Chapter 11 - The Agreement: Acceptance

CHAPTER 11
THE AGREEMENT: ACCEPTANCE

I. LEARNING OBJECTIVES:
This chapter is intended to familiarize students with the legal issues relating to the second
fundamental step in the contracting process: acceptance of an offer by the offeree. After reading
the chapter and attending class, a student should be able to:
A. Explain the elements of an acceptance under both the UCC and common law
B. Apply the elements of acceptance to a given scenario and analyze whether an acceptance
has occurred.
C. Determine how acceptance can be communicated in a given scenario and analyze the
time at which acceptance is likely to be effective.
D. Distinguish the circumstances under which silence is acceptance and the circumstances
under which silence is not acceptance.
E. Determine whether an oral acceptance is effective in a situation in which the parties
anticipate putting their contract in writing.
II. ANSWER TO INTRODUCTORY PROBLEM

A. This problem requires students to apply the criteria for a valid acceptance, the rules about
revocability of offers, and the mailbox rule. It comes from First Texas Sav. Ass'n v.
Jergins, 705 S.W.2d 390 (Tex. Ct. App. 1986). In response to First Savings’s offer,
Jergins deposited her entry form with First Texas. The elements of intent, acceptance on
the offeror’s terms, and communication are satisfied.
B. First Texas suggested or required a particular method of acceptance—completing the
entry form and depositing it with First Texas. Jergins used the authorized method of
acceptance. Under the mailbox rule, her acceptance was effective when she deposited it
with First Texas.
C. First Texas’s attempted revocation occurred after Jergins’s acceptance was effective, so it
did not have the right to revoke the offer.
D. Given that the contract was formed before the change in the contest rules, Jergins did
have the right to collect the $5,000 money market certificate.

III. SUGGESTIONS FOR LECTURE PREPARATION:

A. What is an Acceptance?
Stress the fact that courts trying to decide whether an offeree accepted an offeror's offer look
for the same present intent to contract on the part of the offeree that they look for on the part
of the offeror. Note also that the courts are looking for the offeree's objective intent, not his
subjective intent.
Trademark Properties v. A & E Television Networks (p. 353): Davis had an idea for a tv show
about flipping properties and submitted the plot to A & E Network. After an A & E director
viewed the pilot, he and Davis spoke on the phone and Davis proposed specific terms. The
director responded, “Okay, okay, I get it.” Other communications followed, but the deal was
never reduced to writing. However, A & E filmed 13 episodes of “Flip this

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House,” which became a hit. Davis was never compensated. He sued for breach of contract.
The trial jury awarded him about $4 million, and A & E appealed. The issue on appeal was
whether A & E objectively manifested assent to the terms that Davis proposed. The court
found that there was sufficient evidence from which a reasonable jury could conclude that
Davis objectively treated Nordlanger’s statement as an acceptance.
Points for Discussion: Emphasize the quote from Oliver Wendell Holmes, which is the
classic statement of the objective standard of consent. Note also that this is an example of a
court enforcing an oral contract. Why does the court focus on Davis’s reaction to the
ambiguous statement, “Okay, okay, I get it,” rather than the ordinary meaning of the words?
Would Davis have a stronger case if he focused on A & E’s conduct as constituting
acceptance?
Additional Example: Problem Case #3.
2. Point out that the idea that an offeror is "the master of his offer" means that the offeror
has the power to determine the conditions under which he can be bound to a contract.
This means that he can impose any conditions on acceptance that he chooses, even those
which may make acceptance unduly burdensome or difficult. Once his offer is accepted,
however, the offeror cannot change any of its terms.
Example: Problem Case #2.
3. Point out why offeree attempts to change the offer's terms in their acceptances are treated
as counteroffers: by trying to change the offer's terms the offeree is impliedly rejecting
them rather than indicating the required intent to be bound by them.
Examples: Problem Cases #2 and 8.
4. Discuss the common law "mirror image" rule and the courts' tendency to apply it more
liberally in recent years to avoid finding a counteroffer in the following situations:
a. Inquiries regarding terms.
b. "Grumbling acceptances".
Example: See Panhandle Eastern Pipe Line Co. v. Smith, 637 P.2d 1020 (Wyo. Sup.
Ct. 1981).
c. Non-material variances in an acceptance.
Pride v. Lewis (p. 355): Lewis offered to buy the Prides’ home, with a stated closing date
of May 15. The Prides changed this date to June 1 and signed the contract. The Prides
and their realtor initialed the change, but Lewis did not. Lewis did not close the deal and
the Prides sued him for breach of contract. The trial court found in favor of the Prides,
and Lewis appealed. The issue on appeal was whether Lewis accepted the Prides’
counteroffer. The court found that he did not, and reversed the case in favor of Lewis.
Points for Discussion: Ask students which body of law, common law or UCC, applies in
this situation. Explain the operation of the mirror image rule in this case—any deviation
between the offer and the purported acceptance is a counteroffer. The court’s rejection of
the Envrionmental Waste Management case as controlling precedent is a good example
of the case law reasoning that students learned about in Chapter 1. Ask students whether
they would construe Lewis’s inaction as acceptance, just as a matter of common sense,
and if not, why not.
Additional Example: Problem Case #2.

