Acceptance 2

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Acceptance 2

Contracts

February 18, 2016

SHIPMENT OF GOODS AS ACCEPTANCECORINTHIAN PHARMACEUTICAL SYSTEMS, INC. V. LEDERLE LABORATORIES

(p. 170)

Note 1 (p.174).

What function do each of the listed events in the transaction serve? How are they to be characterized in terms of contract formation?

Lederle’s

letter (price list) to customers is the quotation, and Corinthian’s telephone order is the offer.

What about

Telgo’s

assignment of a tracking number?

The court rejects Corinthian’s position that this is the acceptance, explaining that it is instead a simple ministerial act, in the nature of an acknowledgment of receipt of a purchase order.

Acceptance

Where then is the acceptance?

under UCC § 2-206(1)(b) shipment of goods (both conforming and non-conforming)in response to an order for prompt shipment constitutes acceptance

If

non-conforming

goods are shipped, then the shipment does not constitute acceptance if the seller

notifies

the buyer the non-conforming goods are being sent as an

accommodation

.

Note 2 (p.174).

Why were the goods nonconforming?

Because the quantity was 5% (50 vials) of what was ordered. (See UCC § 2-106(2) for definition of conforming.)

And crucially, the 50 vials were accompanied by a letter stating that the remainder of the order would be billed at the higher price.

The vials and letter thus constitute an accommodation and counteroffer, which, as the letter made clear, Corinthian was free to accept or reject.

Note 3 (p.175).

Doll & Smith

Why should preparation for shipment not count as acceptance?

THE SIGNIFICANCE OF CONTRACT FORMATION (p. 176)

Barker

demonstrates the significance of a contract for recovery for personal injury

The plaintiff was blinded when a shard from an exploding bottle of Dr. Pepper hit his eye

the two year statute of limitations on Barker’s negligence claim had run out

sought to come within the five year statute applicable to the breach of implied warranty of merchantability under UCC § 2-314

But was there a “contract for sale” as required by that provision?

SECTION 4. TERMINATION OF THE POWER OF ACCEPTANCE (p. 177)

(A) LAPSE OF AN OFFER (p. 178)

tardy acceptance?

a counter-offer

some action on the part of the original offeror is necessary to signify an acceptance

Lapse -- Problem (p.179).

Yaros v. U Penn

Should the university counsel's offer of settlement be regarded as a face-to-face conversation so that the offer lapsed when it was not immediately accepted?

Should the offer be deemed to have lapsed following the two-minute attorney-client consultation, as university counsel maintained?

Why did the client decide she wanted to settle during the defendant's closing argument?

(B) REVOCATION OF OFFERS (p. 179)

In the Hoover Motor Express case, the court held that the words, “We might not want to go through with it.” were enough to revoke the offer.

What explains the difference in the legal significance that attaches to the similar phrases? I.e., hard to make offer, easy to revoke.

Simply that at the formation stage, courts lean away from finding a contract.

Rewards – Shuey v. US

A

Zouve fighting in the Crimean War

Surratt was found out while serving as a

zouave

in the Vatican military service.

LIMITING THE POWER OF REVOCATION: OPTION CONTRACTS DICKINSON V. DODDS (p.181).

On Wednesday,

Dodds

offered to sell his property to Dickinson for £800, “offer to be left over until Friday, 9 o’clock a.m.”

On Thursday, Dickinson learned from his agent Berry that

Dodds

had been offering his land for sale to Allen.

Dickinson then chased around town, leaving a signed acceptance with Dodd’s mother-in-law.

Having made up several copies of the acceptance, Dickinson and Berry delivered two more acceptances to

Dodds

who was boarding a train.

Dodds

refused to take the acceptances, informing Dickinson that he was too late, and the court agreed: There was no consideration given for the undertaking or promise ... to keep the property unsold until 9 o’clock on Friday.”

Dodds

Dodds

made

two promises.

first -- an offer to sell the property to Dickinson in exchange for £800.

second -- to leave the offer open until Friday.

No consideration was sought or received for the second promise

it was a mere “

nudum

pactum

” and did not operate to keep the offer open.

R2d 42 & 43

§

42. REVOCATION BY COMMUNICATION FROM OFFEROR RECEIVED BY OFFEREE

An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract

.

