Making a Contract I - Mutual Assent

Lesson 0 of 0, 1m
Making a Contract I – Mutual Assent

Assessment Questions

Question 1

Adam goes to the local car dealership and sees a sign that reads, “We’ve got cars for $500!” Adam picks out the nicest car on the lot and tells the owner, Bruce, that he’ll take that car for $500. Bruce tells Adam he couldn’t part with that car for less than $2,000. Adam says he’ll see Bruce in court. Which of the following statements is true?
a
The sign at the dealership constituted an offer to sell any car on the lot for $500.
b
Bruce has breached his contract with Adam.
c
No one has made an offer in this fact pattern.
d
No one has accepted an offer in this fact pattern.
Explanation
Adam’s lawsuit is doomed to fail because there’s no contract for him to enforce. Advertisements like the dealership’s sign do not count as offers. That means that when Adam said he’d take the nicest car on the lot for $500, he wasn’t accepting an offer from Bruce; he was making an initial offer of his own. Adam’s statement met all of the requirements for a valid offer: it was serious; it included the basic terms (i.e., which car and what price); it conveyed Adam’s intention to be bound; and Bruce had the power to accept. Instead, Bruce chose to make a counteroffer, and the parties never reached an agreement.

Question 2

Which of the following statements about acceptance is not true?
a
With a bilateral contract, one party accepts by performing an action rather than making a promise.
b
At common law, an acceptance must perfectly match the offer.
c
When a deal involves the sale of goods, the offer and acceptance can differ as long as the parties intend to be bound.
d
If both parties are merchants, any new terms in the acceptance are automatically added to the contract.
Explanation
Choice A describes a unilateral contract, not a bilateral one. The parties to a bilateral contract exchange promises. With a unilateral contract, one party makes a promise in return for the other party’s performing some action. A reward for finding a lost dog is the classic example. At common law, the mirror-image rule requires that an acceptance match the offer; any response that alters or adds a term is considered a counteroffer. The UCC, which governs the sale of goods, takes a more relaxed approach. New terms in the response do not preclude mutual assent. They are considered proposals, and if both parties are merchants, those terms are automatically incorporated into the agreement.

Mutual Assent

  1. Mutual assent means both parties have agreed to be bound to a particular contract
  2. Doctrinal requirements: offer must…
    1. Be serious
    2. Contain basic terms of the deal
      1. A term can be left open if contract provides a way to figure it out
    3. Convey intention to be bound
    4. Give offeree the power to accept
      1. A "Yes, but" is really a rejection plus counteroffer
  3. The standard is objective
    1. It doesn't matter what parties actually thought, so long as reasonable observer would have concluded they reached agreement
  4. Non-offers
    1. Preliminary negotiations are not offers
    2. Ads, etc., are invitations to make offers, not offers
  5. Mirror image rule
    1. Common law requires acceptance to match offer exactly
    2. UCC requires rough consensus, but allows offer and acceptance to differ slightly
  6. Additional terms
    1. Additional terms are automatically included in contract between merchants
    2. Not included between non-merchants
  7. Bilateral vs. unilateral contracts
    1. Bilateral contract: an exchange of promises
      1. E.g., a sale of goods (goods for money)
  8. Unilateral contract: promise exchanged for action
    1. E.g., offer of reward
    2. Taking action constitutes acceptance
  9. Acceptance can be implied

Lesson Note

No note. Click here to write note.

Click here to reset

Leave a Reply