CONTRACTS ch 2 Offer And Acceptance
Lucy v. Zehmer?
Plaintiff and defendant were drinking at a bar. Plaintiff offered
to purchase defendant's farm. Defendant drafted an agreement on the
back of a bar receipt to sell the farm to plaintiff and had his wife
sign it, saying it was a joke. Plaintiff wanted barn but defendant
refused, saying it was a joke.
RULE: The OBJECTIVE, not subjective, expression of a party's intent to be bound in an agreement, is what determines the existence of a valid and enforceable contract. (whether a REASONABLE PERSON believe there is a valid offer).
Specht v. Netscape Communications?
Defendant provided software programs online. Plaintiff downloaded
this program. A link to a license agreement was at the bottom of the
screen below the "download" button, and was not visible to
users who do not scroll down. Plaintiff sued and defendant wanted to
enforce arbitration subject to the license agreement
RULE: An offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he is unaware, contained in a document whose contractual nature is not obvious. (Reasonable person standard).
Fairmount Glass Works v. Crunden?
Plaintiff asked for lowest price for mason jars. Defendant sent a letter with a quote of prices for "immediate acceptance." Plaintiff then accepted but defendant stated it could not be filled and that it didn't intend to make an offer, but a quote.
RULE: Where a party both quotes prices AND invites acceptance by another party, a binding offer has been made that cannot be revoked once accepted.
Owen v. Tunison?
Plaintiff asked defendant if he was willing to sell his lot.
Defendant said "it would not be possible to sell unless I
received $16,000 in cash."
RULE: Stating a minimum price of what a person would sell does not constitute a valid offer, but preliminary negotiations.
Harvey v. Facey?
Plaintiff asked 2 questions: (1) whether defendant wanted to sell; and (2) what is the lowest price he would sell for. Defendant replied 900 euros to the second question.
RULE: A valid offer requires an affirmative statement to sell to the buyer.
Lefkowitz v. Great Minneapolis Surplus Store?
A store put an advertisement out that they were selling some clothes for $1 on a first-come, first-serve basis on a certain date. Plaintiff was first and wanted the item but store refused to sell because he was a man.
RULE: An advertisement constitutes an offer when it is clear, definite, and explicit, and leaves nothing open for negotiation. Offeror cannot unilaterally modify the terms before acceptance or impose additional or arbitrary conditions not stated in the offer.
International Filter v. Conroe Gin?
RULE: Where the form of acceptance is not prescribed by the parties, acceptance can take the form of any words or conduct that a reasonable person would understand as acceptance.
Dickinson v. Dodds?
Defendant drafted a document stating his willingness to sell a piece of property to plaintiff. The document contained an option contract that it would be left open until a certain date. Plaintiff found out from his agent that defendant planned to sell the property to a third person. Immediately, plaintiff tried to accept the offer, but defendant already sold it.
RULE: (1) If offeror takers action inconsistent with the intent
to enter into a contract and offeree obtains reliable info of this
action, then the offer is revoked.
(2) An option contract in common law requires separate consideration since it is a separate promise to extend a deadline. If not, it is not binding.
White v. Corlies & Tift?
Plaintiff, a builder, submitted his estimate to defendant, for work to be done. Defendant said "upon agreement to finish.... you can begin at once." Plaintiff purchased supplies and prepared materials for work. Defendant revoked their offer. Plaintiff sued.
RULE: (1) Preparatory steps do not communicate a valid
acceptance to the offeror that performance has commenced.
(2) When promisor seeks a return promise, notice of acceptance is required.
Ever-Tite Roofing v. Green?
Defendant offered plaintiffs to build his roof. Offer did not
specify a time frame for acceptance. The terms of the offer allowed
acceptance via in writing OR commencing performance. Plaintiffs
bought materials and found that defendant had hired others to build
his roof. Plaintiff sued for breach.
RULE: (1) A contract may be considered binding by commencement of performance when the contract states that it is a valid mode of acceptance.
(2) If no time for acceptance is specified in a contract, it is within a reasonable time.
Carlill v Carbolic Smoke Ball?
Defendant manufactured a smoke ball and placed an ad saying that
100 pounds would be paid to anyone who bought it and still
contracted influenza. Plaintiff did this, still got influenza, and
sued defendant for not paying him.
RULE: Notification of acceptance of a general advertisement is not required. Performance is sufficient.
United States Life Insurance Company v. Wilson?
Defendant was holder of a life insurance policy that
expired. Insurance company gave him until July 25th to reinstate
the policy. On the 23rd, he directed the payment. It was delivered
on the 30th, but he died on the 28th. Insurance company said he
wasn't covered since they did not receive acceptance until after
RULE: Under the mailbox rule, acceptance is rendered when out of the offeree's hands, not upon receipt.
Drennan v. Star Paving Co?
A general contractor was looking for bids to a contract. Defendant
gave the lowest bid and plaintiff subsequently was granted the
contract because of it. Defendant later revoked, saying that the low
bid was a mistake and refusing to perform.
