LAW OF CONTRACT

PART I

CHAPTER I

THE AGREEMENT-OFFER AND ACCEPTANCE

§1. Contract Defined. A contract is a legally enforcible agreement between two or more persons.

§ 2. Agreement, Basis of All Contracts. An agreement consists in two persons being of the same mind and intention with reference to some matter under their consideration. Without such an agreement or "meeting of the minds", as it is frequently called, there can be no contract. Every true contract has an agreement as its basis.

§3. Agreement and Contract, Distinction Between. In addition to the agreement or meeting of the minds of the parties concerned, there are other necessary elements before the agreement becomes a contract. To become a contract, the agreement must be such as the law recognizes and the courts will enforce and, therefore, must be in legal form, for a sufficient consideration, between competent parties, with their mutual consent, and for a legal purpose. These various elements necessary before an agreement becomes a contract, will be treated at length in subsequent chapters.1

§4. Express and Implied Contracts, Distinction Between. Where the contract results from an acceptance of a spoken or written offer, the contract is called an express contract. Where the contract results from an acceptance of an offer indicated by the offeror's conduct or actions, the contract is called an implied contract, or a contract 1 Chapters II-VI.

Copyright, 1912, by American School of Correspondence.

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implied in fact, as distinguished from a contract implied in law. Contracts implied in law are treated elsewhere.2

§ 5. Agreement Results from Offer and Acceptance. The agreement, or meeting of the minds of the parties, which, as we have said, is the basis of and necessary to the existence of every true contract, is the result of an offer or proposition by one or more persons, called the offeror or offerors, and directed to one or more persons called the offeree or offerees. When the offer or proposition is accepted, the agreement or meeting of the minds at once. comes into existence and becomes a contract if the other necessary elements, subsequently discussed, also exist. Thus, an agreement by A to work for B for two years, at $1,000 per year, arises from B's acceptance of A's offer to work for him for that period and at that salary. This meeting of the minds of A and B on the essential terms of the employment constitutes a sufficient agreement to be the basis of a contract. Whether the agreement becomes a contract, that is, an agreement which the law will enforce, will depend upon the further existence of the other elements previously noted. But in all cases where a contract comes into existence, an offer and an acceptance of the offer, creating an agreement, are necessary in the beginning.

Uncommunicated Intentions Do Not Create Agreement. An agreement or "meeting of the minds" of the parties, is not created by an uncommunicated identity of mental intention on the part of those interested. Thus, A's unexpressed willingness to work for B for two years at $1,000 per year, and B's uncommunicated readiness to employ A for that period at that salary, would not create an agreement.

Intention Determined from Outward Expressions. Also, whether there is an agreement and what that agreement is, is determined from the expressed intentions of the parties and not from their undisclosed but real intentions, even though the expressed intention were uttered by mistake. Thus, if a man should lead a colt from the stable and offer 2 See article on Quasi-Contracts.

it to A for $100, and A should accept the offer, there would be an agreement and binding contract, even though the vendor had by mistake led a different and more valuable animal from the barn than the one he really intended to offer for $100, provided his words and conduct would justify a reasonable person in believing that the words used were expressive of his real intention. And one cannot say that he had no intent to enter into a contract where his words and actions clearly show a contractual purpose.3

§ 6. What Is an Offer. An offer or proposition is the expression of an offeror's willingness to have the offeree enter into an agreement with him by an acceptance of the offer in its terms. Such an offer may be made orally or in writing, or may be founded merely on the offeror's actions or conduct, but, as we have already noticed, it must be an expressed intention-not a mere uncommunicated mental willingness.

Offer Must Contemplate Legal Relation. Not all apparent offers are such that an acceptance creates an agreement that may be the basis of a contract. For instance, the offeror's intention to bind himself must appear. Thus, if an angry man should shout, "I will give $100 for the name of the boy who knocked my hat off with that snowball,' it would be clear that the man's intention was not to contract. There are other situations where it is certain that the offer is not in contemplation of legal consequences and relations. Thus, an acceptance of a proposal to dine or to go to a football game cannot result in a contract, since there was no intention to contract. Nor could an action for breach of a promise to marry be based upon an offer of marriage and acceptance in a pretended engagement scene enacted in amateur theatricals. An actual marriage ceremony performed in jest is not valid because of the absence of intent to contract. But a person is not permitted to say that he was jesting if his conduct and words would warrant a reasonable person in believing that he was serious.

