Creating a Contract:

1
CHAPTER 9

• Creating a Contract
• Offers

2
What is an Valid Offer?

• Offer the manifestation of a willingness to
  enter into a contract if the other party agrees
  to the terms
• Offeror makes the offer
• Offeree receives (may accept) the offer

3
What is an Valid Offer?

• Question 5 at end of chapter
• No. A promise is a manifestation of intent by the
  promisor to be bound. Mere predictions or
  statements of opinion are not promises that will
  support a contract. Flecks statement was a mere
  expression of opinion or prediction concerning
  the future availability of S-54 remnants. No one
  could predict exactly how much excess Monsanto
  would have because Monsanto milled S-54 in
  January for installation during the summer. Fleck
  did not guarantee a never-ending supply he made
  a prediction of future sales of S-54 at
  1.75/square foot. Major Mat Co. v. Monsanto, 969
  F.2d 579 (7th Cir. 1992).

4
What is an Valid Offer?

• Intent?
• Present
• Definite
• Communicated
• Considers all the circumstances

5
What is an Valid Offer?

• Intent?
• Question 10 at end of chapter
• Mears v. Nationwide Mutual Ins. Co.
• An offer of His and Hers Mercedes to the person
  who came up with the best theme for a regional
  convention is enforced.
• Sufficient objective evidence of intent.
• Whether the company really intended to give away
  two Mercedes for a slogan for a regional
  convention is irrelevant. The fact that the offer
  was made by a major employer as part of a
  convention designed to boost morale and recognize
  employee achievements was an important objective
  fact.
• This is a unilateral contract

6
What is an Valid Offer?

• Definiteness?
• The more specific the proposal the more likely
  the court is to call it an offer
• Behavior, acting as though a contract, may lead
  to finding a contract
• Question 11 at end of chapter
• Mears v. Nationwide Mutual Ins. Co.
• This is the same case as the one discussed above.
  The issue before the court in this part is
  whether the offer was sufficiently definite. The
  court found it was.
• The Code generally requires less definiteness
  than the common law. Generally, courts do not
  like for contracts to fail for indefiniteness.
• Mears testified that the least expensive new
  Mercedes cost 31,450. He was awarded 60,000.

7
What is an Valid Offer?

• Definiteness?
• Key v. Coryell, p. 165.
• The court found that the terms of the education
  agreement were too indefinite to form the basis
  of a contract. The Code generally requires less
  definiteness than the common law. However, unlike
  contract law interpretation earlier in the
  century, courts using either system generally do
  not like contracts to fail for indefiniteness.

8
What is an Valid Offer?

• Definiteness?
• Question 7 at end of chapter
• Yes. A court cannot enforce a contract unless it
  can determine what it is. There is no evidence
  from which to determine the parameters of the
  promise alleged here. The vagueness as to
  material details such as the form, frequency, and
  amount of payments render the assertion of a
  contract meaningless. The promise, if made, is
  unenforceable. Saunder v. Baryshnikov, 487 N.Y.S.
  2d 51 (Sup. Ct. N.Y. 1985).

9
What is an Valid Offer?

• Communication?
• ProCD, Inc. v. Zeidenberg, p. 166, Shrink Wrap
  License
• The 7th Circuit finds that contract terms
  appearing on the inside of a software box are
  adequately communicated.
• License becomes effective as soon as the customer
  takes the wrapping off. The court finds that
  allowing payment first serves buyers interests
  by accelerating effectiveness and reducing
  transaction costs. The court also cites insurance
  sales, and sales of consumer goods in boxes as
  instances where full contract terms are not
  disclosed until after the transaction in
  completed. UCC Section 2-204 allows a contract to
  be made in any manner sufficient to show
  agreement. The offeror may set the terms of
  acceptance, which ProCD did. Since the initially
  undisclosed terms were not unreasonable, they are
  enforceable.

10
What is an Valid Offer?

• Solicitations of Offers?
• Advertisements
• Courts have generally held that ads for the sale
  of goods at a specified price are not offers, but
  invitations to negotiate
• Under certain circumstances courts have found
  highly specific ads to be offers

11
What is an Valid Offer?

• Advertisements
• Leonard v. Pepsico, Inc., p.168
• An ad which showed a teenager flying a Harrier
  Jet he had purchased with Pepsi points is found
  by the court to clearly not be a serious offer.
• The cost of a Harrier Jet is roughly 23 million.
  The court notes that Leonard should have
  concluded that this was too good a deal to be
  true. The court explains the commercial was
  meant to evoke military and espionage thrillers,
  and the implication was that Pepsi Stuff
  merchandise will inject drama and moment into
  hitherto unexceptional lives. A reasonable viewer
  would view the ad as mere puffery. Also, the
  court said the callow youth featured in the ad,
  is a highly improbable pilot, one who could
  barely be trusted with the keys to his parents
  car, much less the prize aircraft of the United
  States Marine Corps. The notion of traveling to
  school in a Harrier Jet is an exaggerated
  adolescent fantasy. The number of points would
  require someone to drink 7,000,000 Pepsis, or
  roughly 190 a day for the next hundred years an
  unlikely proposition. The situation did contain
  the elements the court usually looks for when
  treating an ad as an offer a highly specific
  statement about what is offered and expected in
  return the person doing something extraordinary
  to accept and, the number of people accepting
  will be limited. The potential for unfairness,
  though, is limited.

