Mutual Assent (a.k.a. “Offer and Acceptance”), Timing and Technical Issues
Dickinson v Dodds (1876) 2 Ch D 463
In this case, the Defendant approached the Plaintiff with an offer to sell his houses, stating that the offer remained open until Friday 9 a.m. However, on Thursday, the Plaintiff was informed by a third party that the Defendant was offering the houses for sale to another individual. Plaintiff met the Defendant the following morning about 7a.m. and communicated his acceptance of the Defendant’s offer. The Defendant refused to accept Plaintiff’s acceptance. Therefore, the Plaintiff sued the Defendant.
This case raises two issues. The first issue is whether the Defendant’s promise to keep the offer open amounted to a valid contract. The second issue is whether the communication of a party’s withdrawal of an offer can be communicated effectively by a third party.
The Court held on the first issue that the offer made by the Defendant should have been followed by a consideration from the Plaintiff. Since the Plaintiff failed to provide any consideration to tat effect, there was no contract in existence. On the second issue, the Court held that a third party can effectively communicate the withdrawal of a party’s offer.
The Court reasoned that for a contract to be valid and enforceable, it must be followed by consideration. If the Plaintiff had issued any consideration in response to Defendant’s offer, the Defendant would be liable for breach of contract. It follows; the third party who bought the houses was entitled to the houses since he issued a consideration to Defendant’s offer, before Plaintiff. Also, the Defendant’s offer would be considered accepted when the Plaintiff made communication of his acceptance. On the second issue, the Court reasoned that there is no fixed way of communicating withdrawal of an offer. And that in this case, the third party’s notification to the Plaintiff that the offer was withdrawn amounted to valid communication of the withdrawal.
The “Objective” Theory of Assent
Embry v. Hargadine, McKittrick Dry Goods, 22 Ill.127 Mo. App. 383, 105 S.W. 777 (Ct. App. 1907)
In this case, the Plaintiff was contracted to perform some work for the Defendant. When the contract expired, the Plaintiff made several attempts to speak with the Defendant’s president to seek a renewal of the contract. Finally, the Plaintiff met the Defendant’s president in the President’s office. The president responded to the Plaintiff’s request by telling him that, “go ahead, you’re all right; get your men out and don’t let that worry you”. The Plaintiff went away knowing that the President renewed the contract. However, several months later, the Plaintiff’s contract was terminated. The contention was in the content and meaning of the words spoken by the President to the Plaintiff. The Plaintiff went to Court claiming a breach of contract.
The issue in this case is whether the communication made by the Defendant’s president to the Plaintiff amounted to a valid contract.
The Court held that the oral communication made by the Defendant’s president indeed amounted to a valid contract.
According to the Court, an oral promise amounts to a valid contract if the recipient of the promise reasonably believes the promise to be a binding agreement. The court reasoned that the after receiving the President’s communication, the Plaintiff went ahead to act on the said promise, knowing that he had entered an Agreement thereby. The court noted categorically that the President’s response to the Plaintiff’s request was unequivocal. And for that reason, the Defendant was bound to perform on the promises. The court stated that no reasonable man would fail to believe that the President’s words amounted to a granting of the Plaintiff’s request. The president guaranteed the Plaintiff that his fears were settled and that the Contract would be renewed.
Lucy v. Zehmer, 196 Va. 493; 84 S.E.2d 516 (1954)
In this case, the Plaintiff and the Defendant entered a contentious sale of land agreement. The Defendant owned a farm. The Plaintiff had made several intentions to purchase the said farm from the Defendant. Every time the Plaintiff made the offer for the purchase, the Defendant would back out. One day, the Plaintiff met the Defendant and his wife in a restaurant. After a moment of drinking, the Plaintiff again made the offer for the purchase of the land. This time, the Defendant agreed to the Plaintiff’s offer. They wrote a brief agreement which stated that the Defendant had offered to sell the farm. Later, when the Plaintiff sought to close the deal, the Defendant refused to recognize the Agreement and stated that it was entered in jest and that the parties were drunk, therefore the Agreement was not valid. The Plaintiff therefore sued the Defendant for breach of contract.
The issue in this case is whether there was a valid agreement entered between the Plaintiff and the Defendant.
The Court held that the Agreement made between the two parties was valid.
