Offer and Acceptance

MBEMax wiki article — paired with the Contracts question set on mbemax.com.

One-line summary

A contract forms when a valid offer (showing present intent and definite terms) is accepted by the offeree before it is revoked, rejected, or lapses.

Mnemonic

C-O-V-R-L — Communicated, Objectively manifesting willingness to contract on Valid (reasonably certain) terms, open for acceptance until Revoked, rejected, or Lapsed.

Picture the word "COVRL" as a little receiving tray: an offer must check each box before it sits there waiting.

Offer — the rule

An offer is a manifestation of willingness to enter into a bargain so made as to justify the offeree in understanding that his assent will conclude it. Objective theory governs — subjective secret intent is irrelevant.

Elements:

• Present intent — not a joke (Lucy v. Zehmer applies objectively).
• Definite and certain terms — quantity is indispensable for sale of goods (UCC); price is often implied at a reasonable rate; subject matter, parties, and time for performance must be clear or ascertainable.
• Communicated to the offeree.

Advertisements are usually invitations to deal, not offers, unless specific and limited (Lefkowitz v. Great Minneapolis Surplus Store).

Termination of offers

1. Revocation — offeror may revoke before acceptance unless the offer is irrevocable. Effective on receipt. A direct or indirect reliable communication (e.g., sale of the unique subject matter to another with offeree's knowledge — Dickinson v. Dodds) terminates power.
2. Rejection / counteroffer — effective on receipt. Common-law mirror image: any different terms = counteroffer + rejection. UCC § 2-207 softens.
3. Lapse — after stated time or a reasonable time.
4. Death or incapacity — terminates the offer (not the contract) even without notice; different for options (options survive).
5. Illegality or destruction of subject matter.

Irrevocable offers (exceptions)

• Option contract — consideration for the offeror's promise to keep open.
• Firm offer (UCC § 2-205) — merchant, signed writing, assurance to hold open; irrevocable up to 3 months (even without consideration).
• Unilateral-contract partial performance (Restatement § 45) — once offeree begins performance, option-like irrevocability arises; mere preparation is not beginning.
• Promissory estoppel reliance — reliance that is reasonable and foreseeable, injustice only by enforcement.

Acceptance — the rule

Acceptance is a manifestation of assent to the terms of the offer, made by the offeree in a manner invited or required.

• Mirror image (common law). Additional or different terms = counteroffer.
• UCC § 2-207 ("battle of the forms"). Between merchants, additional terms become part of the contract unless (i) offer limits acceptance to its terms, (ii) terms materially alter, or (iii) timely objection. Different terms — knockout rule in many jurisdictions; drop both, fill with UCC defaults.
• Silence. Not acceptance unless prior course of dealing or offeree takes benefit knowing it is offered.
• Unilateral vs. bilateral. Unilateral — performance is acceptance; partial performance triggers option. Bilateral — promise is acceptance, and acceptance by performance requires notice within reasonable time.
• Mailbox rule. Acceptance effective on dispatch if properly addressed and by reasonable means. Exceptions: option contracts (effective on receipt), stated rule, rejection dispatched first (whichever arrives first wins; reliance governs).

NCBE loves to test

• Advertisement ambiguity. "First come, first served, $1 mink stole" is an offer (Lefkowitz). Generic ad copy is not.
• Firm offers without consideration. Only merchants; only signed writing; only up to 3 months.
• Battle-of-the-forms nuances. Material alteration examples: warranty disclaimers, arbitration clauses, unreasonable remedy limits.
• Mailbox rule twists. Offeree dispatches rejection then acceptance — whichever arrives first controls. Acceptance by unreasonable means is effective on receipt.
• Revocation cross-purposes. An offeror who hints to the offeree that they plan to sell the subject to another effectively revokes upon offeree's awareness (Dickinson v. Dodds).

Fast hypos

Hypo 1. D offers to sell her car to P for $5,000, "offer open one week." Day 3, D sells car to T. Day 4, P accepts. No contract — sale to T (communicated to P by reliable source) revokes offer.

Hypo 2. Merchant M signs a letter: "We will supply you 500 widgets at $10 each; offer open 60 days." Day 40, M tries to revoke. Firm offer under UCC § 2-205; cannot revoke within 3 months / stated 60 days.

Hypo 3. Offer for sale of goods says "ship by May 1." Seller ships non-conforming goods by May 1. Accommodation shipment? Seller's cover letter saying "as accommodation" = counteroffer. Silent shipment of non-conforming goods = acceptance + breach.

Hypo 4. Offer for reward for finding a lost dog. P finds dog without knowing about reward. Offer requires knowledge of the offer at time of performance (majority). No contract under traditional unilateral analysis.

Case anchors

• Lucy v. Zehmer, 84 S.E.2d 516 (Va. 1954) — objective theory.
• Lefkowitz v. Great Minneapolis Surplus Store, 86 N.W.2d 689 (Minn. 1957) — ad as offer when limited and specific.
• Dickinson v. Dodds, 2 Ch.D. 463 (1876) — indirect revocation by reliable source.
• Petterson v. Pattberg, 248 N.Y. 86 (1928) — revocation of unilateral offer before full performance; Restatement § 45 modified this sharply.
• ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996) — shrinkwrap/clickwrap acceptance.

See also

• Consideration
• Statute of Frauds
• Parol Evidence
• UCC — Sales
• Modification

Sources

Restatement (Second) of Contracts §§ 24, 25, 32, 36, 41, 45, 50, 63, 69; UCC §§ 2-204, 2-205, 2-206, 2-207; Lucy v. Zehmer, 84 S.E.2d 516 (Va. 1954); Lefkowitz v. Great Minneapolis Surplus Store, 86 N.W.2d 689 (Minn. 1957); Dickinson v. Dodds, 2 Ch.D. 463 (1876); Petterson v. Pattberg, 248 N.Y. 86 (1928).