Transcript Chapter 11
P A R T
3
Contracts
Introduction to Contracts
The Agreement: Offer
The Agreement: Acceptance
Consideration
Reality of Consent
McGraw-Hill/Irwin Business Law, 13/e
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
P A R T
3
Contracts
Capacity to Contract
Illegality
Writing
Rights of Third Parties
Performance & Remedies
McGraw-Hill/Irwin Business Law, 13/e
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
C H A P T E R
11
The Agreement: Acceptance
“Make your bargain before beginning to plow.”
Arab proverb
Learning Objectives
Basics
of Acceptance
Intent
Communication
Special Problems
11 - 5
Requirements for Acceptance
Acceptance must be by clear expression by
offeree of intent to be bound by terms of
offer and communicated to offeror
Only offeree may accept offer
If offer calls for performance, then performance
is acceptance
Offeror may specify manner of accepting offer
11 - 6
Example: “notify of your acceptance in writing”
Specht v. Netscape
Communications Corp.
Facts & Procedural History:
Plaintiffs offered or downloaded Netscape
software
Netscape included a licensing agreement in its
“SmartDownload” process
Plaintiffs sued Netscape, alleging that download
process transmitted private information
Netscape moved to compel arbitration per their
online licensing agreement
8-7
Specht v. Netscape
Communications Corp.
Issue: Under what circumstances does the act of
downloading create a contract?
Reasoning and Holding:
8-8
Promises become binding when there is a meeting
of the minds and consideration is exchanged
Netscape’s “browse-wrap” license merely invited
plaintiffs to agree to the license
Plaintiffs did not assent to the license, thus are not
subject to arbitration clause in the contract
Requirements for Acceptance
Silence may be acceptance
General rule is that an offeree’s silence, without
more, is not an acceptance
Circumstances may impose a duty on offeree to
reject the offer affirmatively or be bound
Includes cases in which offeree’s silence
objectively indicates an intent to accept
11 - 9
Example: McGurn v. Bell Microproducts, Inc.
McGurn v. Bell Microproducts
Facts:
11 - 10
Bell extended offer of employment to plaintiff
Plaintiff altered written offer to include severance
package, signed and returned
Bell silent regarding alteration and plaintiff
worked for more than a year
Bell fired plaintiff and refused to pay severance
Plaintiff won summary judgment for breach of
contract
McGurn v. Bell Microproducts
Reasoning & Ruling:
Silence in response to an offer does not constitute
acceptance unless offeree takes benefit of offered
services with reasonable opportunity to reject
them and reason to know that they were offered
with the expectation of compensation
11 - 11
Restatement (Second) of Contracts §69
Whether Bell accepted plaintiff’s alteration of the
contract by its silence and conduct is a matter of
fact, thus a matter for the jury; case remanded
Mirror Image Rule
Traditional contract law rule required
acceptance to be the mirror image of the offer
Currently, judges hold that only material
variances between an offer and an alleged
acceptance result in an implied rejection of
the offer
11 - 12
Mirror Image Rule & The UCC
UCC 2–207 allows contract formation even
when there is some variance between terms
of offer and terms of the acceptance
A definite and timely expression of acceptance
creates a contract, even if it includes terms that
are different from those stated in the offer or
even if it states additional terms that the offer
did not address [2–207(1)]
Example: Standard Bent Glass Corporation v.
Glassrobots Oy
11 - 13
11 - 14
Communicating Acceptance
With instantaneous forms of communication,
knowing when acceptance occurs is easy
Complicated by non-instantanesous forms (e.g., mail)
Mailbox rule makes acceptance effective upon
dispatch when the offeree used a manner of
communication expressly or impliedly authorized
(invited) by the offeror
Courts today allow communication by any reasonable
means of communication
11 - 15
See Ellefson v. Megadeth, Inc.
Effect of Acceptance
OFFER
+ ACCEPTANCE
AGREEMENT
11 - 16
Test Your Knowledge
True=A, False = B
Silence may never indicate acceptance
Offeror may specify manner of acceptance
Only material variances between an offer and
8 - 17
an alleged acceptance result in an implied
rejection of the offer
UCC 2–207 does not allow contract formation
if there is some variance between terms of
offer and terms of the acceptance
Test Your Knowledge
Multiple Choice
The effect of offer plus acceptance is:
8 - 18
(a)
(b)
(c)
(d)
negligible
an agreement
the mirror image rule
none of the above
Thought Question
Do you read shrink-wrap and browsewrap license agreements?
8 - 19