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5. Discuss section 2-207, the Code "Battle of the Forms" section, and its attempt to
recognize reality in the age of the form contract by dispensing with the common law
"mirror image" rule in some circumstances. Since 2-207 is complicated and somewhat
confusing (one court described it as "a mystery clothed in an enigma"), you may want to
limit discussion to a brief general statement of its nature and intent. If you choose to treat
2-207 in detail, the following procedure is suggested:
a. The first step in applying 2-207 is to see if the parties had a contract under 2-207(1).
Was the offeree's communication a "definite and seasonable expression of
acceptance?" If not, no contract results under 2-207(1)--the Code still recognizes the
concept of rejection. For an example of an offeree response too at variance with the
offer to amount to an "expression of acceptance," see Howard Construction Co. v.
Jeff-Cole Quarries, Inc., 669 S.W. 2d 221 (Mo. Ct. App. 1983) [seller alters price
terms in buyer's purchase order: no contract under 2-207(1)]. Even if the offeree's
communication meets the above test, was it made "expressly conditional" on the
offeror's assent to the new or different terms? If so, no contract results under
2-207(1).
b. If the offeree's communication was a definite and seasonable expression of
acceptance and wasn't made expressly conditional on assent to the new or different
terms, a contract results under 2-207(1).
If a contract results under 2-207(1), proceed to 2-207(2) to determine its terms. If the
parties are both "merchants" the additional terms became part of their agreement
unless: the offer expressly limited acceptance to its own terms; the additional terms
would "materially alter" the offer; or the offeror objects to their inclusion within a
reasonable time. By negative inference, if one or both of the parties are not
merchants, the additional terms can never become part of the contract unless the
other party expressly agrees to them. The language of 2-207 does not clearly indicate
what happens to "different" terms. If no contract results under 2-207(1), turn to
2-207(3). Is there conduct by both parties that "recognizes the existence of a
contract?" If so, a contract results and its terms are those upon which the writings of
the parties agree, supplemented by the "gap-filling" terms provided by the Code.
Example: Problem Case #3. See the helpful guide cited in Log On, p. 359).
Belden v. American Electric Components, Inc. (p. 357): Belden was AEC’s longtime
supplier of wire, which it used in its sensors., including the sensors that it sold to
Chrysler for inclusion in its cars. In 2003, Belden began using a nonconforming
insulation in its wire. Belden’s order acknowledgement, sent in response to AEC’s
purchase order, contained a limitation of remedy that was not in the offer. It also
stated that its acceptance was expressly conditioned on AEC’s acceptance of its
terms. The sensors that AEC sold to Chrysler failed, due to the nonconforming
wiring, and Chrysler had to recall cars. AEC had to reimburse Chrysler for its losses
caused by the recall. AEC sued Belden to recover the amount of money it had paid to
reimburse Chrysler, and Belden claimed that the limitation of remedies in its
acknowledgement protected it from liability for these damages. The trial court
awarded partial summary judgment to AEC and Belden appealed. The issues on
appeal were whether 2-207 (2) or (3) applied to determine the outcome of the case
and whether the limitation of remedies was part of the parties’ course of dealing that
should be included in the contract as a supplementary term.

