1 george mason school of law contracts i e.offers f.h. buckley fbuckley@gmu.edu
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George Mason School of Law
Contracts I
E. Offers
F.H. Buckley
fbuckley@gmu.edu
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Hume on Beneficial Reliance
Your corn is ripe to-day; mine will be so tomorrow. `Tis profitable for us both, that I shou'd labour with you to-day, and that you shou'd aid me to-morrow. I have no kindness for you, and know you have as little for me. I will not, therefore, take any pains upon your account; and shou'd I labour with you upon my own account, in expectation of a return, I know I shou'd be disappointed, and that I shou'd in vain depend upon your gratitude. Here then I leave you to labour alone: You treat me in the same manner. The seasons change; and both of us lose our harvests for want of mutual confidence and security.
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The Five W’s
Who What Where When Why
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Basic Questions of Formation
Who are the parties What happens to non-parties?
What Where When Why
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Basic Questions of Formation
Who are the parties What did they agree to?
What are the terms and conditions
Where When Why
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Basic Questions of Formation
Who are the parties What did they agree to? Where was the contract formed?
Under which law
When Why
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Basic Questions of Formation
Who are the parties What did they agree to? Where was the contract formed? When was it formed?
Pre-contractual rights Limitation periods
Why
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Basic Questions of Formation
Who are the parties What did they agree to? Where was the contract formed? When was it formed? Why did they enter into the contract
The doctrine of consideration
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Who are the parties? Restatement § 2 (1) A promise is a manifestation of intention to
act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.
(2) The person manifesting the intention is the promisor.
(3) The person to whom the manifestation is addressed is the promisee.
(4) Where performance will benefit a person other than the promisee, that person is a beneficiary.
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Who are the parties? Restatement § 2 (4) Where performance will benefit a person
other than the promisee, that person is a beneficiary. The old rule of privity of contract
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What counts as a contract?
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The need for a “meeting of the minds” Quinn J. in Williams v. Walker-Thomas at
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Non-promises
2(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. What does this exclude?
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Non-promises
(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. “I expect to see you at lunch tomorrow”
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Non-promises
(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. “I may sell my car to you”
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Secret reservations
How about: “I will sell you my car tomorrow” (while privately resolving not to do so)
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The Objective Standard
Restatement § 2(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. A remedy for “false promising”
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Lucy v. Zehmer at p. 14
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Lucy v. Zehmer at p. 13
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Lucy v. Zehmer
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Back on State 40 about a half mile from the junction with County 613 the traveler comes upon the FERGUSON PLACE; … The two sections are connected by a passageway—commonly called a colonnade, though quite innocent of columns. The wide-boarded floors, flat-head nails, massive locks, H and L hinges, and hand-carved mantels attest the antiquity of a house well worth the restoration it has not received.
And here it is!
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Why does the drinking matter?
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Why does the drinking matter?
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Capacity: Restatement § 16 (1) A person incurs only voidable
contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication (a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or (b) he is unable to act in a reasonable manner in relation to the transaction
Why does the drinking matter?
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Capacity: Restatement § 16 (1) A person incurs only voidable
contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication (a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or (b) he is unable to act in a reasonable manner in relation to the transaction
Why does the drinking matter?
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Capacity: Restatement § 16 (1) A person incurs only voidable
contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication (a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or (b) he is unable to act in a reasonable manner in relation to the transaction
Why does the drinking matter?
Restatement § 2(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.
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Why does the drinking matter?
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Capacity: Restatement § 16 (1) A person incurs only voidable
contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication (a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or (b) he is unable to act in a reasonable manner in relation to the transaction
Why does the drinking matter?
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Capacity: Restatement § 16 (1) A person incurs only voidable
contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication (a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or (b) he is unable to act in a reasonable manner in relation to the transaction
Why does the drinking matter?
Restatement § 2(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.
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Lucy v. Zehmer
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What is the role of intention to create legal relations? Restatement § 21: Neither real nor apparent
intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract.
What if Zehmer didn’t really intend to sell?
Lucy v. Zehmer
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What if Zehmer didn’t really intend to sell? An Objective standard
Lucy v. Zehmer
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Suppose Lucy knew that Zehmer acted in jest?
