Contracts: Stage 3of Agreement Process: Has the Offer been Accepted?
- Offer can (but usually does not) control the manner of acceptance
- Usually offers can be accepted by a promise, by performance, or by starting performance. Watch out for language in the offer controlling how the offeree will accept.
- Start of performance is acceptance of an offer to enter into a bilateral contract, but not an offer to enter into a unilateral contract (when only full performance will do).
- House offers painter $10,000 to paint his house. Painter does not respond verbally, but starts painting the house. Has painter accepted the offer so that he is now bound to finish the job? Yes. Like almost every bar question, this involves a bilateral contract because the offer didn’t have “only by” language. With a bilateral contract, starting performance carries with it an implied promise to finish the job.
- House’s offer states that Painter can accept only by painting the house. If painter starts painting the house, has he accepted the offer so that he is bound to finish the job? No. An offer to enter into a unilateral contract can be accepted ONLY by completing performance.
- Same facts. Can House still revoke his offer? Not on MBE. House chose this form of offer (to enter a unilateral contract), so he is stuck with the consequences. In NY, the offeror can revoke all the way up until performance is complete.
- Improper performance usually operates as acceptance
- Improper performance is both acceptance of an offer and a simultaneous breach of contract.
- Article 2 exception: If Seller tells Buyer that it is sending goods as an accommodation, there is then no acceptance, and therefore no breach. It is a counteroffer that Buyer can either accept or reject.
- Silence is not acceptance
- When is acceptance effective?
- Mailbox Rule: acceptance is effective when mailed.
- 4 Exceptions to Mailbox Rule:
- Does not apply if offeror provides otherwise.
- Capt. Kirk offers to sell the Starship Enterprise to the Klingons for $5 million. His offer provides, “Your acceptance must be received by Jan. 9.” On Jan. 9, the Klingons mail their acceptance, which Capt. Kirk receives on January 11. Capt. Kirk is not bound. The offeror can override the mailbox rule.
- Does not apply to an irrevocable offer (offeree does not need protection of Mailbox Rule).
- Mailbox rule does not apply to option contract.
- Acceptance, then rejection: Mailbox Rule applies unless rejection gets there first and the offeror relies on the rejection [very limited exception].
- Slash gets an invitation from the Dixie Chicks to join the group. Slash mails an acceptance on June 8. He changes his mind and faxes a rejection on June 9. The rejection will get there first. However, the mailbox rule will still apply unless the offeror relied on the rejection.
- Rejection, then acceptance: whichever arrives first is effective.
- An offeree who mails rejection doesn’t need the mailbox rule. Whichever one gets there first is effective. It’s a race.