AGREEMENT [4306]

 

•     An agreement is:

 

A meeting of two or more minds in regard to the terms of a contract- a mutual understanding between those parties.

 

•     The process of agreement usually involves two steps:

 

(1)  Offer [4307]: A promise or commitment to perform or refrain from performing some specified future act made by the offeror; and

 

(2)  Acceptance [4308]: A voluntary act by the offeree- either in the form of words or of conduct-- that indicates agreement to the terms of the offer.

 

•      The acceptance must be unequivocal and must be communicated to the offeror.

 

•     The acceptance must be made by the offeree- a third party generally cannot substitute for the offeree and effectively accept the offer.

 

 

REQUIREMENTS OF AN OFFER [4307.4]

 

 

•      Three elements are required for an offer to be effective:

 

(1)   Serious, objective intent, on the part of the Offeror, to perform or refrain as offered;

 

(2)   The terms of the offer must be reasonably certain or definite; and

 

(3)   The offer must be communicated to the offeree.

 

•     What common statements related to business transactions are not offers? Here are some examples:

 

•      Expressions of opinion;

 

•      Preliminary negotiations;

 

•     Auctions and other invitations to bid, negotiate, and/or contract including most forms of advertisement; and

 

•      Agreements to Agree to one or more material contract terms or conditions at some later day.

 

DEFINITENESS [4307.04 b]

 

 

•     Generally, an offer must include the following terms, either expressed in the contract or capable of being reasonably inferred from it:

 

(1)   the identity of the parties to the offer;

(2)   the identity of the object or subject matter of the offer, including, e.g., quantity of goods, work to be performed, specific identity of unique goods, etc.;

 

(3)   the consideration to be paid; and

 

(4) the time of payment, delivery, or performance.

 

•     An offer may invite an acceptance to be worded in such specific terms that a contract is made definite by the acceptance.

 

 

 

TERMINATION OF THE OFFER [4307.14]

 

 

•     The communication of an effective offer gives the offeree the power to transform the offer into a binding agreement, or contract, subject to the following acts of the parties:

 

•      Revocation [4307.09]: The withdrawal of an offer, communica­ted to the offeree prior to the offeree’s acceptance. Unless an offer is irrevocable, the offeror may revoke any offer not yet accepted at any time without liability. Examples of offers generally deemed to be irrevocable [4307.15] include:

 

•     “Firm offers” for the sale of goods made by a merchant and subject to the provisions of the Uniform Commercial Code; and

 

•     Option contracts, under which the offeror cannot revoke his or her offer for a stipulated time period during which the offeree has the sole right of acceptance.

 

N.B. (note carefully): The offeree must give the offeror valuable consideration to make an option contract irrevocable.

 

•     Offers on which the offeree has justifiably relied to her detriment (a.k.a. “promissory estoppel”)

 

•     Rejection: The terms of the offer may be rejected by the offeree, in which case the offer terminates.[4307.10]

 

•      Any subsequent attempt by the offeree to “accept” will be construed as a new offer, which the original offeror (now the offeree) may accept.

 

•      Rejection is ordinarily accomplished by words or by conduct evidencing an intent not to accept.

 

•      To be effective, the rejection must be received by the offeror prior to any contrary writing or conduct evidencing acceptance by the offeree.

 

•     Counteroffer : A rejection by the offeree of the original offer, coupled with a new offer made by the original offeree to the original offeror.

 

•     “Mirror Image” Rule: Prior to the adoption of the Uniform Commercial Code, an offeree’s acceptance was required to match the offeror’s offer exactly. If the offeree’s acceptance materially changed, added to, or deleted any terms in the original offer, the offeree’s acts were deemed to constitute a counteroffer, not an acceptance.

 

 

•     An offer may also terminate by operation of law if any of the following occur [4307.14]:

 

•     Lapse of Time: An offer terminates automatically when the time period specified in the offer expires.