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The court decided that the contract was not formed under subsection (1) of 2-207
because Belden had expressly conditioned acceptance on AEC’s consent to the
additional terms, but that a contract had been formed under (3) by conduct that
recognized the existence of a contract. Under (3), the contract consists of terms on
which the parties’ writings agree plus “supplementary terms” under the UCC. The
court held that (3) and not (2) was controlling, and that, while course of dealing could
provide a supplementary term, the course of dealing between Belden and AEC did
not show that AEC had ever agreed to Belden’s attempts to limit remedies. The court
affirmed the case in favor of AEC.
Points for Discussion: What are Belden’s main arguments? Why does the court reject
them? Note that this case and the previous case, Pride v. Lewis, both deal with the
problem of determining an offeror’s agreement with an offeree’s counterproposal.
The outcome is the same, but call the class’s attention to how the process of
analyzing the case is different under the common law and UCC.
Additional Example: Problem Case #4.
6. Discuss the requirement that acceptances must be communicated to the offeror. Why is
communication necessary?
B. When is Acceptance Communicated?
1. Discuss the concept that offerors are free to stipulate the time or manner of acceptance
under both the common law and the Code. Discuss the outcome of a purported
acceptance sent by some means other than the stipulated means. Discuss Problem Case
#9. Even under the Code's liberal rules concerning the manner in which offers can be
accepted the idea that the offeror is "the master of his offer" still holds sway: the offeror
still has the power under 2-206(1) to specify the manner in which the offeree must accept
and the means the offeree must use to communicate acceptance. Only when the offeror
fails to exercise this power does 2-206(1)(a) authorizing acceptance by any "reasonable"
manner and medium come into play.
Example: Problem Case #6.

2. Discuss the rules relating to when an acceptance is effective to create a contract. Note
that the "implied agency" or "mailbox rules" mean that, in some cases, an acceptance
may be effective when dispatched, even if never received by the offeror. Point out,
however, that offerors can protect themselves from such a result by providing that they
must actually receive an acceptance before they are bound by it. Log On (p. 334)
provides some good supplementary examples of the mailbox rule in action.

3. Discuss the concept of an authorized means of communication and the various ways in
which a given means could become an authorized means at common law: express
authorization by the offeror; implied authorization (the means the offeror used to
communicate the offer); and trade usage. Note that the acceptance must be properly
dispatched (e.g., correctly addressed, accompanied by adequate postage) for the mailbox
rule to apply. Remind students that revocations are not effective until they are received.
Okosa v. Hall (p. 360): Quarterly payment for the Okosas’ auto insurance policy was past
due, so its insurance carrier sent them a letter indicating that the payment was past due
and that the policy would be cancelled at 12:01 a.m. on March 16 unless payment was
made by that date. The letter also contained language referring to mailing—it said, “If
you’ve recently mailed your payment, please disregard this notice.” The Okosas sent

