Deck 13: Formation of Contracts: Offer and Acceptance

Question 1

Able Sofa, Inc., sent Noll a letter offering to sell Noll a custom-made sofa for $5,000. Noll immediately sent a telegram to Able purporting to accept the offer. However, the telegraph company erroneously delivered the telegram to Abel Soda, Inc. Three days later, Able mailed a letter of revocation to Noll, which was received by Noll. Able refused to sell Noll the sofa. Noll sued Able for breach of contract. Able:
a. Would have been liable under the deposited acceptance rule only if Noll had accepted by mail
b. Will avoid liability since it revoked its offer prior to receiving Noll's acceptance
c. Will be liable for breach of contract
d. Will avoid liability due to the telegraph company's error (Law, #2, 9911)

Answer 1

a) False. N doesn't necessarily have to accept by mail. Unless there is a specifically stated method of acceptance he can communicate his acceptance or refuse of offer through mail, email, or fax.
b) False. N had accepted the offer before A revoked it. All N had to do was to make an intent of acceptance, he did his duty to accept the offer it was the telegraph company that made the error.
c) True. Once, the offer is accepted A is liable for it even if it wasn't informed N had accepted it. The conflicts in this case may have been avoided if both parties used more instantaneous way of communication.
d) False. An agreement was made prior to the error.

Question 2

Bernie and Phil's Great American Surplus store placed an ad in the Sunday Times stating, "Next Saturday at 8:00 A.M. sharp, 3 brand new mink coats worth $5,000 each will be sold for $500 each! First come, First served." Marsha Lufklin was first in line when the store opened and went directly to the coat department, but the coats identified in the ad were not available for sale. She identified herself to the manager and pointed out that she was first in line in conformity with the store's advertised offer and that she was ready to pay the $500 price set forth in the store's offer. The manager responded that a newspaper ad is just an invitation to negotiate and that the store decided to withdraw "the mink coat promotion." Review the text on unilateral contracts in Section 12(b) of Chapter 12. Decide.

Answer 2

While making an offer, the offeror indirectly extends a promise to do something when the offeree does what the offeror requests. Such contracts can be Bilateral or Unilateral.
Unilateral Contracts include those offers where the offeror may promise to do something when the offeree fulfills the offeror's request. Only the offeror extends a promise in unilateral contracts.
Case Summary :
Company BP placed an ad in the newspaper regarding the sale of their mink coats at a special price on first come, first serve basis. The ad also included the time and date of the sale.
When ML, first in line, went to the store on the specified date, the coats were unavailable for sale. When she confronted the manager about the same, he told her that the ad was just an invitation and BP had decided to withdraw the offer.
In the given case, company BP had in fact extended promise to the customers regarding the $500 mink coats. The statement "First come, first served" made it a unilateral contract. This clearly implied that the person who would be the first one to show up to the store would receive the deal. Hence, ML was eligible for the offer and should have received the coats for $500.
Thus, the store had violated the unilateral contract and could be sued under this violation by ML.

Question 3

On September 27, Summers sent Fox a letter offering to sell Fox a vacation home for $150,000. On October 2, Fox replied by mail agreeing to buy the home for $145,000. Summers did not reply to Fox. Do Fox and Summers have a binding contract
a. No, because Fox failed to sign and return Summers's letter
b. No, because Fox's letter was a counteroffer
c. Yes, because Summers's offer was validly accepted
d. Yes, because Summers's silence is an implied acceptance of Fox's letter (Law, #2, 0462)

Answer 3

a) False. Signing and returning is not necessarily an acceptance, especially when F sent a counteroffer with a different amount.
b) True. A counteroffer voids the prior offer price of $150,000 and makes F the offeror with a price of $145,000.
c) False. A valid acceptance must be sufficiently similar to the original terms. F responded with different terms making it a counteroffer.
d) False. Silence is not acceptance in this case.