3 Harris v. Lumber Co., 97 Ga. 465, 25 S. E. 519.

4 McClurg v. Terry, 21 N. J. Eq. 225.

Statement of Intention Is Not Offer. Statements of mere intention to do a certain thing are not offers. Thus, statements made by a married child to third persons that she intends to pay her parents for her support, result in no contract on her part.5

Offer Is more than Invitation to Deal. Offers which merely amount to invitations to deal may not be turned into binding promises by acceptance. Thus, when A wrote to B, "We are authorized to offer Michigan fine salt, in full car-load lots of 80 to 95 barrels, delivered in your city at 85 cents per barrel," B telegraphed: "Your letter of yesterday received and noted. You may ship me 2,000 barrels of Michigan fine salt as offered in your letter." This was held not to make a binding contract, the court saying that the defendant's letter was only a notice to those dealing in salt that he was in a position to supply that article for the prices named, and requesting offers from the person or persons addressed." Of the same nature are advertisements for bids for execution of work or purchase of goods, advertisements of auctions, and business circulars sent by mail or distributed by hand, offering goods for sale. These are mere invitations to enter into negotiations and do not directly contemplate legal consequences.

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Offer Distinct from Preliminary Negotiations. The same rule applies in cases where the parties are merely negotiating without having reached an agreement. So long as the negotiations are incomplete because all of the terms have not been agreed upon, there is no contract. Sometimes the parties are not bound even though the terms have been agreed upon, if it was their intention to reduce the agreement to writing and that the writing be their agreement. Of course the rule is otherwise if the writing is intended to be merely evidence of the terms of their agreement.

Offer Must Be Definite. It is also necessary that the offer be sufficiently definite and certain that when accepted,

5 Perkins v. Westcoat, 3 Colo. App. 338, 33 Pac. 139.

6 Moulton v. Kershaw, 59 Wis. 316, 18 N. W. 172, 48 Am. Rep. 516.

7 Schenectady Stove Co. v. Holbrook, 101 N. Y. 45, 4 N. E. 4.

the court may be able to say what was promised. So where a person's offer to perform services for such remuneration as shall be deemed right, or for such wages as his employer shall deem right or reasonable, or for "good wages", was accepted, it was held that there was not a sufficiently definite promise of payment to be capable of enforcement. An indefinite, uncertain offer cannot be truly remedied by an acceptance, for the acceptance must be in the terms of the offer. Parties must make their own contracts and cannot leave it to the courts to make contracts for them from the words they have used.

But an agreement will not be deemed uncertain if the court can see what the parties intended. Thus, where goods are offered for sale, a reasonable price or the market price will be presumed to be what the parties intended.

87. Forms of Offer and Acceptance. The process of offer and acceptance may take place in any one of four

ways:

(1) The offer of a promise and its acceptance by simple assent. This occurs only in the single case of offers under seal. If not under seal the agreement reached by the offeree's assent could not result in a contract for want of what is called "consideration". Thus, a promise by A to give B $100 and B's assent thereto, without furnishing some "consideration" therefor, that is, doing something or promising something in return for A's promise, would not create a binding contract. But if A made such a promise in the form of a sealed instrument, that is, in writing with a scroll or seal after his signature and B assented thereto, both would be bound. So an option or offer under seal is irrevocable during the time which it specifies. The above would not be true in those States where the common law distinction between sealed and unsealed instruments has been abolished by statute, and "consideration" made necessary in all cases.

8 Fairplay School Twp. v. O'Neal, 127 Ind. 95, 26 N. E. 686.

9 O'Brien v. Boland, 166 Mass. 481, 44 N. E. 602.