Four ways an offer terminates
Mutual Assent · Sep 16
Floor. ~40 min: R2d § 36 termination map + R2d § 38 + Smaligo. The taxonomy the next class assumes you have covered.
Target. ~75 min: Floor + counter-offer (§ 39) + lapse (§ 41, Yaros) + revocation (§ 42) + the option-contract exits (§§ 45, 87) + synthesis.
An offeree's power of acceptance may be terminated by (a) rejection or counter-offer by the offeree, or (b) lapse of time, or (c) revocation by the offeror, or (d) death or incapacity of the offeror or offeree.
R2d § 38. (1) An offeree's power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention.
(2) A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement.
432 Pa. 133, 247 A.2d 577 (1968)
Supreme Court of Pennsylvania
Rule. An offer is rejected by conduct inconsistent with acceptance. Demanding arbitration after an offer of settlement amounts to a rejection because it is inconsistent with the conclusion that the offer has been accepted.
R2d § 39. (1) A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.
(2) An offeree's power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree.
R2d § 41. (1) An offeree's power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time.
(2) What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made.
742 A.2d 1118 (Pa. Super. Ct. 1999)
Pennsylvania Superior Court
Rule. Where parties bargain face-to-face or by telephone, an offer ordinarily lapses at the end of the conversation unless a contrary intention is indicated by words or circumstances. Where no time limit is stated, the offer remains open for a reasonable time, a question of fact from all the circumstances.
An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract.
R2d § 42: an offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter the proposed contract and the offeree acquires reliable information to that effect.
The offeror may revoke any time before acceptance — but the revocation must reach the offeree.
Indirect revocation: a seller offers a house to a buyer; before the buyer accepts, the buyer reliably learns the seller already sold it to someone else. The offer is revoked, even though the seller never told the buyer directly.
R2d § 48. An offeree's power of acceptance is terminated when the offeree or offeror dies or is deprived of legal capacity to enter into the proposed contract.
(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
(2) The offeror's duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.
(1) An offer is binding as an option contract if it
(a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or
(b) is made irrevocable by statute.
(2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
Revocation is the default — but two doctrines lock an offer open even though the offeree has not yet accepted.
Varney, star of a cable show called Docked Out, sued Avon Plastics for breach of an endorsement deal. Just before trial, Varney sent Avon a letter offering to dismiss the lawsuit for $190,000. Three days later, before Avon replied, Varney sent a second letter "clarifying" that his offer was contingent on Avon entering into a stipulated judgment in Varney's favor (which would make Varney the prevailing party and trigger fees). The next day Avon wired $190,000 exactly. Varney dismissed the lawsuit, then sued Avon for $60,000 in attorney's fees as prevailing party.
Did Avon accept Varney's first offer, or did the second letter revoke and replace it?
Vary one fact. In Smaligo, the offeror sends a written revocation that crosses in the mail with the offeree's written acceptance, both dated the same day. Whose communication takes effect first, and under what rule?
Stretch problems from the chapter.
Rules. R2d §§ 36, 38, 39, 41, 42, 48 (termination); §§ 45, 87 (the option-contract exits).
Cases. Smaligo v. Fireman's Fund Insurance Co. (rejection by conduct) · Yaros v. Trustees of University of Pennsylvania (lapse / conversation rule).
Open question. Today maps how offers DIE and the two doctrines that keep them alive against revocation. Class 8 carries the map forward into the UCC's firm-offer rule (§ 2-205) and opens the battle of the forms — what happens when both sides exchange writings whose terms do not match.
Next class: Termination cont. + Acceptance setup
_Mutual Assent_ · Sep 22
Carry the termination map forward. Read R2d §§ 36, 42, 43, 45, 87 and UCC § 2-205. The question for class: which offers can the offeror still revoke, and which has the law locked in place? Bring one example of each.