1 george mason school of law contracts i viii.acceptance iii f.h. buckley fbuckley@gmu.edu

1

George Mason School of Law

Contracts I

VIII. Acceptance III

F.H. Buckley

fbuckley@gmu.edu

Coordination

The parties need to know how to coordinate their attempts at agreement

2

Acceptance vs. Counter-offer

Wholesaler offeror offers retailer offeree “a dozen 22 inch clay pots for $300.” Offeree emails back “Great. I’ll take three dozen.”

Is there a contract?

3

Acceptance vs. Counter-offer

§39. COUNTER-OFFERS. (1) A counter-offer is an offer made by an offeree to

his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.

(2) An offeree's power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree.

4

The “Mirror Image Rule”

§59. PURPORTED ACCEPTANCE WHICH ADDS QUALIFICATIONS. A reply to an offer which purports to accept it but is conditional on the offeror's assent to terms additional to or different from those offered is not an acceptance but is a counter-offer.

5

Acceptance vs. Counter-offer

Corinthian Pharmaceutical at 226 Was the delivery of 50 vials an

acceptance of the offer?

6

UCC 2-206(1) § 2-206(1) Unless otherwise unambiguously indicated by the

language or circumstances (a) an offer to make a contract shall be construed as inviting

acceptance in any manner and by any medium reasonable in the circumstances:

(b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but the shipment of nonconforming goods is not an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

7

Offer and Acceptance in Article 2

What is an Article 2 transaction?

8

Offer and Acceptance in Article 2

What is an Article 2 transaction? UCC § 2-102 “This Article applies to

transactions in goods”

9

Offer and Acceptance in Article 2

What is an Article 2 transaction? UCC § 2-102 “This Article applies to

transactions in goods” UCC § 2-105 “Goods” means all things …

which are moveable at the time of identification

10

Acceptance vs. Counter-offer

Wholesaler offeror offers retailer offeree “a dozen 22 inch clay pots for $300.” Offeree emails back “Great. I’ll take three dozen.”

Not having heard from wholesaler, retailer emails back “OK, I’ll take a dozen.”

Is there a contract?

11

Acceptance vs. Counter-offer

Restatement § 36. Methods of Termination of the Power of Acceptance(1) An offeree’s power of acceptance may be terminated by

(a) rejection or counter-offer by the offeree

12

Counteroffers: Dataserv Equipment at 247

13

Counteroffers: Dataserv Equipment at 247

Dataserv (seller)

Technology (buyer)

14

Counteroffers: Dataserv Equipment at 247

Did Technology accept Dataserv’s initial offer?

15

Counteroffers: Dataserv Equipment at 247

Did Technology accept Dataserv’s initial offer?

Could Dataserve accept the counter-offer? And did it?

16

Counteroffers: Dataserv Equipment at 247

Did Technology accept Dataserv’s initial offer?

Could Dataserv accept the counter-offer? And did it?

Having rejected the counter-offer, could Dataserv subsequently accept it?

17

Counteroffer as Rejection: Dataserv Equipment

Restatement § 38(1). A party’s rejection terminates its power of acceptance. Once rejected an offer is terminated and cannot be accepted without ratification by the other party.

18

Counteroffer as Rejection: Dataserv Equipment

Restatement § 38(1). A party’s rejection terminates its power of acceptance. Once rejected an offer is terminated and cannot be accepted without ratification by the other party.

Why might this make sense? What’s the alternative?

19

Acceptance vs. Counter-offer

Wholesaler offeror offers retailer offeree “a dozen 22 inch clay pots for $300.” Offeree emails back “Great. I’ll take a dozen but I’d really be much happier if you could send me three dozen.”

20

Acceptance vs. Counter-offer

§ 61. Acceptance Which Requests Change of Terms. An acceptance which requests a change or addition to the terms of the offer is not thereby invalidated unless the acceptance is made to depend on an assent to the changed or added terms.

21

The Battle of the Forms

22

Why might this be a problem?

The Battle of the Forms

23

“The sender of the last form … could insert virtually any conditions it chooses into the contract” Ionics

The Battle of the Forms

24

Distinguish the case where performance has begun from the case where it hasn’t

Counteroffers

What happens at common law where: There is performance and indisputably a

contract There has been a “Battle of the Forms”

25

The Last Shot Doctrine

What happens at common law where: There is performance and indisputably a

contract There has been a “Battle of the Forms”

The Last Shot Doctrine as a corollary of the mirror image rule

26

How is the Last Shot doctrine changed by “the infamous” UCC § 2-207?

27

How is the Last Shot doctrine changed by “the infamous” UCC § 2-207?

Seller offers a 1956 Ford for $5,000. Buyer writes to say “I accept but I’d like you to give it a fresh car wash.”

28

How is the Last Shot doctrine changed by UCC § 2-207?

Seller offers a 1956 Ford for $5,000. Buyer writes to say “I accept but I’d like you to give it a fresh car wash.”

 2-207 (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon

29

How is the Last Shot doctrine changed by UCC § 2-207?

Seller offers a 1956 Ford for $5,000. Buyer writes to say “I accept but I’d like you to give it a fresh car wash.”

 2-207 (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon

Was this a new term?