According to the Court, if the words in an agreement are reasonable with respect to the parties in the agreement, then it does not matter the intentions the parties had in making the agreement. The Court reasoned that the wordings in the agreement expressed the intention of the parties to the agreement. Therefore, the Defendant’s allegation that they signed the agreement while drunk does not bear any weight to void the contract. The court also stated that the position would only change if there was any unreasonable meaning in the wordings of the agreement. It is only in such a situation may the court resort to probe the intentions of the parties to the agreement.
Leonard v. Pepsico, 22 Ill.210 F.3d 88 (2d Cir. 2000).
In this case, the Defendant made a commercial that depicted a teenager arriving at school with a military jet. The commercial proceeded to state that consuming the Defendant’s products would make the consumers obtain more products. The commercial also stated that consumers who accumulate 7,000,000 points would be given a jet. The Plaintiff managed to accumulate the said points by consuming Defendant’s products. Accordingly, he placed a claim for the fulfilment of the Defendant’s promise in the commercial. The Defendant refused to grant the Plaintiff’s claim, alleging that the commercial was only made in jest. The Plaintiff then sued the Defendant.
The issue in this case is whether the Defendant’s commercial amounted to a valid offer.
The Court held that the commercial did not amount to a valid offer.
According to the Court, the commercial could not be classified as an offer because the commercial referred to a catalog provided by the Defendant, and that the jet was not in the catalog. Also, the contents of the commercial were unreasonable. No teenager can be trusted to navigate a jet. Besides, no school would permit a jet to land in the premises. Also, the military jet, whose function is basically for assault and defense, could not be made the subject of a contractual offer. It follows; the reasonability test can be used to determine the validity of an offer, or a contract. In this case, it was unreasonable that the Defendant’s customers would be given a jet worth millions of dollars for merely 7,000,000 loyalty points. In conclusion, the Court affirmed the Defendant’s contention that the commercial was only made in jest and was only intended to stimulate adolescent fantasy.
Invitational Talk
Nebraska Seed v. Harsh, 152 N.W. 310 (1915)
In this case, the Defendant appealed the trial court’s decision that found him in breach of a contract. The Defendant had sent the Plaintiff a letter containing information that the Defendant had an amount of seeds and the price the seeds would go for. The Plaintiff then responded to the letter by asking the Defendant for information on how he would pack and load the seeds. The Plaintiff then paid the amount stated in the Defendant’s letter and sent a letter requesting the Defendant to ship the seeds. The Defendant failed to ship the seeds. Accordingly, the Plaintiff company sued the Defendant for breach of contract. The trial court held in favor of the Defendant and the Plaintiff appealed.
The issue at the appeal was whether a contract can be formed from a statement that only stated what a party has and the price of the said commodity.
The Court held that a contract did not exist between the parties.
According to the Court, the Defendant’s letter did not amount to an offer. The language thereof was only meant to be an invitation for the Plaintiff to make bids for the Defendant’s seeds. Also, the court reasoned that the Defendant’s letter lacked any provision for the time in which the delivery was to be made. Therefore, the Court reversed the trial court’s judgement. This case shows that the contents of an offer must not be confused with an invitation to treat. An invitation to treat only serves as a notification or invitation of the other party to present an offer. Therefore, unlike offers, invitation to treats are not binding and a party cannot rely on them to seek the enforcement of a contract. It follows; in the instant case, the Plaintiff could not rely on the Defendant’s letter since it was only an invitation to treat but not an offer.
Preliminary Agreements and Agreements to Agree
Empro v. Ball-Co, 22 Ill.870 F.2d 423 (7th Cir. 1989).
In this case, the Defendant offered its stock to the market in the public looking to see who may be interested in obtaining them. The Plaintiff thereafter engaged the Defendant, expressing the Plaintiff’s intention to purchase the stock. The Plaintiff drafted a letter of intent in that regard, which letter was followed by responsive letter of intent from the Defendant. Both parties also agreed that the sale of the stock would be subject to the Defendant’s acceptance of Plaintiff’s Note. Later, when the parties intended to close the deal, they failed to agree on how the Note would finance the sale. Consequently, the Defendant engaged another prospective purchaser upon which the Plaintiff sued the Defendant for breach of contract and for reliance damages.
The issue in this case is whether mutual letters of intent may amount to a valid contract if there are unsettled terms in the agreement.
The Court held that the letters of intent did not amount to an agreement between the parties.
