Class 5: Contract Offers

• Class 5 focuses on contracts

Plan

• Review contract basics
• Discuss advertisements, rewards, and offers
• Cover actions that happen after an offer is made

Requirements for an Offer

• Communication of the offer
• The offer shows intent to be bound
• Essential terms outlined in the offer are sufficiently clear
• The offer invites acceptance which will create a contract
• The offer is made to a specific person or group of people

Contract Hypothetical

• Peter tells Grace, "I am eager to sell my house. I would consider $400,000 for it."
• Grace promptly answers, “I will buy your house for $400,000 cash.”
• Consider whether there is a valid offer from Peter and from Grace

Contract Hypothetical 2

• Kaylen posts an ad online: "Ferguson Farm for sale. $50,000 or best offer."
• Katie texts Kaylen, "Interested in purchasing Ferguson Farm."
• Kaylen texts back, “Let me know, I have other offers."
• Katie texts Kaylen the next day that she opened escrow with instructions to pay Kaylen $50,000 with good title for FF
• Kaylen texts back, "Sorry, Katie, I sold Ferguson Farm to Elly this morning."
• Consider if there were any valid offers

Advertisements

• Generally, advertisements are not offers
• They are considered invitations for those seeing the advertisement to make an offer
• An advertisement is an offer if it is clear, definite, and nothing is left to negotiate

Leonard v. Pepsico

• This case concerns a Pepsi commercial
• Questions raised in this case include what law to apply, who the parties are, and the remedy being sought

Procedure for Leonard V Pepsico

• Leonard demanded a jet based on a Pepsi commercial
• Pepsico sued for declaratory judgment
• Leonard then sued for specific performance
• Pepsico filed a Motion for Summary Judgement
• This case went to trial at the district court level and there was no appeal

Issues in Leonard V Pepsico

• Key questions are whether the commercial was a valid offer that Leonard could accept and if it was a reward

Key facts that mattered in the Leonard V Pepsico Case

• Music in the commercial
• Teen preening
• Landing next to a bike rack
• Authority figure losing his clothes
• Slogan: "Sure beats the bus"

Rules for Advertisements

• Advertisements are not normally intended or understood as offers
• They are requests to consider, examine, and negotiate
• Advertisements do not create the power of acceptance
• An ad might be an offer if there is language of commitment or invitation to take action without further communication (R2K 26)
• An ad does not become an offer through an order form or someone's desire to accept

Was the Commercial an Offer?

• The commercial was not an offer
• It was indefinite, leaving details in the catalog
• No specific person could accept the offer
• It was not a reward or a unilateral contract
• No objective reasonable person could have concluded that it was an offer

Bilateral vs. Unilateral Contracts

• Most contracts are bilateral
• Bilateral contracts involve acceptance through promise or performance
• If the offer does not indicate the manner of acceptance, courts will treat the contract as bilateral
• Unilateral contracts acceptance can only occur through performance

Consider

• Internal communications showing that Pepsico did not intend to offer anyone a Harrier jet would be relevant
• The commercial would create a valid offer for the sunglasses in exchange for 175 points
• Comparison to the case from Lucy

Sprint Island

• There was a commercial for Sprint Island
• The key question is whether the commercial was an offer?

Lefkowitz v. Great Minneapolis Surplus Store, Inc.

• This case deals with common law or UCC issues
• Review the parties and remedy

Advertisements in Lefkowitz v. Great Minneapolis Surplus Store, Inc. case

• Saturday 9 A.M. sharp 3 Brand New Fur Coats Worth $100, First Come First Served $1 Each
• Saturday 9 A.M. 2 Brand New Pastel Mink 3-Skin Scarfs Selling for $89.50 each for $1.00. 1 Black Lapin Stole Beautiful, worth $139.50 for $1.00 First Come First Served

Facts of Lefkowitz v. Great Minneapolis Surplus Store, Inc. case

• Lefkowitz showed up first, dollar in hand, but the store refused to sell coats based on a "house rule" that the sales were only for women
• Lefkowitz did the same for the stole the following week
• The store said no and reminded him of their house rule
• Lefkowitz sued the store alleging there was an offer he accepted

Principles and Rules of Lefkowitz v. Great Minneapolis Surplus Store, Inc. case

• If advertisements are an offer depends on whether the facts show some performance promised in positive terms in return for something requested
• An offer is created if clear, definite, and explicit, leaving nothing open for negotiation

Start with Coats

• Lefkowitz could not recover on the coats
• The value was uncertain being "worth to $100"
• An offer must be sufficiently certain to determine a bargain and give a remedy

Stole

• The offer was valid and valued at $139.50
• The ad was clear, definite, and explicit-it left nothing to negotiate
• The terms were clear regarding the first person, particular day, and exchange
• Court must determine if the house rule matters

Mesaros v. U.S.

• Review common law and UCC issues
• Identify parties and what a class action is
• Identify the remedy

Facts of Mesaros v. U.S.

• The case involves Statue of Liberty Coins
• Parties returned an order form & check, money order, or credit card form.
• Those who paid by check or money order received the coins while some of those who paid by CC did not

Principles and Rules of Mesaros v. U.S.

• Goods advertised at a certain price are generally not an offer
• It is instead an invitation to bargain
• The customer's belief that the ad or form was an offer has to be objectively reasonable

Were the Advertisements Offers?

• No, they were an "invitation to deal."
• There was no power of acceptance
• This distinguishes the case from Lefkowitz

Carlill v. Carbolic Smoke Ball

• Review the common law and UCC issues
• Identify parties and their remedy

Carlill v. Carbolic Smoke Ball facts

• £100 reward to anyone who bought and used the device, and then caught the flu
• The company deposited £1000 with a bank to show its sincerity
• Carlill bought the device, used it, and caught the flu

Was the Ad an Offer?

• Yes, the ad was an express promise
• The offer was limited to people who bought and used the ball which performed the condition
• It was a unilateral contract: the customer bought the product, used it, and then still got sick performing the contract entitling them to fulfillment of the promise ie £100

Emirates Covid Offer

• Emirates customers can travel with confidence
• The airline will cover medical expenses of up to EUR 150,000
• Quarantine costs of EUR 100 per day for 14 days are covered
• This is only if customers are diagnosed with COVID-19 during travel
• This cover is an offering of the airline, free of cost to its customers

Dateline Dare (pg. 95)

• Court held this was not an offer
• People are free to contract, and they are also free from contracts
• Imposing contractual liability for offhand remarks or grandstanding is not practical
• When considering statements, the context in which the statements were made, and the conduct of the parties it is unreasonable to say Mason assented to enter into a contract for one million dollars

Contract flowchart

• Offer can lead to acceptance
• Offer can lead to rejection
• Offer can lead to counteroffer
• Offer can lead to revocation
• Counteroffer can lead to acceptance by offeror
• Counteroffer can result in rejection
• Counteroffer can lead to offeror makes new counteroffer

Bilateral: promise for a promise or performance

• Most contracts are bilateral
• If the offer does not indicate the manner of acceptance, courts will treat the contract as bilateral

Unilateral: promise for performance

• In most instances, it does not matter that the offeror does not know that a party has started performance

Ways the power of acceptance may be terminated (R. § 36)

• Rejection by the offeree
• Counteroffer by the offeree
• Lapse of time
• Revocation by the offeror
• Death or incapacity of the offeror or offeree
• Non-occurrence of any conditions accepted under the terms of the offer