Business Law Chapter 10 Homework The Court Suggested That Consider 1 Whether there

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Chapter 10

MUTUAL ASSENT

I. Offer 3. Rejection

A. Essentials of an Offer 4. Counteroffer

1. Communication 5. Death or Incompetency

2. Intent 6. Destruction of Subject Matter

a. Preliminary Negotiations 7. Subsequent Illegality

b. Advertisements II. Acceptance of Offer

c. Auction Sales A. Communication of Acceptance

3. Definiteness 1. General Rule

a. Open Terms 2. Silence as Acceptance

b. Output and Requirements Contracts 3. Effective Moment

B. Duration of Offers a. Stipulated Provisions in the Offer

1. Lapse of Time b. Authorized Means

2. Revocation c. Unauthorized Means

a. Option Contracts d. Acceptance Following a Prior Rejection

b. Firm Offers Under the Code B. Variant Acceptances

c. Statutory Irrevocability 1. Common Law

d. Irrevocable Offers of Unilateral Contracts 2. Code

e. Promissory Estoppel

Cases in This Chapter

Catamount Slate Products, Inc. v. Sheldon

Lefkowitz v. Great Minneapolis Surplus Store, Inc.

Osprey L.L.C. v. Kelly-Moore Paint Co., Inc.

Sherrod v. Kidd

Chapter Outcomes

After reading and studying this chapter, the student should be able to:

Identify the three essentials of an offer and explain briefly the requirements associated with each.

State the seven ways by which an offer may be terminated other than by acceptance.

Compare the traditional and modern theories of definiteness of acceptance of an offer, as shown by the

common law “mirror image” rule and by the rule of the Uniform Commercial Code.

Describe the five situations limiting an offeror’s right to revoke her offer.

 Explain the various rules that determine when an acceptance takes effect.

TEACHING NOTES

I. OFFER

Four elements — competent parties, legal subject matter, consideration, and

mutual assent — are essential to a contract; mutual assent is often viewed to be

the core requirement. Mutual assent is usually made through an offer and an

acceptance. One party proposes an offer to another party who, in turn, accepts

the offer. Both the offer and the acceptance generally can take the form of

either words or conduct. Thus, even if there is no de$nite spoken or written offer

or acceptance, but there is some action by both parties which indicates that they

recognize the agreement, it can be a legal contract.

*** Chapter Outcome ***

Identify the three essentials of an offer and explain brie(y the requirements associated with

each.

A. ESSENTIALS OF AN OFFER

An offer is a de$nite proposal or undertaking made by one person (the offeror) to

another (the offeree) indicating a willingness to enter into a contract. An offer

gives the offeree the power to create a contract by acceptance. An offer must

have: 1) Communication, 2) Intent, and 3) De$niteness.

Communication

• The offeree must know about the offer in order to accept it.

• The offer must be communicated to the offeree in an intentional manner.

• The offer must be made or authorized by the offeror.

Intent

To have legal effect an offer must show intent to enter into a contract. It is not

necessary that the terms be absolutely specific, but only that the intent to

contract is clear. Invitations to negotiate, advertisements, and auctions do not

constitute an intentional offer, but merely invite another party to make an offer.

Acceptance of such a proposal creates an offer only and does not create a

contract.

Preliminary Negotiations — If a communication creates in the mind of a

reasonable person in the position of the oeree an expectation that his

acceptance will conclude a contract, then the communication is an oer. If it

CASE 10-1

CATAMOUNT SLATE PRODUCTS, INC. v. SHELDON

Supreme Court of Vermont, 2004

2003 VT 112, 845 A.2d 324

http://scholar.google.com/scholar_case?case=12161607133389120155&q=2003+VT+112&hl=en&as_sdt=2,22

Skoglund, J.

