Contracts Class Notes 1/21/04


The problem from p. 444


Somebody is interested in selling land.  They write out an offer to sell the land and send it out on November 9th.  They tell the buyer that they need an answer “at once” because there’s another deal pending.  The letter gets to the purchaser’s place on November 11th.  The purchaser decides to accept the next day at 3 PM and dispatches a telegram to the seller.  Then, at 3:30, the seller sells to somebody else because he hasn’t heard from the purchaser.  At 4 PM, the seller gets the telegram.  The seller then calls the purchaser and says “aw nuts”.  So is there a contract or not?  Was the acceptance effect on dispatch or on receipt?


The thing is that we’re trying to figure out if the acceptance was done with a method invited by the seller.  Is the mailbox rule triggered by this factual pattern?  § 63 would say: was “telegram” a medium invited by the offer?  If it was, then the mailbox rule is triggered and the acceptance is effective on dispatch.  When the offer is made by mail, usually acceptance is invited by mail too.  Can a mailed offer invite a telegraphic acceptance?


The letter wanted a “quick” means of acceptance.  Telegrams are reliable.  You could argue that telegraphic acceptance is invited here.  If I get a mailed offer today and accept by FedEx or DHL, do I get the benefit of the mailbox rule?  It depends on whether the medium I used to respond was invited.


But what’s another problem with making the acceptance effective at 3 PM, assuming the mailbox rule was triggered?


So there are a couple of issues: (1) Did the offeror invite a telegraphic acceptance?  (2) Did the offer “provide otherwise”?  Does this offer negate the mailbox rule?


You can argue that because the offeror says “I will have to know at once”, the offeror is negating the mailbox rule.  The offeror can’t know at the time of dispatch.  Therefore, you can’t have acceptance effective on dispatch in this case.


So what follows if the mailbox rule was negated?  The acceptance is effective on receipt.  Therefore, there is no contract because the offeror took an action at 3:30 PM inconsistent with the continued life of the offer.  If the acceptance isn’t effective until 4 PM, then do we have a contract?  But the problem is that the offeree has an offer that appears still alive at 3 PM and 3:30 PM and 3:59 PM.  The revocation of the offer is effective when the offeree learns of it, or at least gets reliable information of it.  That didn’t happen before the receipt of the offeree’s acceptance.  We have an ineffective revocation because it comes after the acceptance.


So the third issue is that the revocation is only effective on receipt.  If the seller doesn’t want to be bound by this contract, what arguments can be made?  The seller can argue that the offer has lapsed because the acceptance was requested “at once”.  You could argue that the offer had already lapsed by the time of the acceptance.  So the “at once” may be construed as “a reasonable time”.  Maybe you have to reply on November 11th or else the offer has lapsed.  Or maybe “at once” can be stretched out to the first thing in the morning on November 12th.  It’s kind of flexible.  So that’s a powerful argument for the offeror: the offer was dead.


What’s another argument for the offeror who doesn’t want a contract?  Is the acceptance really an acceptance?  It sounds like it, but then it says: “Send contract for me to sign.”  When was contract formation going to take place?  It’s suggested that the contract will be formed at the time the “full-fledged” contract is signed.  Also, what are the terms of this offer that we don’t know?  There was some kind of “deposit” involved.  Was the offeror asking for a “bipartite” acceptance?  If so, then the offeror didn’t get it until after he said that he had made a contract to sell to a third person.  There aren’t enough facts to resolve this, but we might want to get some more facts.


What else can we say about this situation?  Maybe you could argue that there was no offer because there was no commitment on the offeror’s part.  The terms of the offer were stated, though, and a response was requested “at once”, so it looks like an offer, but again, we’d like to hear more.


Silence as acceptance – § 69


Here’s a hypothetical, consisting of an offer and four possible responses.  What will happen with each response?


The offer is made orally, face-to-face: “Will you marry me?”


1.     She turns on her heel and marches out the door, slamming it behind her.  That’s a rejection.  What do you learn legally from that?  There are different ways to say “no” or “yes”.  Conduct can indicate assent or dissent strongly.  Think of auctions, where you can say “yes” or “no” with hand signals and the like.

2.     “She lunges into a mad embrace and thence to bed.”  Sounds like an acceptance, or maybe a counteroffer followed by acceptance of the counteroffer.

3.     “She is dumbstruck.”  What’s that?

4.     “She bursts into tears.  What the hell does that mean?”


These last two have some significant similarity because we can’t tell what she means.  They’re like silence in that they are ambiguous.  Keep in mind objective mutual assent.  What did the offeree mean by being dumbstruck or bursting into tears?  What interpretation did the offeror put on that conduct?  When you have ambiguous, non-communicative conduct, generally we don’t have a contract.


Consider § 69, which talks about silence as acceptance.  The most important word in this section is the word “only”.  The cases where silence is acceptance are highly limited.  Treatise after treatise will tell you, rightly, that silence as acceptance is the exception rather than the rule.


