1. C H A P T E R
11
The Agreement:
Acceptance
Make your
bargain before
beginning to
plow.
Arab proverb
11-1
2. Learning Objectives
• Explain elements of acceptance
under common law and the UCC
• Determine how acceptance can
be communicated, including by
silence
• Determine when oral acceptance
is effective
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3. 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
acceptance
• Example: “notify of acceptance in writing”
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4. Trademark Properties v. A & E
Television Networks
• Facts & Procedural History:
– Dispute arose out of a disagreement over alleged
oral agreement to split equally net revenues of
the reality television series “Flip This House”
– Court dismissed all plaintiff’s claims except breach
of contract. Jury returned verdict awarding
Plaintiff just over $4 million, or about half of first
season’s net revenues
– Defendant appealed arguing that evidence was
legally insufficient to support a finding of an oral
contract under New York law
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5. Trademark Properties v. A & E
Television Networks
• Issue: Did jury reasonably find that parties formed
an oral contract over distribution of revenue?
• Reasoning and Holding:
– Oral contracts as binding as written contracts,
but “context matters”
– If Davis reasonably understood A&E
representative’s equivocal statement as
acceptance, then contract was formed; also,
conduct of A&E and Davis supports both parties
believed contract existed
– Judgment affirmed
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6. Mirror Image Rule
• Traditional contract law rule required
acceptance to be the mirror image of
the offer
– Example: Pride v. Lewis
• Currently, judges hold that only
material variances between an offer
and an alleged acceptance result in
an implied rejection of the offer
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7. The UCC & Variance of Terms
• UCC 2–207 allows contract formation even
when there is some variance between terms
of offer and terms of acceptance
– A definite and timely expression of acceptance
creates a contract, even if it includes terms
different from those stated in offer or if it states
additional terms offer did not address [2–207(1)]
– Belden v. American Electric Components, Inc.
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9. Communicating Acceptance
• With instantaneous forms of communication,
knowing when acceptance occurs is easy
– Non-instantaneous forms (postal mail) more difficult
• Mailbox rule makes acceptance effective
upon dispatch when the offeree used a
manner of communication expressly or
impliedly authorized (invited) by the offeror
• Okosa v. Hall illustrates operation of the rule
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11. Silence as Acceptance
• General rule is that an offeree’s silence,
without more, is not an acceptance
• Circumstances may impose duty on
offeree to reject offer affirmatively or be
bound
• Includes cases in which offeree’s silence
objectively indicates an intent to accept
– Example: McGurn v. Bell Microproducts, Inc.
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12. McGurn v. Bell Microproducts
• Facts:
– 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
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13. 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
• 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
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15. 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
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
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16. Test Your Knowledge
• Multiple Choice
– The effect of offer plus acceptance is:
a) Negligible
b) An agreement
c) The mirror image rule
d) None of the above
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17. Thought Questions
• Do you read clickwrap agreements when
purchasing goods through a website?
• Should you be bound by click agreements
if purchasing via the internet?
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Editor's Notes
2004: plaintiff Richard C. Davis and his real estate investment company (Trademark Properties Inc.) produced a treatment and demo of a reality show about purchasing, renovating and “flipping homes.” Davis submitted it to A&E Television Networks and then met with A&E. Davis argued that the terms of the agreement were that he and his company would be equal partners with A&E (paying all production costs). Davis would find, refurbish and sell all real estate featured in the show. Davis argued that A&E expressly agreed to the terms, so he let A&E shoot 13 episodes of the resulting show, "Flip This House." Davis claimed that A&E kept promising to prepare and sign a written contract to confirm the partnership terms, but a contract was never provided. When A&E decided to – and did – film subsequent seasons without Davis and his company, Davis sued for breach of contract, fraud, conversion, misappropriation of trade secrets and unfair competition, among their other claims. A&E argued that it had made it clear to Davis that it had final creative authority over the show, owned all legal rights in it and controlled and would keep all revenues. A&E claimed Davis agreed to appear in the second season, but walked away from the deal and even signed a statement acknowledging that A&E had no financial obligation to him.
A & E claimed that the only specific words of acceptance Davis said that Norlander (A&E’s representative) made were, “Okay, okay, I get it.” A & E contended that statement did not constitute unambiguous acceptance because it conveyed at most that Nordlander understood the terms of the offer, not that he accepted the offer on behalf of A & E. A & E maintained, therefore, a contract was never formed.
Hyperlink is to the Missouri court’s opinion. Court: Before a plaintiff can establish a breach of contract, he or she must first establish the existence of a contract. A contract does not exist without a defi nite offer and a ‘mirror-image’ acceptance . Any acceptance that includes new or variant terms from the offer presented amounts to a counteroffer and a rejection of the original offer. The unequivocal acceptance of the offer is fundamental to the existence of a contract. Lewis contends that the Prides made a counteroffer when they changed the closing date for the property. While both the Prides initialed this change, it was undisputed that neither Mr. nor Mrs. Lewis initialed the change to the contract. The Prides acknowledge that changing the closing date amounted to a counteroffer. The question is, was the counteroffer ever accepted? Lewis argues that he never accepted this counteroffer, and, thus, there was no contract. The Prides argue that Lewis accepted their counteroffer through his conduct and failure to act. As a general rule, silence or inaction cannot constitute acceptance of an offer. Regardless of whether he breached cultural mores, Lewis had no legal duty to act or explicitly reject the counteroffer. The Prides erroneously assumed that silence was equivalent to acceptance. This case does not fi t with the line of cases holding that an offeree’s conduct or failure to act amounted to acceptance of an offer. The Prides should have secured Lewis’s acceptance to the counteroffer before advancing the transaction. This court cannot create a contract where one did not exist.
Hyperlink is to the Indiana court’s opinion. The photo is of a wire manufacturer’s operation. For many years, Belden sold wire to American Electronic Components (“AEC”), an automobile sensor manufacturer, to use in its sensors. In 1996, Belden notified AEC it would be using a certain insulation in its wires to comply with AEC’s quality control program. A few years later, Belden began incorporating another insulation in its wire. That insulation cracked, causing a recall of 14,000 cars. Belden argued that the back of its customer order acknowledgement form expressly limited the damages available to AEC and that AEC’s acceptance of the agreement was expressly made conditional upon AEC’s assent solely to the terms of the form. Under Section 2-207 of the UCC, if an acceptance contains a clause conditioning the acceptance on assent to additional or different terms, the writings do not form a contract. If parties perform as if a contract exists, then conduct by the parties may be sufficient to establish a contract even if the writings between the parties do not form a contract. Court concluded that Belden could not unilaterally include terms that were expressly conditional on AEC’s assent; therefore, writings between parties did not create a contract. Bottom line: Contracts between businesses will only be based on terms upon which all parties agreed. Consequently, an attempt to expressly limit acceptance of additional language to the terms of the offer must fail.
Click to add notes
Hyperlink is to the case opinion on the Findlaw.com website.
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Hyperlink is to the opinion by the U.S. Court of Appeals for the First Circuit.
Click to add notes
False. 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 Restatement (Second) of Contracts §69 True. True. False. UCC 2–207 allows contract formation even when there is some variance between terms of offer and terms of the acceptance
The correct answer is (b)
Courts have held that people who purchase on the internet have “accepted” any underlying contract once the purchaser clicks on the submit or purchase icons.