Catamount Slate Products, Inc. and its principals the Reed family appeal from

a Rutland Superior Court ruling enforcing what appellees characterize as a

binding, mediated settlement agreement. The trial court concluded that, at

the end of their September 5, 2000 mediation, the parties had reached a

binding settlement agreement. Because the Reeds lacked the requisite intent

to be bound to the settlement agreement in the absence of a writing, we

hold that no binding agreement was reached. * * *

The Reeds own and operate Catamount Slate, a slate quarry and mill, on

122 acres in Fair Haven, Vermont. The appellees, the Sheldons, are also Fair

Haven property owners and the Reeds’ neighbors. Since 1997, the parties

have been litigating the Reeds’ right to operate their slate business and to

Prior to the mediation, Judge O’Dea sent each party a Mediation

Agreement outlining the rules governing the mediation. Paragraph nine of

the Mediation Agreement stated that:

i. all statements, admissions, confessions, acts, or exchange * * * are

acknowledged by the parties to be offers in negotiation of settlement and

compromise, and as such inadmissible in evidence, and not binding upon

* * *

The mediation was held on September 5, 2000. Judge O’Dea began the

session by reaCrming the statements made in the Mediation Agreement.

After ten hours, the parties purportedly reached an agreement on all major

issues. Judge O’Dea then orally summarized the terms of the resolution with

the parties and counsel present. The attorneys took notes on the terms of

the agreement with the understanding that they would prepare the

necessary documents for signature in the coming days.

The resolution required the Reeds to pay the Sheldons $250 a month for the

right to use the access road, while the Sheldons agreed to be coapplicants on

Catamount Slate’s pending Act 250 permit. Payments were to commence on

October 1, 2000. The parties also agreed to a series of terms governing the

On September 7, 2000, two days after the mediation, the Sheldons’

attorney, Emily Joselson, drafted a letter outlining the terms of the

settlement and sent copies to James Leary, the Reeds’ attorney, and Judge

O’Dea. Within a week, Leary responded by letter concurring in some respects

and outlining the issues on which the Reeds disagreed with Joselson’s

characterization of the settlement.

* * *

On October 1, 2000, the Reeds began paying the $250 monthly lease

payments, but, since the settlement agreement was not final, the parties

agreed that the money would go into an escrow account maintained by the

Sheldons’ counsel. The check was delivered to the Sheldons’ attorney with a

cover memo stating, “This check is forwarded to you with the understanding

that the funds will be disbursed to your clients only after settlement

In February 2001, while drafts were still being exchanged, Christine

Stannard, the Reeds’ daughter, saw a deed and map in the Fair Haven Town

Clerk’s OCce which led her to believe that the disputed road was not owned

by the Sheldons, but was a town highway. The Reeds then refused to proceed

any further with negotiating the settlement agreement. A written settlement

agreement was never signed by either party.

The Sheldons responded by $ling a motion to enforce the settlement

agreement. * * * The trial court granted the motion, finding that the

attorneys’ notes taken at the end of the mediation and the unsigned drafts of

the Lease and Settlement Agreements suCciently memorialized the

agreement between the parties and thus constituted an enforceable

settlement agreement. * * *

The question before us is whether the oral agreement reached at

mediation, when combined with the unexecuted documents drafted

subsequently, constituted a binding, enforceable settlement agreement.

Parties are free to enter into a binding contract without memorializing their

until the execution of what both parties consider to be a final, binding

agreement.

We look to the intent of the parties to determine the moment of contract

formation. [Citation.] Intent to be bound is a question of fact. [Citation.] “To

discern that intent a court must look to the words and deeds [of the parties]

which constitute objective signs in a given set of circumstances.” [Citation.]