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payment by certified mail on March 15. On March 16, Mrs. Okosa was involved in a
wreck with an uninsured motorist. She made a claim for benefits under her policy but her
claim was rejected by the insurance carrier on the ground that the policy had lapsed. The
issue was whether the mailbox rule would apply so that the Okosas’ March 15 payment
would be considered timely. The court held that the mailbox rule did apply and that the
insurance carrier’s notice contemplated response by mail. Thus, the March 15 payment
was timely and the insurance policy was in effect at the time of the accident.
Points for Discussion: Clarify what about this transaction was contractual—insurance
carrier made an offer to continue coverage, which the Okosas accepted by sending
payment. The insurance carrier’s notice spoke of receipt of the payment. Why isn’t this a
situation in which the offeror specifies that acceptance will not be effective until it is
received?
Additional Examples: Problem Cases #9 and 10. Compare Gibbs v. American Sav. &
Loan Ass'n, 266 Cal. Rptr. 517 (Cal. Ct. App. 1990) (acceptance must be placed out of
one's control for mailbox rule to apply, so acceptance was not effective when plaintiff
handed envelope to mail clerk in her office).
b. Note how the Code [in 2-206(1) (a)] and the Restatement Second have broadened the
notion of an impliedly authorized means to include any means "reasonable" under the
circumstances.
1) Discuss those factors a court is likely to consider in determining whether a given
means is "reasonable": the nature of the goods (are they perishable or subject to
rapid fluctuations in value?); the parties' prior dealings (has any normal pattern of
dealing arisen?); and the reliability of the means selected.
c. Discuss the traditional rule on the effectiveness of attempts to accept by a
nonauthorized means: they are only effective when actually received by the offeror
within the time they would have been received had the offeree used the authorized
means. Note how the Code [in 1-201(38)] and the Restatement Second have
modified this rule.
Example: Put the following example on the board and walk students through it to
illustrate the above concepts:
On October 1, 2012, Thomas mails Stephens a letter offering to sell a beach-front
condominium for $120,000.
October 5, 2012, at 10:00 a.m. Thomas telegraphs Stephens and attempts to revoke
his offer.
October 5, 2012, at 10:10 a.m. Stephens telegraphs his acceptance of Thomas's offer.
October 5, 2012 at 11:00 a.m. Stephens receives Thomas's revocation. October 5,
2012 at 11:10 a.m. Thomas receives Stephens's acceptance.
1) Under traditional rules: No contract. Stephens has attempted to accept by a
nonauthorized means (authorized means on these facts is mail). His acceptance
will only be effective when actually received by Thomas. Since Stephens
received Thomas's revocation before Thomas received his acceptance, the offer
was effectively revoked prior to acceptance. If Thomas's letter had said: "You
may accept by telegram?" Contract (telegram now an expressly authorized
means). If Stephens had mailed his acceptance? Contract (he has accepted by the
impliedly authorized means). If by some fluke Thomas received Stephens's
acceptance before Stephens received the revocation? Contract.

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2) Same facts as example above, but Thomas's offer is to sell machine parts.
Contract? Yes. Code applies (sale of goods). Section 2-206(1)(a) controls.
Telegram is probably a "reasonable" means by which to accept this offer.
Therefore, a contract was created at 10:10 a.m. when Stephens dispatched his
acceptance. Point out that even if a telegram was for some reason an
unreasonable means of accepting (or if Stephens had used a truly unreasonable
means, e.g., giving his acceptance to a 10 year-old child to deliver across town) a
contract would still result under the Code because Thomas received the
acceptance in a timely fashion. Note also that if a court applied the Restatement
Second to the original facts, it would reach the conclusion that the parties have a
contract on the same reasoning employed under the Code.
C. Special Acceptance Problems
1. Discuss the requirements for acceptance of an offer for a unilateral contract: the offeree
must perform the act requested by the offeror. If you have mentioned "reverse unilateral
contracts" (act for a promise variety) earlier, point out that the offeree must make the
requested promise to accept such an offer.
2. Discuss the requirements for acceptance of an offer for a bilateral contract: the offeree
must make the return promise requested by the offeror. Where this is done expressly, no
problems result, but point out that it is also possible for an offeree to impliedly indicate
an objective intent to be bound by the terms of the offer in a variety of ways:
a. The offeree acts in a manner inconsistent with the offeror's ownership of offered
property.
b. Even though silence by the offeree generally will not amount to acceptance, there are
some important exceptions to this rule:
1) Customary trade practice or prior dealings between the parties indicates that
silence signals acceptance--discuss example in the text.
2) The offeree indicates that his silence will signal acceptance.
The offeree accepts the offeror's performance, knowing the offeror's terms. This rule,
combined with the common law "mirror image" rule sets up the so-called "last shot"
principle under common law: offerors who accept performance after receiving a
counteroffer are impliedly bound by the counteroffer's terms. As students have
already seen, 2-207(3) changes this rule in Code cases.
McGurn v. Bell Microproducts, Inc. (p.363): The court holds that an employer’s
silence in response to the alteration of a written employment contract by an employee
was not acceptance absent some proof that it knew or should have known that the
contract had been altered.
Points for Discussion: What are the ethical considerations involved in this case? Who
has the better argument, the majority or Judge Selya?
3) Ethics in Action (p. 365): No. The problem of unfair surprise—which Samantha
experienced in the case problem—would be one ethical problem. Another would
be that marketers would essentially be placing the time and expense burden on
buyers—without their consent-- to take the initiative to communicate with
sellers. You might wish to discuss the legal analysis of this problem as well as
the ethical analysis.

