Chapter 10 – The Agreement: Offer
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The document summarizes key concepts around offers in contract law: 1) An offer requires intent to enter a binding agreement, definite terms, and communication to the offeree. 2) Advertisements are generally invitations to negotiate rather than offers, but rewards are treated as unilateral contract offers that can be accepted with performance. 3) Offers can be terminated by revocation before acceptance, rejection, lapse of time, or subsequent illegality under common law, though the UCC provides more flexibility.
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Chapter 10 – The Agreement: Offer
- 1. C H A P T E R 10 The Agreement: Offer There is nothing more likely to start disagreement among people or countries than an agreement. E.B. White 10-1
- 2. Learning Objectives • Explain the elements of an offer under both the UCC and common law • Distinguish advertisements from mere invitations to negotiate • Describe circumstances for termination of an offer 10-2
- 3. Requirements for an Offer • 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 by the offeror 10-3
- 4. Intent • 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? – See Meram v. MacDonald 10-4
- 5. Definiteness of Terms • 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 – See Armstrong v. Rohm and Haas Company, Inc. 10-5
- 6. Armstrong v. Rohm and Haas Compan . • 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 10-6
- 7. Armstrong v. Rohm and Haas Compan . • 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 10-7
- 8. Definiteness Under the UCC • 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 10-8
- 9. Advertisements • Advertisements for a 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 10-9
- 10. Rewards • 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 (such as returning a lost dog to its owner) 10-10
- 11. Auctions and Bids • Advertisements for bids and sellers at auctions generally are treated as making an invitation to offer, so those who bid are making an offer that seller may accept or reject • Gleason v. Freeman: online real estate auction is not a binding contract, but a non- binding advertisement 10-11
- 12. 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 10-12
- 13. 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 terms of the original offer • Lapse of time and expiration of offer • Death or disability of either party • Destruction of subject matter • Subsequent illegality 10-13
- 14. 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 10-14
- 15. 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) 10-15
- 16. Test Your Knowledge • Multiple Choice – Which is not an invitation to negotiate: a) Advertisement of sale b) Offer of Reward c) Auction 10-16
- 17. 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? 10-17
Notas do Editor
- The hyperlink is to the opinion on Findlaw.com. Robert Armstrong and Marc Pottle worked for Morton International as ceramic grinders at its facility in Spencer, Massachusetts. In 1999, Rohm and Haas (RH) acquired Morton and announced that it would close the Spencer facility. RH gave Morton employees one month to decide whether to accept a severance package and quit their jobs. Employees who chose instead to transfer to the Woburn facility would receive an incentive payment larger than the payment offered as part of the severance package. Armstrong and Pottle wanted to remain with the company, but Thomas Payne, the plant manager at the Spencer facility, suggested that they could make substantially more money if they resigned, accepted the severance package, and started their own company to handle RH’s outsourced grinding work. At the time of Payne’s statements, the grinding work was being sourced to a company called Chand Associates, and Payne indicated that the company wanted to end its dependence on Chand. Payne represented to Armstrong and Pottle that the company would give their new business “all the [outsourced grinding] work they could handle” and that the company “would like to” give the plaintiffs “all of its outsourced work in ceramic grinding, which had been in the neighborhood of $10,000 per month.” In reliance on Payne’s representations, Armstrong and Pottle resigned from RH and accepted the severance package. After their resignations, Armstrong and Pottle invested in shop space and tools so that they could begin handling RH’s outsourced work. During the first few months after the resignations of Armstrong and Pottle, RH gave them a small amount of work and assured them that it was all the work that was available because of a decrease in production. That trend continued into late 2001 when Pottle accepted a job with Chand due to the lack of work in his new business. When he began to work for Chand, he discovered that RH was still outsourcing large amounts of grinding work to Chand. Armstrong and Pottle filed suit against RH on a number of grounds, including breach of contract. RH filed a motion to dismiss for failure to state a claim upon which relief can be granted.
- Trial court: “Here, defendant’s alleged promise is too vague for this Court to ascertain a reasonably certain basis for providing an appropriate remedy. As an initial matter, it is unclear what the volume of work was to be performed— that is, what the parties meant by the phrase “all the work” plaintiffs could “handle.” [Court listed many missing terms.] Not all of these issues are insurmountable …Taken together, however, the omissions are fatal. This court cannot supply the missing terms without writing a contract for the parties which they themselves did not make. RH’s alleged promise is therefore unenforceable as a matter of law.”
- See Jannusch v. Naffziger , a festival concessions case. Court’s decision: “The “predominant purpose” test is used to determine whether a contract for both the sale of goods and the rendition of services falls within the scope of Article 2 of the UCC. A contract that is primarily for services, with the sale of goods being incidental, will not fall within the scope of Article 2 of the UCC. Certainly significant tangible assets were involved in this case. The evidence presented in this case was sufficient to support the conclusion that the proposed agreement was predominantly one for the sale of goods…. The parties’ agreement could have been fleshed out with additional terms, but the essential terms were agreed upon. Louann admitted there was an agreement to purchase Festival Foods for $150,000 but could not recall specifically making an oral agreement on any particular date. “An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.” 2-204(2)….We conclude there was an agreement to sell Festival Foods for the price of $150,000 and that the Naffzigers breached that agreement.
- The hyperlink is to the opinion on the Justia.com website.
- False. Courts apply the objective theory of contracts based on the reasonable person. True. 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. False. Sales puffery is NOT an offer.
- The correct answer is (e).
- The correct answer is (b). This is an invitation for a unilateral contract, which will be made once the offeree performs the task required by the reward offer.
- The department store made an invitation to negotiate, you take the item to the register and offer to pay, the department store accepts your offer and completes the contract by ringing up the sale and giving you a receipt for your item.