1 George Mason School of Law Contracts I IV.Offers F.H. Buckley [email protected].

1

George Mason School of Law

Contracts I

IV. Offers

F.H. Buckley

[email protected]

Last classes

Contract law solves the trust problem of PD games and permits credible commitments

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Last classes

Contract law solves the trust problem of PD games and permits credible commitments

This results in a society which is wealthier, happier, freer and more open

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Last classes

Promising and contract law assume the existence of promissory conventions (Hume) The libertarian (non-consequentialist)

explanation of promising therefore appears to founder

So too natural law explanations

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Last classes

Promising and contract law are content-independent

Quasi-contract (restitution) as contract-dependent Was there really a benefit?

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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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Who are the parties What did they agree to?

What are the terms and conditions

Where When Why

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Who are the parties What did they agree to? Where was the contract formed?

Under which law

When Why

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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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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 may sell my car to you” “I expect to see you at lunch tomorrow”

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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. 13

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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.

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


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.

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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Has there been either any beneficial or detrimental reliance at that point?

Lucy v. Zehmer

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Has there been either any beneficial or detrimental reliance at that point?

Does the Coase Theorem help?

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.

Leonard v. Pepsico at 18

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32

Was this really an offer to sell a jet for $700,000?


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“No objective person could reasonably have concluded that the commercial actually offered consumers a Harrier Jet.”


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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.


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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?


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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?


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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?


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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

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: Promisors are found to promise when they really didn’t intend to do so (false positive)

Lucy v Zehmer?

Type II: Promisors are not found to promise where they intended to do so (true negative)

Leonard v. Pepsico

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?


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What if we could identify the party who could at least cost eliminate the accident? Who was this in Bailey?


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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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What counts as an offer?


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What counts as an offer? What counts as an acceptance?


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What counts as an offer? What counts as an acceptance? How long do offers and acceptances

stand (i.e., what about retraction?)

What counts as an offer?

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Offers to the world: unilateral contracts

Offers vs. “Invitations to treat”

Offers vs. “mere puffs”

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?


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What did the flyer say? Plaintiff’s wire on Oct. 8

Could that have been accepted as an offer?


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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?


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Offer v. Invitation to treat Does a course of dealings change

anything?

Offers to the PublicFairmont v. Cruden-Martin 210

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Can you distinguish this case?

Offers to the PublicFairmont v. Cruden-Martin 210

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Can you distinguish this case? “for immediate acceptance”?

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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Did the offeror revoke in time? Could the offeror revoke through a private

“house rule”? Restatement §42. An offeree's power of

acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract.

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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Why did the store insist on the offeree showing up at the store?

Why is it so hard to get from one store to another at Pentagon Mall?

76 Pentagon City Mall

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?

Carlill v. Carbolic Smoke Ball

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Rest. § 54. Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification.

Carlill v. Carbolic Smoke Ball at 224

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Should this have been seen as anInvitation to Treat?

How do you tell?


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Can you think of a reason why the Δ might WANT to assume liability?


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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”

The need for certainty

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Restatement § 33(1). Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.

Self-service stores

Barker v. Allied at 215 How would you analyze this?

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Cole v. Sandel at 215

What was the standard idea agreement? And why wasn’t it an agreement?

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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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1 George Mason School of Law Contracts I IV.Offers F.H. Buckley [email protected].

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