Chapter 2: Has an Offer Been Made? - PDF

I. Overview: “Meeting of the Minds” and the Distinction Between Factors and Elements 1. Holmes’s Critique of “Meeting of the Minds” * Oliver Wendell Holmes, Jr.: “There never was a more unfortunate expression used than ‘meeting of the minds.’” * Emphasizes the objective test (rather than s...

I. Overview: “Meeting of the Minds” and the Distinction Between Factors and Elements 1. Holmes’s Critique of “Meeting of the Minds” * Oliver Wendell Holmes, Jr.: “There never was a more unfortunate expression used than ‘meeting of the minds.’” * Emphasizes the objective test (rather than subjective mental agreement) in contract formation. 2. Elements vs. Factors * Elements: * Strict requirements that must all be satisfied (e.g., elements of battery or burglary). * If an element is missing, the cause of action (or contract) fails. * Factors: * Considerations that bear on whether a legal standard is met. * Courts weigh factors; not all must be present to reach a conclusion. * In Contracts: * Many key questions—especially about offers—turn on a list of factors, not rigid elements. * Contract law’s subtlety: No mechanical box-checking; rather, courts look at context and reasonableness. 3. Central Question for Offers * “Would another person be justified in believing they could form a contract by assenting to the proposition?” * Alternatively: “If I were the offeree, would I reasonably think I could form a contract by responding ‘yes’?” * Because “reasonable minds may differ,” courts impose structure through precedent and recognized factors. ________________ II. The Basic Offer Test: “Would a Reasonable Offeree Think They Could Conclude the Deal by Saying ‘Yes’?” 1. Why Courts Look for Structure * Predictability: People need to know how to plan business affairs. * Rule of Law: Judges follow precedent; they do not just invent “whimsical” definitions of an offer. 2. Factors that Courts Use to Determine If a Communication Is an Offer * There is no single, fixed list; however, frequent considerations include: 1. Language Used (e.g., “I offer,” “I am asking,” “I want,” “first come, first served”) 2. Definiteness / Specificity (are key terms spelled out, or are major details missing?) 3. Context and Custom (industry norms, prior dealings, standard practices) 4. Multiple Acceptance Problem (is there a risk that more than one offeree could simultaneously accept, exceeding the seller’s supply?) 5. Surrounding Circumstances (who initiated the deal, is it a “formal” or “informal” situation, etc.?) 3. Not Everyone Uses “Elements” and “Factors” Precisely * Some opinions or memos might use the term “factor” to mean a required element. * Lawyers must read carefully to see if a purported “factor” is really a requirement or just a consideration. 4. Uncertainty in Close Cases * Even after reading many cases, lawyers cannot predict with 100% certainty in borderline scenarios. * Pennzoil v. Texaco cautionary tale: Even top lawyers can misjudge whether a court/jury will find an offer and acceptance. ________________ III. Case Illustrations: Defining an Offer A. Lonergan v. Scolnick (Cal. App. 1954) 1. Facts * Seller (Scolnick) places an advertisement for land. * Plaintiff (Lonergan) responds, gets more details in a form letter. * Scolnick writes: “If you are really interested, you will have to decide fast,” then sells to someone else. * Lonergan sues for specific performance, claiming there was an offer and acceptance. 2. Holding & Reasoning * No offer had been made to Lonergan. The communication was a preliminary step (invitation to make an offer). * Key points: * The ad was directed to the public (“need cash, will sacrifice”). * Seller’s letter was a “form letter”, clarifying land info, not a binding proposition. * Mention of “I have another buyer” indicated no intent for a binding offer. * Reasonable person would understand further assent by Scolnick was needed before a deal was final. 3. Takeaway * General ads + form letters = mere invitations for offers. * The multiple-acceptance problem: Seller’s language suggested he might accept the first suitable buyer, not a single offeree. B. Lefkowitz v. Great Minneapolis Surplus Store (Minn. 1957) 1. Facts * Newspaper ad: “Saturday 9 AM, 3 brand new fur coats, first come first served, $1 each.” * Plaintiff arrives first with $1 but store refuses (relying on a “house rule” that sale is for women only). * Plaintiff sues for breach of contract. 2. Holding & Reasoning * Ad was an offer: Clear, definite, explicit, leaving nothing open for negotiation (“first come, first served”). * Plaintiff accepted by arriving first and offering $1. * Store could not impose new restrictions after acceptance (“house rule” disallowed). 3. Comparison to Lonergan * Specific & Limited quantity; “first come, first served” avoids the multiple-acceptance problem. * Language was definite (price, quantity, who could accept). C. Courteen Seed Co. v. Abraham (Or. 1929) 1. Facts * Defendant wrote: “I am asking 23 cents per pound for my seed. I have an offer at 22 ¾...” * Plaintiff says, “I accept your offer,” and sues when defendant refuses to deliver. 2. Holding & Reasoning * No offer: * Language: “I am asking” is indefinite; no firm promise to sell. * “Asking price” often signals an invitation to deal, not a binding proposition. * Court heavily emphasizes word choice: “asking” vs. “offer.” 3. Important Note * The same phrase in a different context might be an offer; but here, the indefinite usage + references to other buyers = no offer. D. Southworth v. Oliver (Or. 1978) 1. Facts * Oliver decides to sell ranch land. Tells neighbor (Southworth) he will send a letter with pricing. * Sends letter to 4 neighbors with price and terms: “Selling… at assessed market value of $324,419, terms available, 29% down…” * Southworth promptly replies: “I accept your offer.” Oliver then says: “It wasn’t an offer; only information.” 