Contracts
Class Notes
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
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
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
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”.
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
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.
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,