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George Mason School of Law
Contracts I
E. Offers
F.H. Buckley
[email protected]
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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 today, 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.
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The Five W’s
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Who
What
Where
When
Why
Basic Questions of Formation
 Who are the parties
 What happens to non-parties?
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What
Where
When
Why
Basic Questions of Formation
 Who are the parties
 What did they agree to?
 What are the terms and conditions
 Where
 When
 Why
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Basic Questions of Formation
 Who are the parties
 What did they agree to?
 Where was the contract formed?
 Under which law
 When
 Why
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Basic Questions of Formation
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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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Basic Questions of Formation
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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
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
12
What counts as a contract?
 The need for a “meeting of the
minds”
 Quinn J. in Williams v. Walker-Thomas at
53
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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?
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”
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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”
16
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”
18
Lucy v. Zehmer at p. 14
19
Lucy v. Zehmer at p. 13
20
Lucy v. Zehmer
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 handcarved mantels attest the antiquity of a house
well worth the restoration it has not received.
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And here it is!
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Why does the drinking matter?
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Why does the drinking matter?
 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
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Why does the drinking matter?
 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
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Why does the drinking matter?
 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
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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?
 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
28
Why does the drinking matter?
 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
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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
 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?
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Lucy v. Zehmer
 What if Zehmer didn’t really intend
to sell?
 An Objective standard
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Lucy v. Zehmer
 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.
33
Lucy v. Zehmer
 What remedy is sought and why did
that matter?
 Recall Mansfield in Moses v. Macferlan
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Lucy v. Zehmer
 Even if a contract was made on the
Saturday, why couldn’t Zehmer
retract on the Sunday?
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Lucy v. Zehmer
 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?
36
Leonard v. Pepsico at 18
37
Leonard v. Pepsico at 17
 Was this really an offer to sell a jet
for $700,000?
38
Leonard v. Pepsico at 17
 “No objective person could
reasonably have concluded that the
commercial actually offered
consumers a Harrier Jet.”
39
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.
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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
 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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Formation as a Coordination Game
 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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Formation as a Coordination Game
 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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Formation as a Coordination Game
 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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Formation as a Coordination Game
 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?
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What side of the road to drive on?
Coordination Games
Player 2
Player 1
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Right
Left
Right
Happy, Happy
Death, Death
Left
Death, Death
Joy, Joy
Formation as a coordination game
Player 2
Player 1
50
Promise
No Promise
Promise
10, 10
-10, 0
No Promise
0, -10
0, 0
Formation as a coordination game
Assume both parties want to agree
Player 2
Player 1
Thinks there’s a Doesn’t think a
Promise
Promise
Thinks there’s a 10, 10
Promise
Doesn’t think a
Promise
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0, -10
-10, 0
0, 0
The interesting case: where the
parties disagree about the agreement
Player 2
Player 1
Thinks there’s a Doesn’t think a
Promise
Promise
Thinks there’s a 10, 10
Promise
-10, 0
0, -10
10, 10
Doesn’t think a
Promise
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Solving the coordination problem
 Do the rules of offer and acceptance
provide the parties with suitable focal
points?
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Bargaining errors as an avoidable
accident
What we got here
is a failure to
communicate
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Two kinds of Promissory Accidents
Type I: We believe in a falsehood
Type II: We don’t believe in that
which is true
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Two kinds of Promissory Accidents
Type I: We believe in a falsehood
 We think we have a contract, only we
don’t
A false positive: Leonard v. Pepsico
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Two kinds of Promissory Accidents
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
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How to reduce promissory
accidents? Offer and Acceptance
 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.
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Offers
 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.
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Acceptance
 Restatement § 50. Acceptance of an
offer is the manifestation of assent to
the terms thereof…
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How to reduce promissory
accidents?
 What if we could identify the party
who could at least cost eliminate the
accident?
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How to reduce promissory
accidents?
 What if we could identify the party
who could at least cost eliminate the
accident?
 Who was this in Bailey?
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How to reduce promissory
accidents?
 What if we could identify the party
who could at least cost eliminate the
accident?
