CHAPTERCHAPTER McGraw-Hill/Irwin©2008 The McGraw-Hill Companies, All Rights Reserved Acceptance THREETHREE

3-2 Objectives Chapter Objectives: Use vocabulary regarding acceptance properly Discuss the “mirror image rule” Identify where silence may be acceptance Evaluate the applicability of the “mailbox rule” and how it affects acceptance and/or rejection of an offer Determine if there has been a “substantial beginning” toward partial performance of a unilateral contract, thereby binding the offeror

3-3 This chapter will explore HOW contracts are accepted, WHEN bilateral contracts are accepted, and, WHEN unilateral contracts are accepted –An offeree’s acceptance must be a mirror image of the offer, including the means of delivering that acceptance to the offeror Objectives

3-4 Bilateral contracts can be accepted by making a promise, that promise—once sent, in compliance with the mailbox rule, to the offeror—binds the parties to their performance obligations of the agreement However, the parties are not bound to their obligations until complete or substantial performance has been rendered Acceptance

3-5 This mandate that the offeree accept with only a “yes” has its basis in the mirror image rule This means that the offeree’s acceptance must mirror the offer exactly, without deviation or modification Mirror Image Rule

3-6 The offeror is the master of the offer as he sets all the terms, the offeree is the maker of the contract because the contract is not formed until it is accepted. He is the “closer” of the deal How he closes the deal is subject to the mirror image rule in that if the offer requests a promise (a bilateral contract), the offeree must accept by making the appropriate promise If the offeror requests a performance (a unilateral contract), the offeree must accept by performing the requested act Mirror Image Rule

3-7 Knowledge of the offer –An offeree must be aware of the terms of the offer in order to accept it Mirror Image Rule Contract

3-8 Silence –In certain circumstances, no response may be necessary to properly accept an offer –During the time in which the offer remains open, and the offeree remains silent, there can be no contract formed because there can be no meeting of the minds Mirror Image Rule

3-9 Mutuality of assent −Both parties must objectively manifest their intention to enter into a binding contract by accepting all of the terms Mirror Image Rule

3-10 Acceptance of services or goods −Where an offeree has taken possession of the goods or received the benefit of the conferred services, he has been deemed to have accepted the offer Mirror Image Rule

3-11 Solicited offer –Can be accepted by silence on the part of the offeree because the offeree has such an integral role in the shaping of the offer that the offeree’s acceptance is essentially redundant –The offeree has initiated the contact and invited the offeror to make him/her/it an offer Mirror Image Rule

3-12 Mailbox rule –A principle of contract law that sets the time of acceptance of an offer at the time it is posted and the time of rejection of an offer at the time it is received Mailbox Rule

3-13 Proper dispatch −An approved method of transmitting the acceptance to the offeror −Dropping a letter of acceptance into the mailbox (hence, the mailbox rule) is valid acceptance of a bilateral contract and, that the parties are bound as both have exchanged their promises Mailbox Rule

3-14 The acceptance must be sent to the offeror in the way that the offer has specified, if it has specified any means The acceptance must comply with the terms of the offer –a prescribed method of accepting the offer is a material term and will affect the validity of the acceptance –If no means of acceptance are prescribed in the offer, the courts have determined that any reasonable method of dispatching the acceptance will create the contract Mailbox Rule

3-15 If the acceptance is sent improperly but it is nevertheless received by the offeror, the acceptance is valid upon the receipt of the acceptance Mailbox Rule

3-16 Unlike acceptance, rejection of the offer is valid only upon receipt of the rejection by the offeree Contract law likes to foster the creation of contracts; therefore, it is better to assume that the contract is still open and wait until receipt of the rejection Mailbox Rule

3-17 Option contract –A separate and legally enforceable agreement included in the contract stating that the offer cannot be revoked for a certain time period Mailbox Rule

3-18 Reliance –A party’s dependence and actions based on the assertions of another party Mailbox Rule

3-19 Partial Performance/ Substantial Beginning Partial performance/substantial beginning –An offeree has made conscientious efforts to start performing according to the terms of the contract –The performance need not be complete nor exactly as specified, but only an attempt at significant compliance

3-20 Partial Performance/ Substantial Beginning Tender Of Performance –The offeree’s act of proffering the start of his contractual obligations –The offeree stands ready, willing, and able to perform

3-21 Partial Performance/ Substantial Beginning Tender Of Performance –The tender of performance, standing at the ready to fully perform, is the consideration for keeping the option contract open –It is understood that the offeror of the unilateral contract will accept the tender of performance and in good faith will keep the offer open –The offer cannot then be withdrawn until and unless the offeree manifests an intention not to fully perform on the offer

3-22 Summary Acceptance –The manifestation of the intent to be bound by a simple “yes,” expressed in either words or actions, is acceptance –Very rarely is silence considered valid acceptance because it lacks the element of mutuality of assent

3-23 Summary Acceptance –If the offeree makes the requested promise or does the requested act, the contract is formed, provided that she has knowledge of the offer –Both parties now have legally enforceable obligations to each other under the terms of the contract –The acceptance must be a mirror image of the offer; no new terms or qualifying conditions may be added

3-24 Summary Mailbox rule –Acceptance is valid upon posting and rejection is valid upon receipt, provided that there has been proper dispatch of the acceptance –The court also will look to see if there has been reliance on either the attempted acceptance or rejection in order to determine its effect upon the creation of the contract

3-25 Summary Once it has been determined that a legally enforceable contract has come into being through a valid offer supported by consideration and accepted by the offeree, the remaining terms and conditions of the contract can be examined. These additional terms and conditions do not alter the fact that the contract is enforceable, they determine how and by whom the contract can be enforced