>> The next few modules will break down offer
and acceptance,
one way of establishing mutual assent to a bargain.
This module is going to focus on the offer.
We learned in section 22 of the Restatement
that the ordinary way that mutual assent comes about
is through one party, the offeror,
making an offer to the other party, the offeree,
and the offeree accepting that offer.
The offer is defined in section 24 of the Restatement.
This is a particularly important section
and it deserves our close attention.
As we've previously discussed,
modern law is based on an objective approach to contracts.
Therefore, the question of whether an offer has been made
focuses on the offeror's acts that have been communicated
to the offeree.
Acts, such as oral or written statements,
or, perhaps, physical acts, like nodding one's head.
The question comes down to whether such acts
would be viewed by a reasonable person
as indicating the offeror's willingness
to enter into a bargain.
An offeror's subjective state of mind
is basically irrelevant
to whether or not an offer has been made.
A common maxim of contracts law
is that the offeror is the "master of the offer."
This means that she can propose whatever terms she desires
to be a part of the offer.
Of course, the offeree is free to accept
or reject those terms.
Section 24 further states that to be an offer,
the offeror's proposal must invite acceptance
from the offeree.
Moreover, that section tells us that to constitute an offer,
the offeror's proposal must be in terms
that create a reasonable understanding
that if the offeree does accept,
a contract will be formed without any further approval
on the part of the offeror.
Let's explore the idea of creating
a reasonable understanding
that acceptance by the offeree will conclude the bargain
by using an analogy of a tennis game.
For an offer to have been made,
the offeror's communication must lead the offeree
to believe that the ball is now in her court
and that she now holds the power of acceptance.
If an offer has been made, all the offeree has to do
to create a contract is to say, in effect, "Yes."
A bargain is completed.
No further act of the offeror is required.
Moreover, once the offeree accepts an offer,
the offeror has lost the power to revoke,
or change, the offer.
The requirement that an offer
create a reasonable understanding in the offeree--
that his acceptance will form a contract--
is what distinguishes an offer
from mere preliminary negotiations,
an overture to an offer,
which is defined in section 26 of the Restatement.
Therefore, if, in her communication,
the offeror reserves the final power
to say whether she will be bound by the contract,
that communication is not an offer,
but merely preliminary negotiations.
The hallmark of the offer is putting the power
to create the contract in the offeree's court.
One critical requirement of an offer
is that the terms specified by the offeror
be reasonably certain.
This requirement is set forth in section 33
of the Restatement.
Thus, if one party says to the other,
"I'm interested in selling my car to you."
In all likelihood, a court would not interpret that statement
to be an offer because a critical term,
the price, is left uncertain.
Rather, it would probably be considered
to be an invitation to the other party
to make an offer, to propose a price
at which it would be willing to buy the car.
Discussions like this are preliminary negotiations
under section 26 of the Restatement.
Thus, one critical factor that distinguishes
preliminary negotiations from an offer
is whether the communication from one party to the other
sets forth the essential terms
of the proposed deal, terms like price, quantity,
and dates on which performance is to take place,
that would lead the other party to believe
that an unequivocal offer has been proposed.
The reason given by the Restatement
for the certainty requirement
is that if one party sues the other for breach of contract,
a court must be in position to determine
what the terms of the alleged contract are
in order to decide whether there has been a breach
of that contract, and what an appropriate remedy
should be for that breach.
If the terms of the offer are uncertain,
a court will not be in a position
to determine whether there has been a breach
and to decide upon appropriate remedy.
So, what is the effect of the offeror's
making an offer to the offeree?
Section 35 of the Restatement explains
that once an offer has been made,
the power to accept the offer,
and thereby create a contract, shifts to the offeree.
We're going to explore acceptance in the next module.
But we learn in section 36 of the Restatement,
that the offeror can short-circuit
the offeree's power to accept by revoking the offer
before the offeree accepts the offer.
Section 42 of the Restatement
explains that the offeror can revoke the offer
by communicating to the offeree her intent
that the offer no longer be effective.
Notice that a revocation does not result, simply,
from the offeror sending out a communication
indicating her desire to revoke the offer.
To be effective, the revocation must be received
by the offeree.
Nonetheless, section 43 makes clear
that if the offeree learns through indirect channels
that the offeror no longer desires the offer
to be effective, that knowledge will also serve
as an effective revocation of the offer.
Let's assume that Adam makes an offer
to sell his boat to Eve for $50,000.
Eve says she needs some time to think about it,
and will get back to him in the morning.
That afternoon, Sally approaches Adam
and offers to buy his boat for $60,000.
Adam immediately says, "It's a deal!"
Adam has accepted Sally's offer
and a contract comes into being between Adam and Sally.
Assume that Sally calls Eve that evening
and says that she's just bought Adam's boat.
Under section 43, Eve's power to accept Adam's offer
is terminated because she has acquired information
that Adam took an action--
selling the boat to another person--
that is inconsistent with Adam having an intention
to enter into a bargain with Eve.
Eve's receiving notice of Adam's selling the boat to Sally
operates as a revocation of Adam's offer
to sell the boat to Eve.
But note, Adam's action in accepting Sally's offer
without first revoking the offer he made to Eve
is VERY unwise and potentially dangerous.
If Eve had not learned that Adam sold the boat
to another person, and, in the morning,
had sent Adam an email saying that she accepted his offer,
a contract would immediately come into existence
between Adam and Eve.
In effect, Adam would have entered
into two separate, enforceable contracts
to sell his only boat.
In such a case, Adam would be forced to breach one
of the two contracts and, in all likelihood,
would be held liable to pay monetary damages
to the disappointed buyer who did not receive the boat.