 And in Zehmer?
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The source of promissory accidents
1.
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What counts as an offer?
The source of promissory accidents
1. What counts as an offer?
2. What counts as an acceptance?
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The source of promissory accidents
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?)
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What counts as an offer?
Offers vs. “Invitations to treat”
Offers vs. “mere puffs”
Offers to the world: unilateral
contracts
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Offers to the Public
Courteen Seed v. Abraham 207
 What did the flyer say?
 Could that have been accepted as an
offer?
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Offers to the Public
Courteen Seed v. Abraham 207
 What did the flyer say?
 Plaintiff’s wire on Oct. 8
 Could that have been accepted as an
offer?
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Offers to the Public
Courteen Seed v. Abraham 207
 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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Offers to the Public
Courteen Seed v. Abraham 207
 Offer v. Invitation to treat
 Why does the distinction make sense?
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Offers to the Public
Fairmont v. Cruden-Martin 210
 Can you distinguish this case?
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Offers to the Public
 Can you distinguish this case?
 “for immediate acceptance”?
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Offers to the Public
 Can you distinguish this case?
 “for immediate acceptance”?
 Was anything left out?
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Offers to the Public
Audio Visual v. Sharp at 212
 Why might a presumptive rule that
ads or flyers are not offers make
sense?
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Offers to the Public
Audio Visual v. Sharp at 212
 Why might a presumptive rule that
ads or flyers are not offers make
sense?
 Cf. Newspaper Ad on 213
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Lefkowitz 213
Offer or Invitation to Treat?
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Lefkowitz
 Could the offeror revoke his offer?
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Lefkowitz
 Could the offeror revoke his offer?
 Restatement 36(1) An offeree’s power of
acceptance may be terminated by:
(c) revocation by the offeror
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Lefkowitz
 Did the offeror revoke in time?
 Could the offeror revoke through a private
“house rule”?
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Lefkowitz
 Suppose that the Π had written to the
Δ and said “I accept”?
 Could it be accepted in that way?
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Lefkowitz
 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.
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Lefkowitz
 Suppose that the Π had written to the
Δ and said “I accept”?
 Corbin at 206: unilateral vs bilateral
contracts—what is the difference?
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Lefkowitz
 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
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Lefkowitz
 Suppose that the Π had written to the
Δ and said “I accept”?
 Was Lefkowitz obliged to buy the
coat?
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Lefkowitz
 Suppose that the Π had written to the
Δ and said “I accept”?
 How is this different from the Christy
example on p. 213?
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Lefkowitz
 Is the distinction that the store
insisted on the offeree showing up at
the store?
 And why did that matter to the store?
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Why is it so hard to get from one
store to another at Pentagon Mall?
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Pentagon City Mall
Offers to the Public
Carlill v. Carbolic Smoke Ball
From whom did the Π
buy the smoke-ball?
89
Carlill v. Carbolic Smoke Ball
at 224
Should this have been seen as an
Invitation to Treat?
How do you tell?
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Carlill v. Carbolic Smoke Ball
at 224
What’s a “mere puff”
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Mere puffs: Simple
commendations do not oblige one
“simplex
commendatio
non obligat”
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Carlill v. Carbolic Smoke Ball
at 224
What’s does vagueness
have to do with it?
And how did the court
deal with the vagueness
of the term?
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Offers to the Public
Carlill v. Carbolic Smoke Ball
How did the Π accept the offer?
94
Carlill v. Carbolic Smoke Ball
Does the offeree have to
communicate acceptance
in a unilateral contract?
And did Carbolic have reason
to waive notice?
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Carlill v. Carbolic Smoke Ball
at 224
Can you think of a reason
why the Δ might WANT
to assume liability?
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Self-service stores
 Barker v. Allied at 215
 How would you analyze this?
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Cole v. Sandel at 215
 What did the online form amount to?
 What is an “agreement to agree”
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The Law of Offers serves
coordination and efficiency goals
 Must seem objectively like real offers




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Secret reservations
Invitations to treat
Certainty of terms
Cannot be mere puffs