Question 4

Brown made an offer to purchase Overman's house on a standard printed form. Underneath Brown's signature was the statement: "ACCEPTANCE ON REVERSE SIDE." Overman did not sign the offer on the back but sent Brown a letter accepting the offer. Later, Brown refused to perform the contract, and Overman sued him for breach of contract. Brown claimed there was no contract because the offer had not been accepted in the manner specified by the offer. Decide. [Overman v Brown, 372 NW2d 102 (Neb)]

Question 5

On June 15, Peters orally offered to sell a used lawn mower to Mason for $125. Peters specified that Mason had until June 20 to accept the offer. On June 16, Peters received an offer to purchase the lawn mower for $150 from Bronson, Mason's neighbor. Peters accepted Bronson's offer. On June 17, Mason saw Bronson using the lawn mower and was told the mower had been sold to Bronson. Mason immediately wrote to Peters to accept the June 15 offer. Which of the following statements is correct
a. Mason's acceptance would be effective when received by Peters.
b. Mason's acceptance would be effective when mailed.
c. Peters's offer had been revoked and Mason's acceptance was ineffective.
d. Peters was obligated to keep the June 15 offer open until June 20. (Law, #13, 3095)

Question 6

Katherine mailed Paul an offer with definite and certain terms and that was legal in all respects stating that it was good for 10 days. Two days later she sent Paul a letter by certified mail (time stamped by the Postal Service at 1:14 P.M.) stating that the original offer was revoked. That evening Paul e-mailed acceptance of the offer to Katherine. She immediately phoned him to tell him that she had revoked the offer that afternoon, and he would surely receive it in tomorrow's mail. Was the offer revoked by Katherine

Question 7

Nelson wanted to sell his home. Baker sent him a written offer to purchase the home. Nelson made some changes to Baker's offer and wrote him that he, Nelson, was accepting the offer as amended. Baker notified Nelson that he was dropping out of the transaction. Nelson sued Baker for breach of contract. Decide. What social forces and ethical values are involved [Nelson v Baker, 776 SW2d 52 (Mo App)]

Question 8

Lessack Auctioneers advertised an auction sale that was open to the public and was to be conducted with reserve. Gordon attended the auction and bid $100 for a work of art that was worth much more. No higher bid, however, was made. Lessack refused to sell the item for $100 and withdrew the item from the sale. Gordon claimed that because he was the highest bidder, Lessack was required to sell the item to him. Was he correct

Question 9

Willis Music Co. advertised a television set at $22.50 in the Sunday newspaper. Ehrlich ordered a set, but the company refused to deliver it on the grounds that the price in the newspaper ad was a mistake. Ehrlich sued the company. Was it liable Why or why not [Ehrlich v Willis Music Co.,113 NE2d 252 (Ohio App)]

Question 10

When a movement was organized to build Charles City College, Hauser and others signed pledges to contribute to the college. At the time of signing, Hauser inquired what would happen if he should die or be unable to pay. The representative of the college stated that the pledge would then not be binding and that it was merely a statement of intent. The college failed financially, and Pappas was appointed receiver to collect and liquidate the assets of the college corporation. He sued Hauser for the amount due on his pledge. Hauser raised the defense that the pledge was not a binding contract. Decide. What ethical values are involved [Pappas v Hauser, 197 NW2d 607 (Iowa)]

Question 11

A signed a contract agreeing to sell land he owned but reserved the right to take the hay from the land until the following October. He gave the contract form to B, a broker. C, a prospective buyer, agreed to buy the land and signed the contract but crossed out the provision regarding the hay crop. Was there a binding contract between A and C

Question 12

H. Zehmer discussed selling a farm to Lucy. After a 40-minute discussion of the first draft of a contract, Zehmer and his wife, Ida, signed a second draft stating: "We hereby agree to sell to W. O. Lucy the Ferguson farm complete for $50,000 title satisfactory to buyer." Lucy agreed to purchase the farm on these terms. Thereafter, the Zehmers refused to transfer title to Lucy and claimed they had made the contract for sale as a joke. Lucy brought an action to compel performance of the contract. The Zehmers claimed there was no contract. Were they correct [Lucy v Zehmer, 84 SE2d 516 (Va App)]

