1 George Mason School of Law Contracts I E.Offers F.H. Buckley

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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. 3

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The Five W’s  Who  What  Where  When  Why 5

Basic Questions of Formation  Who are the parties What happens to non-parties?  What  Where  When  Why 6

Basic Questions of Formation  Who are the parties  What did they agree to? What are the terms and conditions  Where  When  Why 7

Basic Questions of Formation  Who are the parties  What did they agree to?  Where was the contract formed? Under which law  When  Why 8

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 9

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 10

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. 11

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 12

What counts as a contract? 13  The need for a “meeting of the minds” Quinn J. in Williams v. Walker-Thomas at 53

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? 14

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” 15

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” 16

Secret reservations  How about: “I will sell you my car tomorrow” (while privately resolving not to do so) 17

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” 18

Lucy v. Zehmer at p

Lucy v. Zehmer at p

Lucy v. Zehmer 21 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! 22

Why does the drinking matter? 23

Why does the drinking matter? 24  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? 25  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? 26  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. 27

Why does the drinking matter? 28  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? 29  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. 30

Lucy v. Zehmer 31  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 32  What if Zehmer didn’t really intend to sell? An Objective standard

Lucy v. Zehmer 33  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 34  What remedy is sought and why did that matter? Recall Mansfield in Moses v. Macferlan

Lucy v. Zehmer 35  Even if a contract was made on the Saturday, why couldn’t Zehmer retract on the Sunday?

Lucy v. Zehmer 36  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 37

Leonard v. Pepsico at  Was this really an offer to sell a jet for $700,000?

Leonard v. Pepsico at  “No objective person could reasonably have concluded that the commercial actually offered consumers a Harrier Jet.”

Leonard v. Pepsico at 17 40

Bargains: Rest. § 3  A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances. 41

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 42

A wholly executed contract: Gleinicke Bridge, Berlin,

Formation as a Coordination Game 44  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 45  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 46  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 47  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 48  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 49 RightLeft RightHappy, HappyDeath, Death LeftDeath, DeathJoy, Joy Player 1 Player 2

Formation as a coordination game 50 PromiseNo Promise Promise10, 10-10, 0 No Promise0, -100, 0 Player 1 Player 2

Formation as a coordination game Assume both parties want to agree 51 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, -100, 0 Player 1 Player 2

The interesting case: where the parties disagree about the agreement 52 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, -1010, 10 Player 1 Player 2

Solving the coordination problem 53  Do the rules of offer and acceptance provide the parties with suitable focal points?

Bargaining errors as an avoidable accident 54 What we got here is a failure to communicate

Two kinds of Promissory Accidents 55  Type I: We believe in a falsehood  Type II: We don’t believe in that which is true

Two kinds of Promissory Accidents 56  Type I: We believe in a falsehood We think we have a contract, only we don’t A false positive: Leonard v. Pepsico

Two kinds of Promissory Accidents 57  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 58  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 59  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 60  Restatement § 50. Acceptance of an offer is the manifestation of assent to the terms thereof…

How to reduce promissory accidents? 61  What if we could identify the party who could at least cost eliminate the accident?

How to reduce promissory accidents? 62  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? 63  What if we could identify the party who could at least cost eliminate the accident? And in Zehmer?

The source of promissory accidents 64 1.What counts as an offer?

The source of promissory accidents 65 1.What counts as an offer? 2.What counts as an acceptance?

The source of promissory accidents 66 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? 67  Offers vs. “Invitations to treat”  Offers vs. “mere puffs”  Offers to the world: unilateral contracts

Offers to the Public Courteen Seed v. Abraham  What did the flyer say? Could that have been accepted as an offer?

Offers to the Public Courteen Seed v. Abraham  What did the flyer say?  Plaintiff’s wire on Oct. 8 Could that have been accepted as an offer?

Offers to the Public Courteen Seed v. Abraham  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 Public Courteen Seed v. Abraham  Offer v. Invitation to treat Why does the distinction make sense?

Offers to the Public Fairmont v. Cruden-Martin  Can you distinguish this case?

Offers to the Public 73  Can you distinguish this case? “for immediate acceptance”?

Offers to the Public 74  Can you distinguish this case? “for immediate acceptance”? Was anything left out?

Offers to the Public Audio Visual v. Sharp at  Why might a presumptive rule that ads or flyers are not offers make sense?

Offers to the Public Audio Visual v. Sharp at  Why might a presumptive rule that ads or flyers are not offers make sense?  Cf. Newspaper Ad on 213

Lefkowitz Offer or Invitation to Treat?

Lefkowitz 78  Could the offeror revoke his offer?

Lefkowitz 79  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 80  Did the offeror revoke in time? Could the offeror revoke through a private “house rule”?

Lefkowitz 81  Suppose that the Π had written to the Δ and said “I accept”? Could it be accepted in that way?

Lefkowitz 82  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 83  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 84  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 85  Suppose that the Π had written to the Δ and said “I accept”?  Was Lefkowitz obliged to buy the coat?

Lefkowitz 86  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 87  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 Public Carlill v. Carbolic Smoke Ball 89 From whom did the Π buy the smoke-ball?

Carlill v. Carbolic Smoke Ball at Should this have been seen as an Invitation to Treat? How do you tell?

Carlill v. Carbolic Smoke Ball at What’s a “mere puff”

Mere puffs: Simple commendations do not oblige one 92 “simplex commendatio non obligat”

Carlill v. Carbolic Smoke Ball at What’s does vagueness have to do with it? And how did the court deal with the vagueness of the term?

Offers to the Public Carlill v. Carbolic Smoke Ball 94 How did the Π accept the offer?

Carlill v. Carbolic Smoke Ball 95 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 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? 97

Cole v. Sandel at 215  What did the online form amount to? What is an “agreement to agree” 98

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 99