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Chapter 10

BMGT 380 Chapter Notes - Chapter 10: Consideration, Cierva C.4, Signify

Business and Management
Course Code
BMGT 380
William Mc Clenahan

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Chapter 10 06:14
I. Requirements for an Offer
A. Offer: the critically important first step in the contract formation process; says, “ this
is it- if you agree to these terms, we have a contract.”
A.1. Offeror: the person who makes the offer; gives the power to bind themselves to
the contract by the acceptance of the offeree
A.2. Offeree: the person to whom the offer is being made; given the power to bind
the offeror to a contract simply by accepting the offer
B. Intent to Contract: the offeror must indicate present intent to contract
B.1. Present intent: the intent to enter the contract upon acceptance; signifies that the
offeror is not joking, haggling, or equivocating
B.2. The Subjective Standard of Intent: used by early American courts as an
approach to contract formation, asking whether there was truly a “meeting of
the minds” between the parties.
B.2.a. Created uncertainty in the enforcement of contracts because
it left every contract vulnerable to disputes about actual intent
B.3. The Objective Standard of Intent: judges agreement by looking at the parties’
outward manifestations of intent
B.3.a. An offeror’s intent will be judged by an objective standard-
what his words, acts, and the circumstances signify about his intent
B.3.b. If a reasonable person familiar with all the circumstances
would be justified in believing that the offeror intended to contract, a
court would find that the intent requirement of an offer was satisfied
even if the offeror himself says that he did not intend to contract
C. Definiteness of Terms: there are two main reasons for this:
C.1. definiteness and specificity in an offer tend to indicate an intent to contract,
whereas indefiniteness and lack of specificity tend to indicate that parties are
still negotiating and have not yet reached agreement
C.2. courts need to know the terms on which the parties agreed in order to determine
if a breach of contract has occurred and calculate a remedy if it has. If an
agreement is too indefinite, a could would not have a basis for giving a remedy
if one of the parties alleged that the “contract” was breached.
C.3. Definiteness Standards Under the Common Law:
C.3.a. Courts are contract enforcers, not contract makers: the
traditional insistence of definiteness can prove useful:
C.3.a.i. It can prevent a person from being held to an
agreement when none was reached or from being bound to a
contract term to which he never assented
C.3.a.ii. It can operate to frustrate the expectations of parties
who intend to contract but, for whatever reason, fail to procure
an agreement that specifies all the terms of the contract
C.4. Definiteness Standards Under the UCC:
C.4.a. The fact that the parties left open one or more terms of their
agreement does not necessarily mean that their agreement is too
indefinite to enforce
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C.4.a.i. If a term is left open in a contract that meets two
standards (a sales contract is created if the court finds that the
parties intended to make a contract and that their agreement is
complete enough to allow the court to reach a fair settlement of
their dispute – “a reasonably certain basis for giving an
appropriate remedy”) that open term or “gap” can be “filled”
by inserting a presumption found in the Code’s “gap-filling”
rules: allow courts to fill contract terms left open on matters of
price, quantity, deliver, and time for payment when such terms
are left open by the parties
C.4.b. If a term was left out because the parties were unable to
reach an agreement about it, this would indicate that the intent to
contract was absent and no contract would result, even under the
Code’s more liberal rules
C.4.c.Intention is still at the heart of these modern contract rules: courts
applying the Code seek to further the parties’ underlying intent to
contract even though the parties have failed to express their intention
about specific aspects of the agreement
D. Communication to Offeree: when an offeror communicates the terms of an offer to an
offeree, he objectively indicates an intent to be bound by those terms
D.1. The fact that an offer has not been communicated may be evidence that the
offeror has not yet decided to enter into a binding agreement
II. Special Offer Problem Areas
A. Advertisements: advertisements for the sale of goods at specified prices are not
considered to be offers; treated as invitations to offer or negotiate
A.1. It is not reasonable to conclude that a seller who has a limited number of items
to sell intends to give every person who sees her ad, sign, or catalog the power
to bind her to contract
A.2. Specificity in ads (limit the power of acceptance to one offeree or a small
number of offerees, are highly specific about he nature and number of items
offered for sale and what is requested in return, and they leave nothing further to
be negotiated) precludes the possibility that the offeror could become
contractually bound to an infinite number of offers
A.2.a. “first come first serve” language limits the number of
people who would have the power of acceptance; the potential for
unfairness to those who attempt to accept such ads and their
fundamental difference from ordinary ads justify treating them as
B. Rewards: to accept the offer and be entitled to the stated reward, offerees must
perform the requested act
C. Auctions: sellers at auctions are generally treated as making an invitation to offer
C.1. Those who bid on offered goods are therefore treated as making offers that the
owner of the goods may accept or reject
C.2. Acceptance occurs only when the auctioneer strikes the goods off to the highest
bidder the auctioneer may withdraw the goods at any time before the acceptance
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