2. Holding & Reasoning * Letter was an offer. * Surrounding circumstances: Oliver specifically told Southworth he’d send a price for the property they’d discussed. * The letter had a definite price and terms; no disclaimers like “asking” or “for information only.” * A “reasonable person in Southworth’s shoes” would think an offer had been made. 3. Contrast with Courteen Seed * Similar words (“selling” vs. “asking”), yet the context, detail, and prior discussions made the difference. * Emphasizes the objective test and surrounding circumstances. E. Continental Laboratories v. Scott Paper Co. (S.D. Iowa 1990) 1. Facts * Parties had months of negotiations over a complex supply/distribution agreement. * Exchanged numerous contract drafts; kept marking them “Draft.” * Plaintiff claimed an oral contract formed in a phone call; defendant said it never intended to be bound without a final writing. 2. Holding & Reasoning * No contract because Scott intended to be bound only upon a final, signed writing. * Court applies seven-factor test (type of deal, complexity, presence of many details, large sums, prior practice of formal writings, etc.). * Merely negotiating or even reaching partial “agreements in principle” is not enough if parties want a written final contract. 3. Key Factors in Big Deals * Complexity and magnitude make it less likely that a partial phone call constitutes acceptance. * The repeated drafting and “DRAFT” stamps evidenced no final intent. F. Metro-Goldwyn-Mayer v. Scheider (N.Y. Sup. Ct. 1972) 1. Facts * Scheider agrees verbally to star in a pilot + potential TV series. Payment terms are set. * No final written contract. Some details (start date) left open. * After the pilot is shot, network picks up the series. Scheider refuses, arguing no final agreement. 2. Holding * There was a binding agreement for Scheider’s services, even though some terms remained open. * Industry custom filled in certain missing terms (start date if the show airs in fall, etc.). * Once the essential terms were agreed upon and partial performance (pilot filming) occurred, the law fills in the gaps by referencing custom. 3. Lesson: * Industry usage and custom can supply omitted details if the essential core is set. ________________ IV. Problems from the Text 1. Problem 2-1 (Scarlett & Rhett) * “If you submit a written offer… I will accept your offer.” * Rhett makes the offer at $275,000. Scarlett refuses. * Issue: Did Scarlett’s statement constitute an operative offer that Rhett only had to “accept?” Or was she just inviting an offer from Rhett? * Compare to R2d § 24 and UNIDROIT art. 2.1.2. 2. Problem 2-2 (Auctions) * U.C.C. § 2-328(3) clarifies “with reserve” vs. “without reserve”: * With reserve: The seller (owner of the goods) can withdraw goods at any time before the final gavel. The bidder is the offeror; the auctioneer (seller’s agent) can accept or reject. * Without reserve: The seller is the offeror; once the bidding starts, the seller cannot withdraw unless no bids are made within a reasonable time. 3. Problem 2-3 (Landlord’s “It never failed here before”) * Tenant sues after water fails. * Court says it was more of a prediction or statement of opinion, not an offer or contract commitment. ________________ V. Synthesizing the Main Factors for Determining an “Offer” 1. Language: Does it manifest a willingness to be bound right now? (e.g., “I offer,” “first come, first served,” or disclaimers like “I am asking…”). 2. Specificity & Detail: Are essential terms (price, quantity, etc.) spelled out or left vague? 3. Context & Custom: Industry norms or trade usage can fill gaps or explain if parties typically finalize later. 4. Multiple Acceptance Problem: If a finite supply is offered to many, is it actually an offer or just a solicitation of offers? 5. Parties’ Conduct / Past Dealings: Did one side rely, perform part of the deal, or disclaim intention to be bound unless in writing? 6. Magnitude / Complexity: The bigger or more complex a deal, the more likely parties want a formal contract before being bound. ________________ VI. Practice Tips and Broader Observations 1. Drafting * Avoid ambiguous language (“I’m asking,” “I’d like,” “we might sell…”). Use unmistakable words if you truly intend to be bound. * Or, conversely, if you do not want to be bound yet, include a statement: “This is for discussion only; no contract until executed in writing.” 2. When Negotiations Are Complex * Written “no-obligation-until-formally-executed” clauses can prevent misunderstandings. * Continental Labs exemplifies the benefit of a clear “we will not be bound unless/until a final written agreement is signed” approach. 3. Industry Norms * Sometimes oral understandings are enforceable (Scheider, typical in Hollywood). * In more traditional business contexts (Continental Labs), courts infer the need for an executed writing. 4. Client Counseling * Clarify the difference between preliminary negotiations and binding offers. * In uncertain contexts, advise clients to use disclaimers or clearly labeled “Term Sheets,” “Letters of Intent,” or “MOU” (Memorandum of Understanding). ________________ VII. Conclusion * Key Theme: Whether a communication is an offer hinges on whether a reasonable offeree would believe that saying “yes” immediately forms a contract. * No Rigid Checklist: Courts weigh many factors (language, detail, custom, context, etc.). * Practical Guidance: Where possible, memorialize intentions clearly (e.g., disclaimers or explicit language) to minimize future disputes.