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3. Discuss the problems courts confront in cases where the parties intend to reduce their
agreement to written form. Did they only intend to be bound when a writing was
executed, or did they intend to be bound at the time agreement was reached, with the
writing intended merely as a memorial of their agreement? Here again, courts attempt to
determine the parties' objective intent from their actions and the surrounding
circumstances.
4. Discuss the problem confronting courts when the offer is ambiguous on the question of
whether the offeree can accept by performance (a unilateral contract) or by making a
return promise (a bilateral contract).
a. Point out that both UCC section 2-206(1)(a) and section 32 of the Restatement
Second allow the offeree to accept such an offer in any reasonable manner (i.e., by
performing or making a promise).
b. Note the special variation on this rule contained in UCC section 2-206(1)(b)
pertaining to offers requiring prompt or current shipment. Discuss the Ampex and
Marks example in the text to illustrate how the Code in this section modifies common
law rules in a way designed to protect both parties. Offerees can't ship the wrong
goods to offerors with impunity, relying on the offeror's circumstances to force him
to accept something other than what he ordered. On the other hand, an offeree who
notifies the offeror that he's making an "accommodation" (thereby giving the offeror
the opportunity to seek the needed goods elsewhere) can still try to make a sale,
although he doesn't have the exact goods the offeror needs.
5. Stress the fact that only the offeree has the power to accept an offer. Attempts to accept
by others are merely offers which the offeror can accept or reject.

IV. RECOMMENDED REFERENCES:

A. E. ALLAN FARNSWORTH, FARNSWORTH ON CONTRACTS (3rd ed. 2004).
B. Melissa Robertson, Note, Is Assent Still A Prerequisite for Contract Formation in Today's E-
conomy?, 78 WASH. L. REV. 265, 266 (Feb. 2003)
C. James J. White, Contracting under Amended 2-207, 2004 WIS. L. REV. 723 (2004)
(discussing proposed revisions of 2-207).
D. Valerie Witnick, The Electronic Formation of Contracts and the Common Law “Mailbox
Rule,” 2004 BAYLOR L. REV. 175 (2004).

V. ANSWERS TO PROBLEMS AND PROBLEM CASES:

1. No. In this case Citibank had made an offer to Wilson about a revised agreement. The court
noted that acceptance need not be made by a spoken or written word. It can be accepted by
conduct or failure to act when the offeree knows that services are being rendered on the terms
offered. It found that Wilson accepted the revised agreement by her conduct with regard to her
credit card. Despite the fact that Wilson could have canceled her credit card when she received
the notice of revised terms, she continued using it, thus showing her assent of the revised
agreement. Citibank v. Wilson, 160 S.W.3d 810 (Mo. Ct. App. 2005).
2. No. The court stated, “It is well settled that in order to constitute a contract by offer and
acceptance, the acceptance must conform exactly to the offer. Under Illinois contract law, an
acceptance requiring any modification or change in terms constitutes a rejection of the

