Mutual assent

     Except in some special cases, the formation of a contract requires: (1) mutual assent by two or more persons to an exchange of promises (bilateral contract) or to an exchange of a promise for performance (unilateral contract) and, (2) a consideration.  R.2d Contracts 17, 3.  Here we explore the requirement of mutual assent to an exchange.  We explore the requirement of a consideration, and also explore some special cases in which contracts are formed without mutual assent to an exchange or a consideration, in Commentary.Consideration and estoppel.     

     In many but not all exchange transactions we can identify and classify discrete communications by which the parties to the exchange come to express their mutual assent.  The traditional language used to classify these communications is "offer and acceptance." Using this language we say that mutual assent to an exchange occurs if and when one party (an "offeree") timely accepts an offer made by another (an "offeror").  Accordingly, part of the study of mutual assent may be conveniently grouped into these questions:  (1) What is an offer and when is it made?  (2) What is acceptance and when does it occur?  (3) At what point does the power to accept an offer terminate such that an attempted acceptance is no longer timely?  Your materials here look at many of the basic rules of offer and acceptance that answer these questions but do not explore every variation or nuance. 

     The materials include two cases that introduce you to the objective theory of contract, under which we generally view the communication of the parties from the perspective of a reasonable person rather than asking what the parties subjectively meant by a communication.  We first see this theory appear in Donovan v. RRL Corporation, which considers whether an automobile dealer's newspaper advertisement of the sale of a used Jaguar was an offer or simply an invitation to negotiate. We next see this theory appear in Leonard v. Pepsico, which considers whether a television commercial promoting rewards for the collection of "Pepsi points" could reasonably be considered to include an offer to reward a consumer with a Harrier jet fighter. You should use Leonard v. Pepsico as your primary authority in considering Problem.Dispute.T-Shirts, in which the owner of a saloon owner faces potentially ruinous liability for appearing to promise too much.    

     Beard Implement Company, Inc. v. Krusa considers the manner of acceptance of an offer invited by a farmer's offer to a farm implement dealer to purchase a combine.  Three problems (Problem.Dispute.Duration of offers, Problem.Dispute.Graduation party, and Problem.Dispute.Sale of used Jaguar) offer opportunities to sort through and apply the relevant rules concerning rejection of offers, revocation of offers, counter-offers, lapse of offers, and the effect of death or incapacity of the offeror or offeree.  In working through these cases and problems, it is important to bear in mind, as R.2d Contracts 22 (2) and UCC 2-204(2) candidly acknowledge, that the rules can oversimplify human behavior.  In many cases, such as in complex commercial deals resulting from months of negotiation and culminating in the mutual execution (i.e. signing) of a carefully crafted written agreement, one finds mutual assent without being able to identify discrete events as either an offer or an acceptance.  Alternatively, in cases in which one or more of the parties fail to execute a contemplated document, one party may claim that assent was to be manifest only through mutual execution of a document or electronic record (notwithstanding earlier communication signaling agreement) while the other party claims that a contemplated document or record was to serve only as a written memorial of an agreement already reached.  And in some cases, as we explore in Marvin v. Marvin and in Problem.Dispute.Soccer trainer, some contracts are implied from facts and circumstances rather than from overt expression of offer and acceptance. 

     The materials also consider problems posed by inconsistent intention, that is, cases in which the parties thought they had agreed to the same thing but later discover the contrary.  Leonard v. Pepsico is such a case, because one party intended a joke and another party took the joke seriously.  The parties in Raffles v. Wichelhaus, a classic early case of misunderstanding,  were both serious, but each misunderstood the other's intention.  You should use that case, as well as R.2d Contracts 20 as your primary authority in considering Problem.Dispute.Misunderstanding, involving a sale of tickets to a Great America amusement park. 