In [citation], the Second Circuit articulated four factors to aid in determining

whether the parties intended to be bound in the absence of a fully executed

document. [Citation.] The court suggested that we “consider (1) whether

The language of the parties’ correspondence and other documentary

evidence presented reveals an intent by the mediation participants not to be

bound prior to the execution of a final document. First, the Mediation

Agreement Judge O’Dea sent to the parties prior to the mediation clearly

contemplates that any settlement agreement emanating from the mediation

would be binding only after being put in writing and signed. Paragraph nine

* * *

Even more compelling evidence of the Reeds’ lack of intent to be bound in

the absence of a writing is the statement in the cover letter accompanying

the Reeds’ $250 payments to the Sheldons’ attorney saying, “This check is

forwarded to you with the understanding that the funds will be disbursed to

your clients only after settlement agreement becomes final. Of course, if the

settlement agreement does not come to fruition, then the funds must be

Because there was no evidence presented of partial performance of the

settlement agreement, we next consider the third factor, whether there was

anything left to negotiate. * * *

As stated by the Second Circuit in [citation], “the actual drafting of a

written instrument will frequently reveal points of disagreement, ambiguity,

or omission which must be worked out prior to execution. Details that are

unnoticed or passed by in oral discussion will be pinned down when the

understanding is reduced to writing.” (internal quotations and citations

omitted). [Citation.] This case is no exception. A review of the lengthy

correspondence in this case makes clear that several points of disagreement

and ambiguity arose during the drafting process. Beyond the location of

seismic measurements and the de$nition of “over blast,” correspondence

indicates that the parties still had not reached agreement on the term and

width of the lease, acceptable decibel levels and notice provisions for blasts,

the definition of “truck trips,” and whether all claims would be dismissed

without prejudice after the execution of the agreement. Resolution of these

issues was clearly important enough to forestall final execution until the

The fourth and final factor, whether the agreement at issue is the type of

contract usually put into writing, also weighs in the Reeds’ favor. Being a

contract for an interest in land, the Lease Agreement is subject to the Statute

of Frauds and thus generally must be in writing. * * *

* * *

Advertisements — A public announcement or advertisement generally set

forth terms indicating only an invitation to deal. It may, however, set forth an

offer where the terms are clearly stated and all that is required of the offeree is

some specific action.

Auction Sales — With Reserve–The auctioneer may withdraw the goods and the

bidder may withdraw her bid at any time. Without Reserve–The auctioneer may

only withdraw goods put up for bid if no bid is made within a reasonable time.

CASE 10-2

LEFKOWITZ v. GREAT MINNEAPOLIS SURPLUS STORE,

INC.

Supreme Court of Minnesota, 1957

251 Minn. 188, 86 N.W.2d 689

http://scholar.google.com/scholar_case?case=1365398257799813577&q=86+N.W.2d+689&hl=en&as_sdt=2,34

Murphy, J.

This is an appeal from an order of * * * judgment award[ing] the plaintiff the

sum of $138.50 as damages for breach of contract.

This case grows out of the alleged refusal of the defendant to sell to the

plaintiff a certain fur piece which it had offered for sale in a newspaper

advertisement. It appears from the record that on April 6, 1956, the

defendant published the following advertisement in a Minneapolis

newspaper:

Saturday 9 AM Sharp

3 Brand New Fur Coats

Worth to $100.00

First Come First Served

$1 Each

On April 13, the defendant again published an advertisement in the same

newspaper as follows:

Saturday 9 AM

2 Brand New Pastel

Mink 3—Skin Scarfs

Selling for $89.50 Out they go

Saturday. Each … $1.00

1 Black Lapin Stole

Beautiful, worth $139.50 … $1.00

First Come First Served

The record supports the findings of the court that on each of the

Saturdays following the publication of the above-described ads the plaintiff

was the first to present himself at the appropriate counter in the defendant’s

and sales would not be made to men, and on the second visit that plaintiff

knew defendant’s house rules. * * *

The defendant contends that a newspaper advertisement offering items of

merchandise for sale at a named price is a “unilateral offer” which may be

withdrawn without notice. He relies upon authorities which hold that, where

an advertiser publishes in a newspaper that he has a certain quantity or

quality of goods which he wants to dispose of at certain prices and on certain

terms, such advertisements are not offers which become contracts as soon

as any person to whose notice they may come signi$es his acceptance by

notifying the other that he will take a certain quantity of them. Such

The test of whether a binding obligation may originate in advertisements

addressed to the general public is “whether the facts show that some

performance was promised in positive terms in return for something

requested.”

* * *

Whether in any individual instance a newspaper advertisement is an offer

rather than an invitation to make an offer depends on the legal intention of

the parties and the surrounding circumstances. [Citations.] We are of the

view on the facts before us that the offer by the defendant of the sale * * *

Definiteness

Although a statement intended to be an offer under the common law need not

cover all possibilities, it must be suCciently clear on the main terms such as 1)

subject matter of the contract, 2) price, 3) quantity, 4) quality, 5) terms of

payment and 4) duration.

Open Terms — Under the Code, an offer for the purchase or sale of goods may

leave some open terms to be specified later in good faith and within limits set

by commercial reasonableness. Where two parties have demonstrated an

intent to contract, a court will attempt to $ll in any missing term through course

of dealing, usage of trade, or by inference.

Output and Requirements Contracts — A contract term may be left open

with special contracts known as output and requirements contracts. An output