12
What is an Valid Offer?

• Solicitations of Offers?
• Rewards (e.g for the return of lost property)
• Generally held to be offers for unilateral
  contracts
• Auctions
• Sellers generally held to be making an invitation
  to offer
• Bidders are treated as offerors
• Therefore items can be withdraw prior to
  acceptance unless auction is advertised as being
  without reserve

13
What is an Valid Offer?

• Solicitations of Offers?
• Bids (e.g. in construction)
• Advertisement for bid generally held to be
  invitation to offer
• Bid Submitters Offerors

14
What is an Valid Offer?

• Solicitations of Offers?
• Bids (e.g. in construction)
• Question 8 at end of chapter
• No. There can be little doubt there was a
  contract. Efficient made its offer by bid to do
  the electrical work on the hotel. Blaine-Hays
  accepted that offer by letter after Marriott
  accepted Blaine-Hays bid to build the hotel.
  Efficient showed it acquiesced to the contract
  when it worked for three months. It cannot now
  deny there was a contract to finish the work.
  Blaine-Hays Construction Co. v. Efficient
  Electric Co., 1991 Tenn. App. LEXIS 961.

15
What are the Terms of an Offer?

• If actual notice (e.g. offeree read) or
  reasonable person should have been put on notice
  bound
• Aronson v. University of Mississippi, p.170
• The court finds terms in a university catalog to
  be the terms of a scholarship offer to a student.
• Do you view what was in the catalog you got from
  Mount Olive College as spelling out terms of a
  contract.?
• The court may reach a different conclusion if the
  change from the catalog had not been as important
  as scholarship terms.
• Some courts in other states have held
  differently.

16
Offer Termination

• An offer is terminated by
• Lapse of time to accept per terms of the offer
  (e.g. this offer expires on 10/24/03)
• If no time specified a reasonable time

17
Offer Termination

• An offer is terminated by
• Revocation
• Offerors generally can revoke offers prior to
  acceptance
• Exceptions
• Firm offers
• signed writing
• by a merchant
• containing assurances that offer will be held
  open
• Options
• Where something of value has bee given in
  exchange for a promise not to revoke
• Effective upon actual receipt by the offeree

18
Offer Termination

• An offer is terminated by
• Revocation
• Question 12 at end of chapter
• No. An offer may be revoked until accepted. Here,
  Madaios written promise to purchase was not
  mailed until two days after McCarthy revoked the
  offer. Since the agreement required acceptance by
  return of the signed contract, the offer was
  effectively revoked before acceptance. Madaio v.
  McCarthy, 489 A. 2d 1197 (N.J. Super. Ct. 1985).

19
Offer Termination

• An offer is terminated by
• Rejection or Counter Offer
• Giovo v. McDonald, p. 173
• The court found that GEICOs offer worked as a
  counteroffer, and thus did not constitute an
  acceptance of Giovos 18/day request. The
  appeals court held that the circuit court should
  have denied the McDonalds' motion for summary
  judgment on their settlement defense and should
  have granted Giovo's motion. The lower court felt
  that all the essential elements of the
  agreement had been met, and that the parties
  could not be expected to anticipate every
  contingency or spell out every incidental detail.
  The appeals court rejected this reasoning,
  holding that an acceptance is effective only if
  it is absolute, unconditional, and identical to
  the terms of the offer.

20
Offer Termination

• An offer is terminated by
• Rejection or Counter Offer
• Question 6 at end of chapter
• Estate of Chosnyka v. Meyer
• Two conditions on the acceptance are deemed not
  to be material changes and therefore a contract
  for the sale of the land was formed when Chosnyka
  sent back the copy.
• The court does not discuss Chosnykas condition
  regarding closing within sixty days. Is this a
  material change?
• Meyer took steps to protect himself regarding the
  receipt and form of the acceptance. Perhaps he
  should also have been as careful in his
  examination of the property before making the
  offer. There was a marker on the land indicating
  the gas line he did not see it until his
  subsequent visit to the land.

21
Offer Termination

• An offer is terminated by
• Operation of Law
• Death/Insanity
• Destruction of Subject Matter
• Intervening Illegality