Acceptance

Contracts – Prof. Merges

Feb. 8, 2011

Elsinore Union Elem. Sch. Dist. V. Kastorff

• Procedural history

Elsinore Union Elem. Sch. Dist. V. Kastorff

• Facts

A Few Points About Construction Ks

• Surety – bond

• Owner – GC – Sub structure

New Hampshire Office70 Zachary RoadManchester, NH 03109603.626.6070603.626.0352 fax

Back to the lawsuit . . .

• Who is suing whom for what?

• What remedy is sought?

What is the primary defense?

• Kastorff

Bid amount

• Bid about $ 90,000

• Meant to bid about $99,500

• Next highest bid: $101,000 – he still would have won!

What is the primary defense?

• Kastorff

–“There’s been a terrible mistake!”

What is Kastorff’s position re: the Contract w/ Elsinore?

What is Kastorff’s position re: the Contract w/ Elsinore?

• It should be rescinded

• What does this implicitly say about K formation?

What is Kastorff’s position re: the Contract w/ Elsinore?

• It should be rescinded

• What does this implicitly say about K formation?

There is indeed a binding contract: BUT . . .

What is the holding?

What is the holding?

1. Honest clerical error in bid, plus

2. Subsequent prompt rescission, means –

Contract is dissolved; defendant need not perform; no liability

Offer and Acceptance in Kastorff

Offer and Acceptance in Kastorff

• When was the K formed?

– What was the offer?

– What/when was the acceptance?

Offer and Acceptance in Kastorff

• When was the K formed?

– What was the offer: When Kastorff handed in the bid, 8 pm on 8/12/52

– What/when was the acceptance: When the schoolboard voted to award the bid to Kastorff after 8 pm 8/12/52

Kastorff’s communication on 8/13 w/ Rendon

• What was Kastorff (the offeror) trying to do?

Kastorff’s communication on 8/13 w/ Rendon

• What was Kastorff (the offeror) trying to do?

• Why was he not able to, legally?

Bids, offers, and acceptances

• Kemper: bids as “options,” p. 143

• Can a GC withdraw a bid after it has been submitted?

• Does the owner have to accept a particular bid?

More on bids as options . . .

• Why does a bid have to be viewed as an option?

• Who does this protect?

Options, in general

• Binding on one party

• Not on the other – until he, she or it CHOOSES to be bound

• The freedom to decide (later) is what an option is all about

GC’s and Subs

• What about subs’s bids to the GC?

– Options also?

– Why?

What if the School Board knew Kastorff had made a mistake?

What if the School Board knew Kastorff had made a mistake?

Note 1, p. 142

Rest. 2d § 153(b): “the other party had reason to know of the mistake”– K void

David Dudley Field (1805–94)

Field Code

Stephen Field

Put aside the mistake in Kastorff

• See how the doctrine of offer and acceptance works to solve real-world problems

• Recall CAB v. Ingram: the messy real world meets “clean and clear” legal theory/doctrine

International Filter v. Conroe Ice

• Procedural History

International Filter v. Conroe Ice

• Facts

The oil revenues and population influx of the 1930s lent Conroe a boomtown atmosphere. It briefly claimed more millionaires per capita than any other town in the United States.

International Filter

• Analyze the communications

International Filter

• Analyze the communications

• 2/10/20: Int’l Filter (π) Letter

• Δ’s “notation” on π’s 2/10 Letter: “Accepted”

• Then π’s 2/13/20 “indorsement” – “OK”

Δ’s Arguments

Δ’s Arguments

1. No proper acceptance

2. No communication of acceptance

3. Therefore: Δ’s 2/28 letter a revocation? Rejection?

How do we decide what is required for Acceptance?

How do we decide what is required for Acceptance?

“The offeror is master of the offer.”

Top p. 150

Carlill v. Carbolic Smoke Ball Co.

• Ad offered reward of people got sick after using inhaler-type product

• Plaintiff argued that using smoke bal and getting sick constituted acceptance

Owen v. Tuniston example

• “If you agree to pay me $16,000 for the Bradley lot in Bucksport, cash, closing within 60 days, I will sell it to you.”

Why might notice of acceptance be required?

• Think from Δ’s point of view . . .

Alternate holding, p. 150

• Notice of acceptance – 2/14 letter by Engel in Chicago

• Note: what if Δ revoked offer on afternoon of 2/13?

Agency Principles

§ 1.01 Agency Defined

Tentative Draft No. 2 (2001)

Agency is the fiduciary relationship that arises when one person (a "principal") manifests assent to another person (an "agent") that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act.

Agency Principles

§ 167. Persons Having Notice Of Limitations Of Written Authorizations

If a person dealing with an agent has notice that the agent's authority is created or described in a writing which is intended for his inspection, he is affected by limitations upon the authority contained in the writing, unless misled by conduct of the principal.

“Home Office Approval Clauses”

• Why?

• Incentives of parties differ

– “Principal-agent problem”