According to the Court, letters of intent are not binding contracts but are merely agreements to agree. It follows; letters of intent could not be enforced unless they future agreement is actualized. The court also reasoned that the Plaintiff was not entitled to any damages for reliance because he failed to produce any evidence of prejudice. The court’s emphasized that parties that make letters of intent anticipate future obligations with respect to their agreement. Therefore, a party cannot rely on a letter of intent to enforce a contractual obligation that is not yet in existence. Accordingly, a show of future intent should not be confused with an offer. Also, matters of intent are looked at objectively.
Texaco v. Penzoil, 729 S.W.2d 768 (Court of Appeals of Texas, Houston (1st Dist.), 1987).
In this case, the Shareholders of a company made an offer for the purchase of shares in the company. The Plaintiff Company accepted to purchase the said shares offered by the Company. A Memorandum of Agreement was entered for the purpose of the purchase, and a press release was made in that regard. Shortly thereafter, the Board of the Company decided to forego the shareholder’s decision to purchase the shares at the price already set. Therefore, the Board set forth a new price. Consequently, the Plaintiff agreed to increase the price they initially offered for the purchase, which the Company duly accepted. However, still, the Company decided to make an offer to the Defendant for the purchase of the shares. This time, the Company entered an agreement with the Defendant in that regard and closed the deal. The Plaintiff went to court claiming that the Defendant interfered with the Agreement between the Plaintiff and the Defendant.
Whether the Memorandum of Agreement between the Plaintiff and the Company was a valid agreement to bind the Company.
The Court held that the Memorandum of Agreement was a valid and binding agreement.
According to the Court, the press release showed that the Plaintiff and the Company intended to be bound by the Agreement. The court also reasoned that the failure of the present of part performance of the Agreement for both the Plaintiff and the Company did not eliminate the fact that the Parties had intended to be legally bound. The parties also appeared to have agreed on the essential terms of the agreement. Finally, the Court held that the manner of concluding an agreement may be inferred from the intent of the parties. In the instant case, it appeared that the parties intended to be bound by the Memorandum of Agreement. This case shows that agreements may be entered and formalized based on different ways, including memorandum of agreements.
Verbal/Written Acceptance: The Mirror Image Rule and the “Battle of the Forms.”
Ardente v. Horan, 366 A.2d 162 (1976)
In this case, the Defendants offered to sell their house to the Plaintiff. The Plaintiff sent a bid for the purchase of the house. In response to Plaintiff’s bid, the Defendant’s attorney sent the Plaintiff a Purchase Agreement which the Plaintiff duly signed. However, when returning the Agreement to the Defendant, the Plaintiff included a letter requesting the sale to include furniture and fixtures. Upon receiving the signed agreement, the payment, and the letter, the Defendant decided not to proceed with the transaction and returned Plaintiff’s money. Consequently, the Plaintiff sued the Defendant for non-performance. The trial court ruled in favor of the Defendant, and the Plaintiff appealed.
The issue before the court is whether a contract is made if a party to the contract accepts an offer with conditions.
The court held that an acceptance that comes with a condition is a counteroffer and should therefore be regarded as a new offer by itself.
According to the Court, the Plaintiff’s acceptance would only be valid if he did not include the other requirements/requests in his letter. And that since he made new requests in his letter, that amounted to a counteroffer, which the Defendant had the latitude to accept or deny. The court reasoned that even if the Plaintiff’s letter would only be considered as a question to the Defendant, it is unclear whether he would accept the property without the requests stated in the letter being met. This case emphasizes the need of acceptance to be clear and unequivocal. An acceptance with conditions is generally not considered valid acceptance unless there are express provisions in the agreement that the added conditions are independent of the contract already formed between the parties. Accordingly, the Court affirmed the trial court’s judgment in favor of the Defendant.
Step Saver Data Systems v. Wyse Technology, 939 F.2d 91, 1991 U.S. App. 16526.
In this case, the Defendant and the Plaintiff entered an agreement where Defendant would sell computer software to the Plaintiff. The Plaintiff would in turn sell the software to other individuals. Normally, the Plaintiff would call the Defendant to place an offer and the parties would proceed to discuss the issue of price and delivery terms over the phone. However, the parties never discussed any issue about warranty. It follows; the warranty provisions were contained on the covers of the software. The warranty provision stated that opening the cover would amount to accepting the warranty terms. The Plaintiff began experiencing trouble when his customers experienced trouble with the software. However, the Plaintiff could not claim any breach of warranty against the Defendant because the Defendant excluded liability on the warranty provisions. The Plaintiff sued the Defendant.
The issues in this case were whether warranty terms on the cover amounted to a conditional acceptance of the purchase contract; whether the parties’ course of dealing demonstrated that the disclaimer applied to their agreement; and whether the warranty provisions amounted to a material alteration of the parties’ agreement.