RULE: An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessaty to avoid injustice, even when consideration is lacking. Aka PROMISSORY ESTOPPEL.
C. Itoh Co v. Jordan International Co?
Plaintiff sent a purchase order to defendant to buy steel coils.
Defendant accepted, but stated: "Seller's acceptance is
expressly conditional on buyer's assent to the additional terms and
conditions printed on the reverse side." On the reverse side
was an arbitration clause. Plaintiff never formally accepted or
objected, but both parties commenced performance.
RULE: Under UCC, where a contract is established by parties' conduct, the established contract consists only of those terms on which the writings of the parties AGREE, together with any supplementary terms. Since the arbitration clause was not agreed to, it is not part of the contract.
Dorton v. Collins & Aikman Corp?
RULE: Under UCC, an acceptance containing additional or supplementary
terms is effective under 2-207(1) and 2-207(2) treats the additional
or different terms as proposals for addition to the contract. But
between merchants, these terms are deemed accepted, unless they
MATERIALLY ALTER the agreement.
If however, the offeree's acceptance was made expressly conditional on acceptance of the additional or different terms, there must be assent to those terms, or acceptance is not effective and no contract is formed.
Bayway Refining v. Oxygenated Marketing & Trading?
RULE: Under UCC 2-207, a material alteration is one that would result in surprise or hardship if incorporated without express awareness by the other party. The party opposing inclusion of additional terms shoulders the burden of proof.
Step-Saver v. Wyse Technology?
A licensing agreement was on the top of each software box (box-top
license) and contained a disclaimer of warranties stating that
opening the box constituted acceptance of the licensing agreement
RULE: Under UCC 2-207, opening a box is a valid acceptance of box-top licensing terms. Terms did not materially alter the agreement between the parties.
Northrop Corp v. Litronic Industries?!!
Offer between parties contained a 90 day warranty and the return
acceptance invoice contained an unlimited warranty. Both parties
thought their term was right.
RULE: 3 different approaches courts use when terms are different:
1. Knockout Rule: Majority Rule. When the difference between the seller's and buyer's terms are material, the two terms cancel each other out and the court supplies a Code gap-filler.
2. Drop-Out Rule: Minority Rule. When a court simply takes out the offeree's discrepant terms and the offeror's terms become part of the contract.
3. Different=Additional Rule: Minority. Equates "different" with "additional" and makes the outcome turn on whether the new terms in the acceptance are materially different from the terms in the offer. If they are materially different, the offeror's terms prevail UNLESS he expressly agrees to the variant terms in the acceptance.If not materially different, they become part of the contract.
Toys Inc v. F.M. Burlington Company?
A lease agreement between parties stated "a new rental amount
to be renegotiated to the then prevailing rate." Plaintiff sues
when kicked out of lease agreement. Defendant says it is not binding
since the term is sufficiently indefinite.
RULE: It is not necessary that the agreement contain ALL terms of the contract to be sufficiently definite, as long as it has a practicable, objective method of determining the essential terms.
Hill v. Gateway?
Defendant shipped an ordered computer to plaintiffs. Inside the
box were shrinkwrap terms which contained a 30 day warranty and an
arbitration clause. Plaintiff alleged that they were not bound by
shrinkwrap terms since they had to open the box to see the
RULE: Under UCC 2-207(3), a buyer may be bound by shrinkwrap terms if buyer has an opportunity to review the agreement and reject it by returning the item.
ProCD v. Zeidenberg?
Plaintiff sold software products. Inside the package, in the
manual, and on the computer screen when booting up the program,
there was a licensing agreement. Defendant violated agreement and
claimed it was not enforceable because it was printed inside the
RULE: Shrinkwrap licenses are generally enforceable.
Hoffman v. Red Owl Stores?
Defendant store told plaintiff that if plaintiff invested money,
moved, sold his store, relocated, etc, defendant would give
plaintiff his own store. Plaintiff did all this but defendant
changed the price originally offered and required other things.
Plaintiff sued based on reliance on the original
RULE: Even though definiteness is required for an agreement/contract, it is not a required element for promissory estoppel. (Reliance and Precontractual Liability)
Channel Home Centers v. Grossman?!!
Defendant offered a lease to plaintiff and asked for a letter of
intent to move in. Plaintiff did so, on the condition that defendant
withdraw property from the market. Defendant signed but sold
property to another.
RULE: When deciding whether there is a binding PRELIMINARY AGREEMENT, the courts asks (a) whether both parties manifested an intention to be boundd by the agreement; (b) whether the agreement terms are sufficiently definite to be enforced; (c) whether there was consideration. If yes to all, preliminary agreement is binding.
Allied Steel v. Ford?
RULE: Where an offer prescribes a preferred method of acceptance, but not an EXCLUSIVE method of acceptance, that does not preclude acceptance by other methods.