30

How is the last Shot doctrine changed by UCC § 2-207?

Seller offers a 1956 Ford for $5,000. Buyer writes to say “I accept but I don’t want the car unless you to give it a fresh car wash.”

31

How is the last Shot doctrine changed by UCC § 2-207?

Seller offers a 1956 Ford for $5,000. Buyer writes to say “I accept but I don’t want the car unless you to give it a fresh car wash.”

 2-207(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

32

How is the last Shot doctrine changed by UCC § 2-207?

2-207(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

Can the parties bargain out of 2-207 by invoking this proviso? (Roto-Lith)

33

How is the last Shot doctrine changed by UCC § 2-207?

Seller offers a 1956 Ford for $5,000. Buyer writes to say “I accept but I don’t want the car unless you to give it a fresh car wash.”

 Does 2-207(2) apply? “The additional terms are to be construed as

proposals for addition to the contract.”

34

How is the last Shot doctrine changed by UCC § 2-207?

Seller offers a 1956 Ford for $5,000. Buyer writes to say “I accept but I don’t want the car unless you to give it a fresh car wash.”

 What does 2-207(2) mean? “The additional terms are to be construed as

proposals for addition to the contract.” So are they in the contract or not?

35

How is the last Shot doctrine changed by UCC § 2-207?

When is 2-207(3) triggered? “Conduct by both parties which

recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract.”

36

How is the last Shot doctrine changed by UCC § 2-207?

When is 2-207(3) triggered? “Conduct by both parties which

recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract.”

In which case, what are the terms of the contract?

37

How is the last Shot doctrine changed by UCC § 2-207?

In which case, what are the terms of the contract?

2-207(3) In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

38

How is the last Shot doctrine changed by UCC § 2-207?

How is it different if the contract is between merchants (and why should that matter)? UCC 2-104 (merchant: a person who deals in

goods of that kind)

39

How is the last Shot doctrine changed by UCC § 2-207? 2-207(2) The additional terms are to be

construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to

the terms of the offer;(b) they materially alter it; or(c) notification of objection to them has

already been given or is given within a reasonable time after notice of them is received.

40

Ionics at 250

Elmwood

thermostats

Ionics

41

Ionics

42

Applying the last shot doctrine, what is the contract? And is there a problem with that?

Ionics at 250

How would you apply UCC § 2-207(1) (before the comma) to Ionics?

UCC § 2-207 (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon

43

Ionics at 250

44

How did Roto-Lith end up applying the Last Shot doctrine?

Ionics at 250

What about the proviso?UCC § 2-207(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

45

Ionics at 250

46

If Ionics rejects Roto-Lith, could 2-207(2) be helpful?

The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or (c) notification of objection to them has already been

given or is given within a reasonable time after notice of them is received.

Ionics at 250

47

If Ionics rejects Roto-Lith, could 2-207(2) be helpful?

The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or (c) notification of objection to them has already been

given or is given within a reasonable time after notice of them is received.

Ionics at 250

48

So what happens when 2-207(1) and 2-207(2) are both ousted?

Ionics at 250

49

So what happens when 2-207(1) and 2-207(2) are both ousted?

Two possibilities: There is “conduct by both parties

which recognizes the existence of a contract” in 2-207(3)

Or there isn’t

Ionics at 250

50

If there is “Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale” In such case the terms of the particular

contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

Step-Saver at 260

Is this a contract between merchants?

51

Step-Saver at 260

Wyse/TSL

Mainframe hardwareplus MS software

Step-Saver

52

Step-Saver at 260

53

IBM AT cpuMS DOS

Shrink-rap Contracts

What did the District Court hold?

54

Shrink-rap Contracts

The District Court: The box-top license as the

crucial Last Shot offer

55

Shrink-rap Contracts

On appeal, before applying 2-207(1), what makes this an Article II transaction?

56

Shrink-rap Contracts

What about 2-207(1)’s proviso? unless acceptance is expressly

made conditional on assent to the additional or different terms

57

Shrink-rap Contracts

What about 2-207(1)’s proviso? unless acceptance is expressly

made conditional on assent to the additional or different terms

58

Shrink-rap Contracts

What about 2-207(2)(b)? Was the exemption clause a “material”

alteration?

59

Shrink-rap Contracts

Can an offeree bargain around 2-207? “the third approach” on p 265

60

Shrink-rap Contracts

Am I missing something? “Opening this package indicates your

acceptance of these terms and conditions. If you do not agree with them you should promptly return the package unopened”?

61

Shrink-rap Contracts

Am I missing something? “Opening this package indicates your

acceptance of these terms and conditions. If you do not agree with them you should promptly return the package unopened”?

Why did the court think that this didn’t work?

62

Shrink-rap Contracts

So what should the court on remand look to?

63

Hill v. Gateway at 268

64

Hill v. Gateway at 268

Was this between merchants?

And was there a battle of the forms?

65

Hill v. Gateway at 268

What result if Step-saver is applied here? In which case, when is the contract

formed?

66

Hill v. Gateway at 268

Why is 2-207 said to be irrelevant here?

67

E-commerce

What happens when you click on “I accept” in an Internet contract?

68