Restatement §20. EFFECT OF MISUNDERSTANDING (1) There is no manifestation of mutual assent to an
exchange if the parties attach materially different meanings to their manifestations and
(a) neither party knows or has reason to know the meaning attached by the other; or
(b) each party knows or each party has reason to know the meaning attached by the other.
Lucy v. Zehmer
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What remedy is sought and why did that matter? Recall Mansfield in Moses v. Macferlan
Lucy v. Zehmer
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Even if a contract was made on the Saturday, why couldn’t Zehmer retract on the Sunday?
Lucy v. Zehmer
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Even if a contract was made on the Saturday, why couldn’t Zehmer retract on the Sunday?
Has there been either any beneficial or detrimental reliance at that point?
Leonard v. Pepsico at 18
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Leonard v. Pepsico at 17
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Was this really an offer to sell a jet for $700,000?
Leonard v. Pepsico at 17
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“No objective person could reasonably have concluded that the commercial actually offered consumers a Harrier Jet.”
Leonard v. Pepsico at 17
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Bargains: Rest. § 3
A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances.
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Bargains: Rest. § 3 A bargain is an agreement to exchange
promises or to exchange a promise for a performance or to exchange performances. Wholly executory contracts: promise for
promise Wholly executed contracts: performance
for performance
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A wholly executed contract:Gleinicke Bridge, Berlin, 1986
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Formation as a Coordination Game
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You have to meet someone here in the United States. You don’t know anything about him and he knows nothing of you. You don’t know where or when to meet. It could be anywhere in the US and it could be any day or any time.
Formation as a Coordination Game
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You have to meet someone here in the United States. You don’t know anything about him and he knows nothing of you. You don’t know where or when to meet. It could be anywhere in the US and it could be any day or any time. What day?
Formation as a Coordination Game
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You have to meet someone here in the United States. You don’t know anything about him and he knows nothing of you. You don’t know where or when to meet. It could be anywhere in the US and it could be any day or any time. What city?
Formation as a Coordination Game
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You have to meet someone here in the United States. You don’t know anything about him and he knows nothing of you. You don’t know where or when to meet. It could be anywhere in the US and it could be any day or any time. Where in NYC?
Formation as a Coordination Game
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You have to meet someone here in the United States. You don’t know anything about him and he knows nothing of you. You don’t know where or when to meet. It could be anywhere in the US and it could be any day or any time. What time?
What side of the road to drive on?Coordination Games
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Right Left
Right Happy, Happy Death, Death
Left Death, Death Joy, Joy
Player 1
Player 2
Formation as a coordination game
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Promise No Promise
Promise 10, 10 -10, 0
No Promise 0, -10 0, 0
Player 1
Player 2
Formation as a coordination gameAssume both parties want to agree
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Thinks there’s a Promise
Doesn’t think a Promise
Thinks there’s a Promise
10, 10 -10, 0
Doesn’t think a Promise
0, -10 0, 0
Player 1
Player 2
The interesting case: where the parties disagree about the agreement
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Thinks there’s a Promise
Doesn’t think a Promise
Thinks there’s a Promise
10, 10 -10, 0
Doesn’t think a Promise
0, -10 10, 10
Player 1
Player 2
Solving the coordination problem
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Do the rules of offer and acceptance provide the parties with suitable focal points?
Bargaining errors as an avoidable accident
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What we got here is a failure to communicate
Two kinds of Promissory Accidents
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Type I: We believe in a falsehood
Type II: We don’t believe in that which is true
Two kinds of Promissory Accidents
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Type I: We believe in a falsehood We think we have a contract, only we don’tA false positive: Leonard v. Pepsico
Two kinds of Promissory Accidents
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Type II: We don’t believe in that which is true
We don’t think we have a contract, but in reality we do:
A true negative: Lucy v. Zehmer
How to reduce promissory accidents? Offer and Acceptance
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Restatement § 22(1). The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties.
Offers
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Restatement § 24. An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
Acceptance
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Restatement § 50. Acceptance of an offer is the manifestation of assent to the terms thereof…
How to reduce promissory accidents?
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What if we could identify the party who could at least cost eliminate the accident?
How to reduce promissory accidents?
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What if we could identify the party who could at least cost eliminate the accident? Who was this in Bailey?
How to reduce promissory accidents?
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What if we could identify the party who could at least cost eliminate the accident? And in Zehmer?
The source of promissory accidents
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1. What counts as an offer?
