C. Acceptance Must Accord with Both the Substantive Terms and the Procedural Requirements of the Offer

A.      

                                                              i.      Substantive

1.      The terms setting out the transaction that if being offered – the proposed contract.

2.      Many older cases required “mirror image” acceptance of the substantive terms.

3.      Modern cases less rigid.  A response at variance with the offer may nevertheless qualify as an acceptance provided that the offeree’s intent to contract is apparent and the variations are not material – they do not significantly depart from the offer.

                                                            ii.      Procedural

1.      The procedure to be followed by the offeree if he wishes to accept the offer.

2.      The offer need not provide a procedure for acceptance.

3.      In the absence of instructions on acceptance, the offeree may accept within a reasonable time, and the communication of acceptance may be by any mode and in any manner that is reasonable.

B.     The Effective Date of Acceptance

Acceptance takes effect when it is communicated to the offeror. 

                                                              i.      The Mailbox Rule – A properly addressed acceptance takes effect when deposited in the mail.  Offeror can avoid the mailbox rule by specifying in the offer that acceptance will be effective only on receipt.  The Mailbox Rule does not apply when revoking an offer. 

1.      Rejections are valid when received.

2.      Acceptances are valid when mailed.

C.     Special Issues

                                                              i.      Lost in transmission: If the acceptance is lost in transmission or delayed, the applicability of the mailbox rule depends on whether the communication was properly addressed.

1.      Properly addressed: If the acceptance is properly addressed, it is effective at the time of dispatch even if it is lost and never received by the offeror at all. (But a court might “discharge” the offeror in this circumstance, for instance if he had sold the goods to someone else.)

2.      Not properly addressed: If the acceptance is not properly addressed, or not properly dispatched (e.g. sent by an unreasonably slow means), it will be effective upon dispatch only if it is received within the time in which a properly dispatched acceptance would normally have arrived.  If it comes later than this “normal” time, it will not be effective until receipt.

                                                            ii.      Option contracts: The acceptance of an option contract is effective upon receipt by the offeror, not upon dispatch.

                                                          iii.      Risk of mistake in transmission: The risk of a mistake in transmission of the terms of the offer is upon the offeror.  That is, a contract is formed on the terms of the offer as received by the offeree.

1.      Example: A intends to offer to sell 100 widgets at $5 each.  Instead, the telegraph company transmits the offer as an offer to sell 200 widgets at $4.  If B accepts without knowledge of the error, A will be stuck having to sell 200 widgets at $4. 

a.       No right to “snap up” obviously wrong offer: However, if the offeree knows or should reasonably have known that the offer has undergone a mistake in transmission, she cannot “snap up” the offer.

D.     Inadvertent Manifestation of Acceptance

                                                              i.      There are situations in which the subjective state of mind is too compelling to disregard.

                                                            ii.      The offeree must know of the offer to intentionally accept it (e.g. a reward for information).  If the offeree learns of the offer after he has rendered part of the performance requested by the offer, he may accept by completing the performance.

E.     Silence as Acceptance

                                                              i.     Inact ion is rejection.

                                                            ii.      Exceptions in Restatement in which offeree’s silence or inaction could operate as acceptance:

1.      Benefit of Services: When offeree takes benefit of offered services with reasonable opportunity to reject them and reason to know they were offered with expectation of compensation.

2.      Reason to Understand: When offeror gave offeree reason to understand that assent may be manifested in silence and the offeree in remaining silent intends to accept the offer.

3.      Prior Conduct: Where because of previous dealings it is reasonable that offeree should notify offeror if he does not intend to accept.

F.      TERMINATION OF THE POWER OF ACCEPTANCE

                                                              i.      Ways in which Offeree’s Power of Acceptance May be Terminated

1.      Lapse of the Offer:

If an offer does not specify its duration, it is deemed to remain open for a reasonable time, which is determined in light of the circumstances of the transaction

2.      Rejection:       

If an offer is not accepted before its lapse, it is rejected.  If offeree communicates to offeror that she does not intend to accept, offer rejected.  Once an offer is rejected, it is no longer effective, and the offeree cannot accept it if she changes her mind.

3.      Counteroffer:

A suggestion of a contract on different terms is a counteroffer AND a rejection of the original contract.  The offeree becomes the offeror when she makes a CO.  Therefore, CO = 1) Rejection of original offer and 2) a New offer.

4.      Revocation:

If offer is option or firm offer, then binding and no revocation allowed.  If offer is not option or firm offer, then offeror has no obligation to keep offer open.  Offeror can revoke any time before acceptance.  Revocation ONLY effective when communicated to offeree: (both acceptable ways)  

a.       Direct Revocation: offeree learns about revocation from offeror.

b.      Indirect Revocation: offeree learns about revocation in some other reliable way.

5.      The Death or Mental Disability of the Offeror:

If one of the parties dies or becomes mentally incompetent after contract is made, the contractual duties of the deceased or incompetent party usually pass to his estate or legal custodian.  If the offeror dies or becomes mentally incompetent between the time the offer is made and the time that it is accepted, the offer lapses.  Applies even if the offeree did not know or have reason to know of the intervening death or disability, because no contract can be created if the offeror has lost the ability to form contractual intent before acceptance.

6.      Lapse of an Offer by the Passage of Time

If an offer does not specify its duration, it is open for acceptance within a reasonable time.  The reasonableness of the time an offeree takes to accept an offer is measured from the perspective of the offeree. (Statute of Limitations)

                                                            ii.      Revocation of the Offer

Unless an offer qualifies as an option, the offeror is free to revoke it at any time before it is effectively accepted – EVEN IF THE OFFER STATES IT WILL BE KEPT OPEN FOR A SPECIFC PERIOD OF TIME.

1.      Lost revocation: If the letter or telegram revoking the offer is lost through misdelivery, the revocation never becomes effective.

                                                          iii.      Case Summaries

1.      Hendricks v. Behee

Rule: There is no contract until acceptance of an offer is communicated to the offeror.  Communication of acceptance of a contract to an agent of the offeree is not sufficient, and does not bind the offeror.  Unless the offer is supported by consideration, an offeror may withdraw his offer at any time before acceptance and communication of that fact to him.

Rule: Revocation must be communicated; until it is communicated, it does not take effect.  The mailbox rule does not apply to a revocation, which must be received by the offeree to be effective.

2.      Dickenson v. Dobbs

Rule: Revocation of an offer must be communicated to an offeree, but it does not have to be direct or intentional communication.

G.     BILATERAL AND UNILATERAL CONTRACTS AND PERSPECTIVES

                                                              i.      Acceptance by Performance – the Bilateral Unilateral Distinction

1.      If, at the point of contract formation, both parties have made promises to be performed at a future date, the contract is said to be bilateral.

2.      A contract is unilateral when the offeree’s performance is complete at the point of contract formation, and only the offeror’s promise is outstanding when the contract is created.  Alt: Unilateral describes a contract in which the obligation of one party is completely performed at the instance of formation, and all that remains is the promise of performance by the other at some future time.

                                                            ii.      Performance as an Exclusive or Permissive Method of Acceptance

1.      Unless the offer clearly requires acceptance to be only by performance, it can be accepted either by performance or promise.  (Conversely, unless the offer clearlyrequires acceptance to be only by promise, it can be accepted either by promise or performance.) 

2.      This is in accord with the broader principle that unless a method of acceptance is unambiguously prescribed as exclusive, the offeree may accept by any method that is consistent with the terms of the offer and is reasonable.