 

•     If no time period is stated in the terms of the offer, then the offer will terminate after a reasonable period of time has expired.

 

•     Destruction of Subject Matter: An offer terminates automatically if the subject matter of the contract (i.e., goods, property) is destroyed prior to acceptance.

 

•     Death or Incompetence: An offeree’s power to accept is terminated when the offeree or the offeror dies or is deprived of legal capacity to enter into the contract, unless the offer is irrevocable, in which case only the offeree’s death or incompetence will terminate the offer.

 

•     Illegality: A statute or court action that makes a previously valid offer illegal will automatically terminate the offer.

 

 

COMMUNICATING ACCEPTANCE [4308.04]

 

 

•     When the offeror and offeree cannot or chose not to deal face to face, acceptance is effective when communicated by the offeree to the offeror by an authorized means.

 

•     The “Mailbox Rule”: An acceptance becomes effective upon being placed in the mailbox by the offeree.

 

•     Note that, whereas a revocation becomes effective upon its receipt by the offeree, an acceptance becomes effective upon its dispatch by the offeree to the offeror.

 

 

•     In addition to any modes of acceptance expressly stated in the offer, common law recognizes the following impliedly authorized methods:

 

(1)   Any means that is as fast or faster than the method identified as acceptable by the offeror; and

 

(2)   U.S. Mail is always impliedly acceptable when the parties are bargaining at a distance.

 

•     N.B.: An acceptance communicated by means not expressly or impliedly authorized is not effective until it is received by the offeror.

 

ACCEPTANCE BY SILENCE [4308.06]

 

 

•     Acceptance by Silence: Generally speaking, silence (or inaction) cannot constitute acceptance -- even when the offeror indicates that silence or inaction will be taken as acceptance. There are exceptions:

 

•     Acts Consistent with Acceptance: If the offeree, despite having an opportunity to reject, takes the benefit of offered goods or services, he or she is implied to have accepted the goods or services and agreed to compensate the offeror according to the terms of the offer.

 

•     Prior Dealings: If the offeror and offeree have prior dealings, pursuant to certain standard terms and conditions, the offeree has the duty to reject or risk being bound by his or her silence.

 

•     Unilateral Contract: Because a unilateral contract requires acceptance by some action on the part of the offeree, acceptance is usually evidenced by the action; and, therefore, notification is unnecessary -- unless the offeror has specifically requested notification or has no means to determine whether the requested act(s) has/ have been performed.

 

EFFECTIVE TIME OF ACCEPTANCE

 

 

•     As a general rule, acceptance is effective at the time it is communicated by the offeree via an authorized means of communication (the “mailbox rule”), subject to the following exceptions:

 

•     If the acceptance is not properly dispatched, it will be effective when received by the offeror;

 

•      If the offeror conditioned the offer on receipt of the offeree’s acceptance, it will be effective when received by the offeror; and

 

•      If the acceptance is sent after a rejection, whichever is received first by the offeror is given effect.

 

        •     If the acceptance is not communicated by an authorized means, it will be effective when received by the offeror.

 

 

ELECTRONIC CONTRACT FORMATION

 

 

•     Faxed Offers and Acceptances: Courts generally have held signatures on faxed offers and acceptances to be legally binding, unless the offer specifically requires an original signature.

 

•      As a general rule, the “mailbox rule” does not extend to make faxed acceptances effective when sent if the fax was not received by the offeror.

 

•      Two issues in determining the viability of faxed offers and acceptances that are not received by the sendee are (1) whether the failure to receive was the sendee’s fault; and, if so, (2) whether the failure would have occurred had the sendee exercised due diligence.

 

 

•      “Click-On” Acceptances: An open issue (except in a few jurisdictions under certain circumstances) is whether clicking “yes” or “agree,” etc. on one’s computer in response to an offer directed either to the offeree or to the public in general is sufficient to constitute acceptance under the U.C.C.