The court held that the warranty provisions did not amount to a conditional acceptance of the purchase contract; the parties’ course of dealing did not demonstrate that the disclaimer applied to their agreement; and the warranty provisions amounted to a material alteration of the parties’ agreement.
According to the Court, the producer of the software did not intend to have the warranty provisions bind the sale/purchase of the software. The court also reasoned that the mere fact that the Defendant had been delivering the package with the warranty provisions does not necessarily mean that the warranty provisions were made a part of the Agreement. Lastly, the court reasoned that the warranty provisions materially altered the parties’ agreement because they materially altered the risk of both parties to the agreement, which affected the parties’ main contract.
ProCD v. Zeidenberg, 86 F.3d 1447, 39 U.S.P.Q.2d 1161, 1 ILRD 634 (7th Cir. 1996).
In this case, the Plaintiff sold a database containing directories in two different types. The first type was for private use and the second one was for commercial use. Therefore, when an individual purchased the database for private use, there was a separate license limiting the application of the database to private use alone. A term on the box of the database referred to a separate attached license. The Defendant purchased the database for private use but failed to check the separate license attached on the box. The Defendant then sold the database. The Plaintiff sued for breach of the license provision.
The issue in this case is whether a party is bound by the terms of a separate agreement that is attached to the main agreement.
The court held that the party must abide by the terms of any additional agreement that is incorporated by reference, into the main agreement.
According to the Court, Consumer law allows for parties to a sale transaction to have separate agreements that allow the purchaser to obtain a detailed review of the terms under the transaction. In the instant case, the Defendant had acquired the database, and was accorded reasonable opportunity to read the contents of the attached license provisions that limited the database to private use. And that the Defendant instead opted to disregard the attached license and failed to read it. Accordingly, the court reasoned that the Defendant had duly accepted the database with the attached license. Therefore, he breached the terms of the license by selling the database. The court’s reasoning in this case suggests that buyers can refuse accepting products if they do not agree with terms contained on additional license terms attached to the product or referred to from the main agreement. Under the mirror image rule, offers must be accepted with no moderation.
Hill v. Gateway, 2000, 22 Ill.105 F.3d 1147, 2 ILRD 695 (7th Cir. 1997).
This case involves an agreement for the sale of a computer. The Plaintiff placed an order over the phone for the delivery of the computer. Accordingly, the Plaintiff purchased the computer from the Defendant, and a package was delivered to the Plaintiff. The package containing the computer had a list of terms which the Plaintiff was unaware of. The terms provided, inter alia, that the method for solving disputes was through binding arbitration, and that the deal would be considered closed if thirty days passed without Plaintiff returning the package. A dispute occurred about the applicability of the arbitration provision.
The issue in this case is whether the additional terms in the package was binding and whether the arbitration clause was part of the parties’ agreement.
The Court held that the arbitration clause was part of the parties’ agreement.
According to the court, contracts can still be binding even if a party to the agreement did not read it. In the court’s reasoning, individuals who fail to read contracts cannot later come and argue unfavorable provisions after they already communicated acceptance thereof, albeit ignorantly. Also, the mode of acceptance of a contract can be limited by a term in the contract. In this case, the contract limited acceptance to staying thirty days with the product. Therefore, the Plaintiff legally accepted the agreement. This case also demonstrated the fact that an offeror reserves the right to restrict the mode of acceptance of the offer. Therefore, parties to contracts should ensure that they read any and all terms included in delivered products, because such terms are considered as important as the terms in the main agreement. The rule in the battle of forms provides in this regard that for parties to a signed contract, the latest terms between the parties constitute the terms of the agreement.
Acceptance by Performance
Carlill v. Carbolic Smoke Ball Co., 1 Q.B. 256 (Court of Appeal 1893).
In this case, the Defendant company placed an advertisement in the public domain that their product prevents flu if the user followed strict guidelines in the usage. Accordingly, the advertisement stated that whoever used their product three times a day for two weeks consecutively and still contracted flu would be paid 100£. The Defendant went ahead to demonstrate that they had deposited 1000£ to the bank for this purpose, to show they were committed to their promise therein and were sincere about it. The Plaintiff bought the Defendant’s product and used it as stated in the commercial. However, the Plaintiff developed a flu and claimed the payment of the said 100£. In response, the Defendant denied the claim alleging that the advertisement was mere puffery. The Plaintiff sued the Defendant. The trial court ruled in favor of the Plaintiff. The Defendant appealed.
