Chapter 10 – The Agreement: Offer

Introduction to ContractsThe Agreement: Offer

The Agreement: AcceptanceConsideration

Reality of Consent

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Capacity to ContractIllegality

WritingRights of Third Parties

Performance and Remedies

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There is nothing more likely to start disagreement among people or countries than an agreement.

E.B. White

The Agreement: Offer

© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives

Requirements for an offer Intent Definiteness of Terms

Special ProblemsTermination of an offer

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An offer is a promise conditional on an act, return promise, or forbearance (refraining from doing something)

Parties to a contract must have intent to enter binding agreement, terms must be definite, and the offer must be communicated to the offeree

Requirements for an Offer

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An offeror must indicate present intent to contract, or the intent to meet the contract obligation upon acceptance

Courts use the objective theory of contracts: Would a reasonable person judge the

offeror’s words and acts in the context of the circumstances to signify intent?

Intent

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Offer and resulting contract must be definite and certain Offer cannot be vague about major

points Example:

“I’ll paint your house until I’m tired” is vague, but “I’ll finish painting your house in three days” is definite

Armstrong v. Rohm and Haas Company, Inc.

Definiteness of Terms

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Armstrong v. Rohm and Haas Company, Inc.

Facts: Plaintiffs worked at a manufacturing plant closed

by RH, which gave employees a choice: accept a severance package or transfer to another facility

Plant manager told plaintiffs to accept severance and begin a company, stating that RH “would like to” give plaintiffs “all [outsourced] work”

Plaintiffs followed manager’s suggestions, but there was little work since RH still outsourced elsewhere, so plaintiffs sued for breach of contract

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Court’s Decision: Defendant’s alleged promise is too vague to

ascertain a reasonably certain basis for providing an appropriate remedy Court listed issues about the alleged

“contract” The lack of definiteness is fatal because the

court cannot supply these terms RH’s alleged promise is therefore

unenforceable as a matter of law

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Armstrong v. Rohm and Haas Company, Inc.

UCC often creates contractual liability where no contract would result under common law

Article 2 sales contracts can be created “in any manner sufficient to show agreement, including conduct…” [2–204(1)]

A price, quantity, delivery, and time for payment term left open in a contract can be filled by inserting a presumption found in the Code’s rules

Definiteness Under the UCC

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Advertisements for the sale of goods at specified prices generally are not considered offers, but are invitations to offer or negotiate Examples: flyers, handbills, catalogs

listing prices, “for sale” ads in newspaper or yard

Sales puffery is not an offer

Advertisements

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Advertisements offering rewards for lost property, information, or capture of criminals are treated as offers for unilateral contracts To accept the offer and receive the

reward, an offeree must perform the requested act

Rewards

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Sellers at auctions and advertisements for bids are generally treated as making an invitation to offer, so those who bid are making an offer that the seller may accept or reject

Auctions and Bids

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Termination by Revocation

An offer may be terminated by revocation if revoked & communicated to offeree before the offer is accepted

Exceptions: Option contract in which an offeror agrees

not to revoke the offer for a stated time in exchange for some valuable consideration

Offers for unilateral contracts (e.g., rewards)

Promissory estoppel circumstances Firm offers for sale of goods

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Other Methods of Termination

Rejection: Offeree expressly rejects (unwilling to accept) offer or impliedly rejects the offer by making a counteroffer An offer to contract on terms materially

different from the terms of the original offer

Lapse of time and expiration of offer Death or disability of either party Destruction of subject matter Subsequent illegality

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Test Your Knowledge

True=A, False = B Courts apply the subjective theory of

contracts when determining whether intent to contract existed

The UCC often creates contractual liability where no contract would result under common law

Sales puffery may be deemed to be a valid offer

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Test Your Knowledge

Multiple Choice An offer requires:

(a) Intent and communication to offeree(b) Motive(c) Definiteness of terms(d) All of the above(e) All of the above except (b)

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Test Your Knowledge

Multiple Choice Which is not an invitation to negotiate:

(a) Advertisement of sale(b) Offer of Reward(c) Auction

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Thought Questions

When you go to a department store and purchase an item, what have you done according to contract law?

Is the law sensible about these contracts?

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