The source of promissory accidents
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1. What counts as an offer?2. What counts as an acceptance?
The source of promissory accidents
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1. What counts as an offer?2. What counts as an acceptance?3. How long do offers and acceptances
stand (i.e., what about retraction?)
What counts as an offer?
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Offers vs. “Invitations to treat”
Offers vs. “mere puffs”
Offers to the world: unilateral contracts
Offers to the PublicCourteen Seed v. Abraham 207
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What did the flyer say? Could that have been accepted as an
offer?
Offers to the PublicCourteen Seed v. Abraham 207
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What did the flyer say? Plaintiff’s wire on Oct. 8
Could that have been accepted as an offer?
Offers to the PublicCourteen Seed v. Abraham 207
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What did the flyer say? Plaintiff’s wire on Oct. 8 Defendant’s response (I am asking 23
cents a pound) Could that have been accepted as an
offer?
Offers to the PublicCourteen Seed v. Abraham 207
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Offer v. Invitation to treat Why does the distinction make sense?
Offers to the PublicFairmont v. Cruden-Martin 210
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Can you distinguish this case?
Offers to the Public
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Can you distinguish this case? “for immediate acceptance”?
Offers to the Public
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Can you distinguish this case? “for immediate acceptance”? Was anything left out?
Offers to the PublicAudio Visual v. Sharp at 212
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Why might a presumptive rule that ads or flyers are not offers make sense?
Offers to the PublicAudio Visual v. Sharp at 212
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Why might a presumptive rule that ads or flyers are not offers make sense?
Cf. Newspaper Ad on 213
Lefkowitz 213
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Offer or Invitation to Treat?
Lefkowitz
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Could the offeror revoke his offer?
Lefkowitz
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Could the offeror revoke his offer? Restatement 36(1) An offeree’s power of
acceptance may be terminated by:(c) revocation by the offeror
Lefkowitz
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Did the offeror revoke in time? Could the offeror revoke through a private
“house rule”?
Lefkowitz
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Suppose that the Π had written to the Δ and said “I accept”? Could it be accepted in that way?
Lefkowitz
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Suppose that the Π had written to the Δ and said “I accept”? Could it be accepted in that way?
Buyers could only accept by showing up with the $1.
Lefkowitz
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Suppose that the Π had written to the Δ and said “I accept”? Corbin at 206: unilateral vs bilateral
contracts—what is the difference?
Lefkowitz
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Suppose that the Π had written to the Δ and said “I accept”? Unilateral Contracts: Where the offeree
can accept only by performance Bilateral Contracts: The offeree accepts
by return promise
Lefkowitz
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Suppose that the Π had written to the Δ and said “I accept”?
Was Lefkowitz obliged to buy the coat?
Lefkowitz
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Suppose that the Π had written to the Δ and said “I accept”?
How is this different from the Christy example on p. 213?
Lefkowitz
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Is the distinction that the store insisted on the offeree showing up at the store?
And why did that matter to the store?
Why is it so hard to get from one store to another at Pentagon Mall?
88 Pentagon City Mall
Offers to the PublicCarlill v. Carbolic Smoke Ball
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From whom did the Π buy the smoke-ball?
Carlill v. Carbolic Smoke Ball at 224
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Should this have been seen as anInvitation to Treat?
How do you tell?
Carlill v. Carbolic Smoke Ball at 224
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What’s a “mere puff”
Mere puffs: Simple commendations do not oblige one
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“simplex commendatio non obligat”
Carlill v. Carbolic Smoke Ball at 224
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What’s does vagueness have to do with it?
And how did the court deal with the vagueness of the term?
Offers to the PublicCarlill v. Carbolic Smoke Ball
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How did the Π accept the offer?
Carlill v. Carbolic Smoke Ball
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Does the offeree have to communicate acceptance in a unilateral contract?
And did Carbolic have reason to waive notice?
Carlill v. Carbolic Smoke Ball at 224
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Can you think of a reason why the Δ might WANT to assume liability?
Self-service stores
Barker v. Allied at 215 How would you analyze this?
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Cole v. Sandel at 215
What did the online form amount to? What is an “agreement to agree”
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The Law of Offers serves coordination and efficiency goals
Must seem objectively like real offers Secret reservations Invitations to treat Certainty of terms Cannot be mere puffs
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