The issue in this case is whether the language in the Defendant’s advertisement amounts to an offer/promise or a mere sales puff.
The Court held dismissed the Plaintiff’s appeal and held that the Plaintiff is entitled to the amount promised in the Defendant’s advertisement.
According to the court, although the language in the advertisement would be considered puffery, the action of the Defendants depositing money towards demonstrating the seriousness of their claims made the contents of the advertisement binding upon them. The deposition of the money with the bank showed some degree of certainty that the Defendant was ready to honor all claims that fell under their promise in the advertisement. Such action changed the nature of the Defendant’s statement from mere puffery to a promise. The court reasoned that there was a contractual relationship that was established. Notably, the Plaintiff bought the product, used it, and suffered influenza contrary to the Defendant’s promise. Therefore, there was valid consideration for the agreement.
White v. Corlies & Tifft, 46 N.Y. 467, 1871 N.Y. 280.
In this case, the Defendant sought to have his property refurbished. He engaged the services of the Plaintiff who was a builder. When the parties met, the Defendant informed the Plaintiff that he could start the refurbishment upon the parties’ agreement in two weeks. The following day, the Plaintiff bought the furniture and proceeded to start the work. On the same day, the Defendant sent the Plaintiff notice countermanding his initial offer to have the office refurbished. The Plaintiff sued the Defendant. At the trial court, the judge instructed the jury that the statement made by the Defendant to the Plaintiff authorized the Plaintiff to start work on the premises immediately. According to the trial judge, the Plaintiff had no obligation to inform/notify the Defendant that he was beginning the work. The Defendant appealed.
The issue at the appeal was whether Plaintiff’s action amounted to a valid acceptance, when he proceeded to purchase the furniture in readiness for the work.
The Court held that the Plaintiff had an obligation to communicate to the Defendant his acceptance before he made any further step to commence the work.
According to the Court, as much as the Plaintiff had the intention to embark on the work, he must have informed the Defendant that he had accepted the offer. Therefore, the Plaintiff should have approached the Defendant and in a reasonable manner, communicated his acceptance thereof. The court also found the trial judge in error when he instructed the jury that the Plaintiff duly communicated his acceptance by beginning the work, and that he had no obligation to notify the acceptance to the Defendant. The court reasoned that although the parties did not set a specific way of communicating acceptance, the Defendant’s statement, to wit, “upon agreement” meant that the Defendant intended there be some sort of agreement.
Petterson v. Pattenberg, 22 Ill.248 N.Y. 86, 161 N.E. 428 (1928).
In this case, the Defendant held bond over mortgage taken over Plaintiff’s husband. One day, the Defendant told Plaintiff’s husband that he (the Defendant) would deduct $780 from the amount owed by the Plaintiff’s husband if the Plaintiff’s husband paid installment on time and settled the principle before May. Accordingly, the husband managed to settle the installments on time and settle the remaining principle in full. However, the Defendant refused to accept the husband’s payment and informed the husband that he had already sold the bond to another individual. The Plaintiff’s husband subsequently died and here his wife sued the Defendant as the executrix of her husband’s estate.
The issue in this case is whether Defendant’s revocation of his offer was made prior to the deceased’s acceptance.
The Court held that the Defendant had lawfully revoked his offer before the deceased could accept the offer.
According to the court, the agreement between the Defendant and the deceased was a unilateral contract. Unilateral contracts are premised on one party’s promise to do an act in exchange for the other party’s performance. It follows; the party receiving the promise in a unilateral contract is not expected to make a promise in return but to act accordingly. In essence, an offer is only accepted under unilateral contracts, until the action is performed by the offeree. Also, parties to a unilateral contract are free to revoke the contract anytime before the offeree acts on the offeror’s promise. In the instant case, the Defendant made the offer which the deceased had to act on for the contract to be binding. Therefore, the Defendant was free to revoke the offer anytime before the deceased made the payments. The court also had dissenting opinions. Generally, the dissenting side opined that taking such a strict stance would make the offer impossible to perform because it involved a future obligation which obligation could not be fulfilled instantly.
At Legal writing experts, we would be happy to assist in preparing any legal document you need. We are international lawyers and attorneys with significant experience in legal drafting, Commercial-Corporate practice and consulting. In the last few years, we have successfully undertaken similar assignments for clients from different jurisdictions. If given this opportunity, we will be able to prepare the legal document within the shortest time possible.