§43. INDIRECT COMMUNICATION OF REVOCATION

An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect.

“FIRM OFFERS” UNDER ARTICLE 2 (p. 184)

UCC § 2-205 provides the second mechanism for creating an option contract.

Why are only merchants, as opposed to offerors in general, able to make firm offers?

Comment 2 sets out the three categories of activity where being a merchant (and a merchant under which definition) matters:

general business practices,

the implied warranty of merchantability, and

duties of good faith and fair dealing in the trade.

PROMISES SEEKING PERFORMANCE AND RESTATEMENT § 45 (p. 186)

Brooklyn Bridge Hypo

A says to B: I will pay you $100 if you walk across the Brooklyn Bridge. B walks half-way. A says “I withdraw the offer.”

two competing solutions

(1) A is free to revoke at any time before B completes acceptance by getting to the other end of the bridge (the traditional answer).

(2) A is bound by an option contract based on an implied subsidiary promise not to revoke until B has had a chance to accept (an answer that would not bind B to finish crossing).

Brooklyn bridge 3d solution

If it is possible to interpret A’s offer as one seeking a promise rather than performance, there is a third solution:

(3) A cannot revoke because A’s offer properly interpreted called for a promise, which B gave by conduct in starting to cross the bridge.

This answer would bind B to finish performance by crossing the bridge.

REVOCABILITY AND RELIANCE (p. 187)

“You just sat there thinking that this piece of hardware had 400,000 components, all of them built by the lowest bidder.”

--

David Scott, the Apollo 15 astronaut, of blast-off in 1978

Question

Whether the subcontractor can revoke its bid after the contractor has been awarded the contract but before the contractor has accepted the subcontractor’s bid.

Learned Hand – Yes, in

James Baird

, arguing that “there is no room in such a situation for the doctrine of 'promissory estoppel.’”

Traynor

in

Drennan

reaches a different conclusion (note his sly “cf.” citation to James Baird).

DRENNAN V. STAR PAVING CO. (p.188).

On the afternoon of July 28, Star Paving (

Hoon

) phoned its $7,131.60 bid to

Drennan

(Johnson).

Later the same day

Drennan

prepared its bid using Star’s bid, the lowest.

Still later the same day the School District accepted

Drennan’s

bid.

On the morning of the next day,

Drennan

stopped by Star’s office and met Oppenheimer, who explained the mistake: $15,000 not $7,131.60.

DRENNAN V. STAR PAVING CO. (p.188).

The court holds that Star was bound by an option contract and could not revoke its bid or claim relief for mistake.

DRENNAN V. STAR PAVING CO. (p.188).

I. Star’s attempted revocation was not effective because:

A. Star’s offer was accepted by

Drennan

when it put in its bid, resulting in a bilateral contract; or

B. Star’s offer contained an “implied subsidiary promise” not to revoke, which resulted in an option contract because

Drennan’s

use of Star’s bid

(1) amounted to consideration; or

(2) resulted in an estoppel.

II. Star was not relieved by its mistake.

(C) DEATH OF AN OFFEROR (p. 193)

Problem (p.193).

Was Aunt Mary seeking performance or a promise from her nephew?

(D) THE CONSEQUENCES OF REJECTION (p. 193)

Why should a rejection bar the offeree from subsequently accepting the offer, especially when the offeror has not relied on the rejection?

Is the rejection of an irrevocable offer by the offeree binding, or has the offeree secured a period in which he may reject and then change his mind?

Should the rejection of a firm offer under the Code be treated differently?

Please turn to p. 199

Megadeth problem p. 199

Should the court grant the defendants' motion to enforce the settlement?

Or was there no settlement because the plaintiff had not received a signed signature page by 5 p.m. on the appointed day, as required under the terms of the settlement offer?

Megadeth -- resolution

The court held that because

Ellefson’s

late fax did not comply with the terms of the offer, it was not a valid acceptance.

because it indicated his willingness to be bound by the offer, it operated as a counteroffer, which defendants could then accept or not.

The court then found that the mailing of the complete contract by the defendants back to

Ellefson

on May 20 constituted an acceptance of his counter-offer.

Ellefson

argued further that mailing by U.S. post was not an appropriate method of response since most of the other exchanges had been by email or fax.

The court rejected this, and granted the defendants motion to enforce the settlement agreement.