     Jokes and misunderstanding of the sort illustrated in those two cases are relatively infrequent.  More common is unexpected disagreement about terms of a contract to which the parties pay little or no attention when making their deal.  Merchants frequently consummate transactions with one another through the exchange of standardized but not identical forms, such as a purchase order sent by a merchant buyer and an acknowledgment of order thereafter returned to the buyer by a merchant seller.  Normally the transaction proceeds without hitch notwithstanding any difference between the two forms, but, in the event of later dispute, each party may be inclined to argue either that a contract was never formed because the exchanged forms were not identical or that that the terms of the contract are those contained in their own form.  Lawyers and scholars frequently refer to this problem as "the battle of the forms", although that moniker is somewhat inaccurate because the same type of problem can arise even if only one form is involved.   U.C.C. 2-207 is the Commercial Code's imperfect solution to this type of unexpected disagreement.  Problem.Dispute.University purchase of fire extinguishers, and Steiner v. Mobil Oil Corp., a case involving discontinuation of a discount on the price of gasoline sold to the owner of a service station, help you explore that solution.  Following many years of discussion and debate, proposed amendments to U.C.C. Article 2 offer a different solution to these problems.  We consider the proposed new solution in Part C of the fire extinguisher problem.  

     The rules of offer and acceptance sprouted and developed long before the mass distribution of consumer products, services, and information, and the rules therefore have not proven particularly well suited to evolving distribution methods.  Two famous and highly controversial opinions, seeking to adapt rules of offer and acceptance to or construe them in light of economic theory, highlight the difficulties.  ProCD v. Zeidenberg considers the formation issues posed by a "shrink-wrap license" accompanying an in-store retail sale of a packaged  CD-ROM.  Hill v. Gateway 2000, Inc. extends the logic of ProCD to the sale of a computer over the telephone.  Mattingly v. Hughes Electronics Corporation considers the now common practice of the mailing to consumers of proposed changes in terms that the offeror claims will be accepted if the customer continues to use the offeror's services.  The opinion alerts you to the limited cases in which silence in response to an offer can operate as an acceptance.  On that issue, also consult R.2d Contracts 69.  You may also be interested in looking at a rule of the Federal Trade Commission that regulates the use of negative option plans in which mail order sellers propose to periodically ship products to a consumer (e.g. a monthly book club selection) that the consumer must purchase unless the consumer notifies the seller that he or she does not wish to receive or accept the product.   

     The opinions in those cases also highlight important and long standing questions about the nature of judicial lawmaking.  The common law of contract (as well as other subjects) in the 19th century was formalistic, with holdings said to merely reflect application of a formal logic to disputes.  Indeed, Christopher Columbus Langdell, appointed Dean of Harvard Law School in 1875, introduced the case law method of study still prevalent in law schools with the expectation that it would teach students the science of law.  Legal realists in the first half of the 20th century and thereafter challenged the prevailing view of judicial decision-making by suggesting that law is at least somewhat indeterminate and often is shaped either by the personal or political predilections of judges or by a judge's conception of appropriate social policy.  

     Some contemporary legal theorists, including Judge Easterbrook (author of ProCD and Hill) and his famous colleague on the 7th Circuit Court of Appeals, Judge Richard Posner, advocate the evolution or evaluation of law in the context of economic theory.  This Law and Economics movement is often associated with the political right.  In contrast, the Critical Legal Studies movement, often associated with the political left, argues that judges, including judges of the law and economic stripe, manipulate law to serve the privileged at the expense of the marginalized.  Feminist legal theorists identify perceived gender bias, and critical race theorists identify perceived racial bias, in judicial decision-making .  The debate among legal theorists, including theorists who hold other views of judicial lawmaking, requires all thoughtful law students and lawyers to consider the extent to which judges are simply political actors, less constrained and thus less accountable to the electorate than legislators or executives.  I encourage you to undertake at least some introductory reading concerning legal theory.  One good place to start is with materials prepared as part of the Harvard Bridge Project.  Follow this link, and then select and choose from the drop-down menu for Legal Theory. 

     Supplementary reading:  Farnsworth, Chapter 3; White & Summers, 1-3 - 1-5.