But what about the exceptional cases?  Say you own a barn and you know the barn might burn down, so you have an interest in wanting it insured against fire.  Say you bought a fire insurance policy a year ago.  Now your insurance agent sends you a letter that says: “Okay, I know you want to renew your policy, so I’m just going to go ahead and renew it unless I hear from you otherwise.”  Will that result in your silence being acceptance?


It turns out that the insurance agent has given the barn owner reason to understand that assent may be manifested by silence.  In order to reject the offer, does the offeree have to go out of their way to reject?  No way!  We don’t want the offeror to be able to force an agreement on the offeree.  The offeror won’t get a contract simply because the offeree is silent.  However, if the offeree wants a deal, they can get it by being silent.  The offeree could choose to accept by being silent.  In this situation, silence operates as an acceptance in favor of the offeree, but not in favor of the offeror.  So this is a dumb offer for the offeror to make!


It’s especially unwise in the case of insurance: if the barn burns down, the offeree will claim to have accepted by silence.  But you can also expect that if the barn doesn’t burn down, some offerees will claim that they didn’t assent and they’ll never have to pay.  That’s the “risk of adverse selection”.


Hobbs v. Massasoit Whip Co.


Here’s another situation where silence will operate as acceptance.


Oliver Wendell Holmes, Jr. made this decision when he was back on the farm in Massachusetts.  What we have here is a seller of eel skins who delivered them to the whip company which sometimes uses the skins to make whips.  When somebody sends you goods under those circumstances and you don’t reply, will that catch you with a contract?  Not in most circumstances, according to Holmes.


We won’t allow a stranger to send some goods to another stranger and say: “These are so good that I’m sure you’ll agree to buy them at this price unless you return them and say you don’t want them.”  But the key word is stranger.  In this case, the seller of skins was not a stranger to the whip company.  This guy had sent skins to the whip company a few times before and they had been paid for.


So here’s a case where silence means acceptance which you can get from § 69 (1)(c).  In this particular case, because of previous dealings, sending the skins forced the defendant to pipe up if it didn’t want to buy.  The previous dealings create a duty to speak.  If you don’t pipe up, your inaction will be treated as an acceptance because acceptance is the reasonable meaning of silence under the circumstances.


Holmes says that whatever the state of mind of the parties had been (subjectively), if the sender of the skins can reasonably read their silence as acceptance, then it is acceptance.  That’s objective mutual assent.


The other situation where silence is acceptance: say we’re sitting here in class and my car is parked out on the lot.  A car washer and waxer comes out to my car and washes and waxes my car and does a wonderful job.  I go out to my car and he asks for $20.  Do I owe him?  No way!  I didn’t have a reasonable opportunity to reject those services.  The guy who performed the services is a volunteer (an officious intermeddler).  But what does it take to change the situation?


Say I walk out of the building and see the guy start to wash and wax the car.  Say I watch him do the entire job.  If you actually see it going on, you have a reasonable opportunity to reject.  If you don’t say that, your silence will turn into an acceptance and you’ll owe a reasonable fee for the wash ‘n’ waxer’s services.


Austin v. Burge


The offeree says he doesn’t want this newspaper.  However, he keeps reading it.  He is stuck with the subscription cost.


This common law rule has been changed by statute.  There is now “unsolicited merchandise” statutes that say you don’t accept such merchandise by silence.  People who send out unsolicited merchandise were considered pests and jerks.  The approach taken by legislatures was to let the recipients of the goods keep them scot-free.


But what if you get a $7,000 laptop computer in the mail by mistake with your name on it?  I didn’t solicit from that seller, and the seller isn’t a jerk.  Can I keep that computer as a free gift?  The statute may be silent, but the seller may sue if you try to keep it.  Often when the mistaken shipper prevails, courts decide not to apply the statutes.


You can solicit merchandise in different ways.  You can join a book club, for example, and when you do, the goods you receive are not considered unsolicited.  When you practice law, you’ll be bugged by book and software salesmen.  You might sometimes think they’re jerks.  Other times, you’ll want to get a subscription to some kind of book or software.


A couple of hypotheticals we’re dealt with before: you go to a barber and get your hair cut.  When the barber is done, you say “thanks” and try to walk away.  A real contract is created there.  There is a contract implied-in-fact that you will pay a reasonable fee in exchange for a haircut.  It’s implicit under the circumstances.  There are lots of service providers for whom contracts implied-in-fact will be awarded.


Let’s say while home for the holidays, my mother cut my hair and now she sends me a bill.  Am I legally obligated to pay that bill?  No, because there is no contract implied-in-fact there.  The presumption is that it was a gratuitous service between family members.  You ought to know that a barber shop will charge for their service, but your mother will probably cut your hair as a gift.  Thus, there is no implicit promise to pay your mother.


Say we have two law students, Sodom and Gomorrah, and they shack up for their three years in law school and then get jobs in different cities.  After a while, the woman sues the man for all sorts of services including cutting his hair during law school.  She thinks he ought to get paid for it.  Will she be successful in that lawsuit?  How do they think about it in Marvin v. Marvin?  What about in Morone v. Morone?  How useful is the law of contracts in dealing with this kind of situation?


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