptance still open

Grumbling Acceptance = acceptance

Test – can offeror reasonably understand that offer is no longer alive?


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Example

Owner of farm writes to prospective buyer offering to sell property for $2 million. The offeree replies:

I accept your offer provided you reduce the price to $1.9 million.”


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Example 2

Same piece of property and offer. Offeree replies:

I am interested in the property, but not at your price.


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Example 3

Same property & price. Offeree replies:

I am considering your offer. Do you propose a cash sale, or will you take a mortgage for the price?


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Communication of Acceptance

Legal Assumption – unless otherwise clearly indicated, the offeror is more interested in attracting acceptance than what method communication is used.

Substantive terms of K are deemed central.

Terms for acceptance are deemed ancillary


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Communication Rules

Must comply with stated mandatory and exclusive method of acceptance.

If specified method does not reasonably appear to be exclusive, then reasonable method will suffice.

If no means are specified, then reasonable means will suffice.


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Silence, Inaction, Ambiguous Action

Required method of acceptance must involve deliberate, unambiguous action.

Offeror cannot impose duty on offeree to take affirmative steps to reject an offer.

Purpose of these rules is to protect offeree.


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When Silence Can Bind

Under two circumstances, silence binds the offeree:

Exercising ownership over property or keeping benefit of service after having reasonable opportunity to refuse.

Prior dealing between parties give offeror reasonable expectation that offeree will give notice of rejection.


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Timeliness of Acceptance

The offeror may specify when acceptance will be effective.

Need to distinguish between instantaneous and noninstantaneous communication

NOTE Under Option Contracts (firm offers), acceptance not effective until receipt.

If sent by unauthorized means, effective upon receipt.


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Instantaneous Communication

Generally, acceptance is effective as soon as manifested.

If interruption in communications:

When both parties are aware, no K until problem is fixed.

When only party is aware, must inform other party of problem ASAP or be bound by other party's reasonable understanding.


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Rule

RULE – with instantaneous communications, acceptance takes effect upon being successfully communicated unless one of the parties is reasonably aware of disruption.

To be determined by Objective Test


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Mailbox Rule

Adams v. Lindsell


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NonInstantaneous Communication

Remember – the offeror can always specify when acceptance become effective.

RULE – unless specified by offeror, acceptance is effective upon dispatch.

provided acceptance is made in a manner and medium authorized by offeror, if specified.

Burden is on offeree to prove proper dispatch


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Unauthorized Mode

If acceptance is never delivered, or delivered beyond reasonable time, then acceptance is effective upon RECEIPT.

Remember, fault here lies with the offeree.

Thus, doesn't get benefit of Mailbox rule.

But, if acceptance reaches offeror in timely manner, than wrong mode has no impact.


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Two Other Situations When Mailbox Rule Does Not Apply

Acceptance follows a counteroffer or rejection.

Offer is irrevocable (firm offer, option K)

Note – all other communications are effective upon receipt. Thus, acceptance is still good even though a subsequent revocation reaches offeror first.


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General Rules

Offer – effective upon receipt

Rejection or Counteroffer – effective upon receipt

can impact Mailbox Rule if sent before acceptance.

Revocation – effective upon receipt

Acceptance –

Instantaneous Communication – effect upon receipt

Noninstantaneous Communication effective upon proper dispatch


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What About EMail

Text says it is considered instantaneous communication.

Is it?


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Review: Normile v. Miller

Who is selling the house?

Who wants to buy the house?

Who made the original offer?

What did the offeree (person who received the offer) do with the original offer?

What did the offeror (person who made the original offer) do with the offeree's response?


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Normile v. Miller

Who eventually agreed to buy this house and why is this important?

What is the legal issue(s) that the court must address?

What does the court say generally is the effect of an “acceptance” that changes the terms of the original offer?

What does the court say the “net effect” of the defendantseller's “counteroffer” is in this case?


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Normile v. Miller

Why do the original offerors (“Plaintiff Appellants”) lose this case?

Under what circumstances might the “PlaintiffsAppellants” have won this case?

Education

Common Law Contract: Acceptance