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original offer and becomes a counteroffer that must be accepted by the original offeror before
a valid contract is formed…any changes to an offer, even minor changes, constitute a
counteroffer rather than an acceptance.” Even though the changes here were minor and
technical, the court strictly applied the mirror image rule. Finnin v. Bob Lindsay, Inc., 852
N.E.2d 446 (Ill. Ct. App. 2006).
3. Yes. Mary had reasonable notice of the clickwrap contract containing the forum selection
clause and she manifested assent to it by clicking “I agree.” She had the ability to understand
the clause and could have rejected the agreement. The forum selection clause contained in the
agreement was valid and enforceable. Although Julie had no direct dealing with Adsit, the
court found that Julie was bound on the contract because she had given Mary authority to
make the purchase using her credit card. Adsit Co. v. Gustin, 874 N.E.2d 1018 (Ind. Ct. App.
2007).
4. Yes. UCC section 2-207 applies to this case. The court stated that, “[b]y using the Glassrobots
standard sales agreement as a template and by authorizing a wire transfer of the down
payment, Standard Bent Glass demonstrated its intent to perform under the essential terms of
Glassrobots’s standard sales agreement. Accordingly, its response was a definite and
seasonable expression of acceptance of Glassrobots’s offer….The parties continued to
perform, with Glassrobots constructing and installing the desired equipment and Standard
Bent Glass timely paying for it. In sum, Standard Bent Glass’s conduct constituted a definite
and seasonable expression of acceptance that evinced the formation of a contract rather than a
counteroffer or rejection. For these reasons, there was a valid contract on the Glassrobots
terms of February 2 that incorporated any nonmaterial additions proposed by Standard Bent
Glass.” Standard Bent Glass Corporation v. Glassrobots Oy, 333 F.3d 440 (3d Cir. 2003).
5. No. The court holds that a contract was not formed because it did not give the plaintiffs
adequate notice of the terms of the contract and did not require unambiguous acceptance,
such as by clicking to indicate agreement. Specht v. Netscape Communications Corp., 150 F.
Supp. 2d 585 (U.S. Dist. Ct. S. D. N.Y. 2001).
6. No. The ads were offers, but Alexander and her son did not accept them. The plaintiffs’
acceptance must have been received by the defendants by the time prescribed in the offer and
in the place where communications of that sort were requested (through the tipline). While
the plaintiffs may have provided information related to the arrest or indictment, there is no
indication in that they provided the information to the people who were authorized to receive
acceptance on behalf of BRCS and LCS. Alexander v. Lafayette Crime Stoppers, Inc., 28 So.
3d 1253 (La. Ct. App. 2010).
7. No. The issue in the case was whether, under the mailbox rule, mail was an authorized mode
of acceptance despite the fact that the offer was hand-delivered and did not expressly state
any particular mode of acceptance. The court applied the Restatement standard that
acceptance dispatched by a reasonable method of communication is effective on dispatch, and
held that the use of mail was reasonable in this case and that the contract was indeed formed
on August 20, when the letter of acceptance was posted. Cantu v. Central Education Agency,
884 S.W.2d 565 (Tex. Ct. App. 1994).
8. No. The court applied the mirror image rule to determine that there had been no meeting of
the minds in this case. The court stated that, “in order for a contract to be formed, an
acceptance of an offer must be absolute, unconditional and identical with the terms of the
offer.” Here, English did not initial the changes in the Montgomerys’ counteroffer or
otherwise confirm her acceptance of the terms in any other way. As a result, no enforceable
contract was formed. Montgomery v. English, 902 So.2d 836 (Fla. Ct. App. 2005).

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9. No. State Farm’s preaddressed envelope authorized Casto to respond to its offer by mail and
Casto did respond by mail. To be effective upon mailing under the mailbox rule, however, the
acceptance must have been properly dispatched. The envelope did not bear any postage when
it was returned, and Casto did not prove that there was postage on the envelope when she sent
it. Thus, this acceptance was not effective when it was dispatched. Casto v. State Farm
Insurance Co., 594 N.E.2d 1004 (Ct. App. Ohio 1991).
10. No. The mailbox rule would apply only where there was an express or implied authorization
to use mail, and that was not the case here. Also, the contract gave Paulaner the sole
discretion to set the terms of payment, and the use of mail was not among the terms of
payment. The court stated that “Paulaner’s letter specifically stated that payment had to be
‘received,’ not merely ‘mailed,’ by a certain date. That directive, as well as the previous
placement of Domanik deliveries on C.O.D. status, overrode any previous course of dealing
between the parties.” Domanik Sales Co., Inc. v. Paulaner-North America Corp., 622 N.W.2d
769 (Ct. App. Wis. 2000).

VI. ONLINE RESEARCH: FINDING CONTRACTS ON THE INTERNET

1. Students could look at almost any example of a website that requires or asks for
registration to see an example of either a browse-wrap or a click-wrap. Sites that allow
downloads would provide other examples.
2. Students could look at almost any commercial website to find an example of a user
agreement/terms of use/terms of service/acceptable use policy. Many user agreements or
terms of use agreements provide that a user’s use of the site constitutes acceptance or
state that the website is made available “subject to” assent to the agreement.

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