Question 13

Wheeler operated an automobile service station, which he leased from W. C. Cornitius, Inc. The lease ran for three years. Although the lease did not contain any provision for renewal, it was in fact renewed six times for successive three-year terms. The landlord refused to renew the lease for a seventh time. Wheeler brought suit to compel the landlord to accept his offer to renew the lease. Decide. [William C. Cornitius, Inc. v Wheeler, 556 P2d 666 (Or)]

Question 14

Buster Cogdill, a real estate developer, made an offer to the Bank of Benton to have the bank provide construction financing for the development of an outlet mall, with funds to be provided at prime rate plus two percentage points. The bank's president Julio Plunkett thanked Buster for the proposal and said, "I will start the paperwork." Did Cogdill have a contract with the Bank of Benton [Bank of Benton v Cogdill, 454 NE2d 1120 (Ill App)]

Question 15

Ackerley Media Group, Inc., claimed to have a three-season advertising Team Sponsorship Agreement (TSA) with Sharp Electronics Corporation to promote Sharp products at all Seattle Supersonics NBA basketball home games. Sharp contended that a valid agreement did not exist for the third season (2000-2001) because a material price term was missing, thus resulting in an unenforceable "agreement to agree." The terms of the TSA for the 2000-2001 third season called for a base payment of $144,200 and an annual increase "not to exceed 6% [and] to be mutually agreed upon by the parties." No "mutually agreed" increase was negotiated by the parties. Ackerley seeks payment for the base price of $144,200 only. Sharp contends that since no price was agreed upon for the season, the entire TSA is unenforceable, and it is not obligated to pay for the 2000-2001 season. Is Sharp correct [Ackerley Media Group, Inc. v Sharp Electronics Corp., 170 F Supp 2d 445 (SDNY)]

Question 16

B. Foster invited Tie and Track Systems Inc. to submit price quotes on items to be used in a railroad expansion project. Tie and Track responded by e-mail on August 11, 2006, with prices for nine items of steel ties. The e-mail concluded, "The above prices are delivered/ Terms of Payment-to be agreed/Delivery-to be agreed/We hope you are successful with your bid. If you require any additional information please call." Just three of the nine items listed in Tie and Track's price quote were "accepted" by the project. L. B. Foster demanded that Tie and Track provide the items at the price listed in the quote. Tie and Track refused. L. B. Foster sued for breach of contract. Did the August 11 e-mail constitute an offer, acceptance of which could bind the supplier to a contract If so, was there a valid acceptance [L. B. Foster v Tie and Track Systems, Inc., 2009 WL 900993 (ND Ill)]

Question 17

On August 15, 2003, Wilbert Heikkila signed an agreement with Kangas Realty to sell eight parcels of Heikkila's property. On September 8, 2003, David McLaughlin met with a Kangas agent who drafted McLaughlin's offer to purchase three of the parcels. McLaughlin signed the offer and gave the agent checks for each parcel. On September 9 and 10, 2003, the agent for Heikkila prepared three printed purchase agreements, one for each parcel. On September 14, 2003, David's wife, Joanne McLaughlin, met with the agent and signed the agreements. On September 16, 2003, Heikkila met with his real estate agent. Writing on the printed agreements, Heikkila changed the price of one parcel from $145,000 to $150,000, the price of another parcel from $32,000 to $45,000, and the price of the third parcel from $175,000 to $179,000. Neither of the McLaughlins signed an acceptance of Heikkila's changes to the printed agreements before Heikkila withdrew his offer to sell. The McLaughlins learned that Heikkila had withdrawn his offer on January 1, 2004, when the real estate agent returned the checks to them. Totally shocked at Heikkila's conduct, the McLaughlins brought action to compel specific performance of the purchase agreement signed by Joanne McLaughlin on their behalf. Decide. [McLaughlin v Heikkila, 697 NW2d 231 (Minn App)]