Problems with Offers

• Author: Franklin G. Snyder, Mark Edwin Burge
• Pages: 77-94

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UNIT 5: PROBLEMS WITH OFFERS 77

Unit 5

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CONTRACT FORMATION

Part Three

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Problems With Offers

FOCUS OF THIS UNIT

We now know—see Restatement (Second) of Contracts § 24—that an offer is a

statement of willingness to enter into a bargain that is made in such a way that the

offeree reasonably understands that if she accepts the offer, a contract will be formed.

Thus, a statement that “I hereby offer to sell you my 1988 Ford Crown Victoria for

$2,500,” would clearly be an offer.

But how long does that offer stay open? Remember that the offer creates a

power in the offeree to make a binding contract. Once the offer is made, the offeror is

to some extent at the mercy of the offeree. And most of us do not want to be on the

hook indefinitely. Most of us understand this inherently. If someone offered to sell

you a house in Los Angeles for $10,000 in 1957, could you wait until 2017 to accept?

Nothing Lasts Forever. As we will see, offers—like milk— eventually spoil at

some point. Offers can be terminated in several ways. A rejection of the offer

terminates it, as does a counter-offer. Thus:

THELMA: I’ll sell you my 1988 Ford Crown Victoria for $2,500.

LOUISE: No, thanks.

THELMA: Okay.

LOUISE: No, wait. I changed my mind. Yes.

Here, the statement “No, thanks” is, in legal terminology, a rejection. An offer ends

when it is rejected. At this point there is no contract. (Of course, Thelma would be

free to treat Louise’s last statement as a new offer that she might accept.) Similarly:

THELMA: I’ll sell you my 1988 Ford Crown Victoria for $2,500.

LOUISE: No, but I’ll give you $2,000.

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78 CHAPTER II: CONTRACT FORMATION

Here, we have a counter-offer. The counter-offer also terminates the first offer. If

Thelma doesn’t accept the $2,000, there is no contract. Of course, if Thelma says,

“You’ve got a deal!” there is a contract because Thelma accepted Louise’s counter-

offer. These are simple examples; as you will see from the cases below, things can get

more complicated.

“Master of the Offer.” Note that it is the offeror who gets to control the content

of the offer, to specify exactly what is wanted. We thus frequently say that the offeror

is “master of the offer.” What does that mean? It means that the offeror gets to specify

exactly when and how the offeree must go about accepting the offer. (The issue of

what constitutes acceptance is the subject of the next unit.) Thus, if an offer specifies

a time that it will remain open or a time it will end, it te rminates at precisely that

time—assuming it hasn’t terminated earlier for some reason. As you can see from the

following, there are several other ways that an offer can be cut off.

In connection with this unit, you may find it helpful to read—or at least skim

over—sections 30, 32, 36, 38-43, and 48 of the Restatement (Second) of Contracts.

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Cases and Materials

IN RE ESTATE OF SEVERTSON

Court of Appeals of Minnesota

1998 Minn. App. LEXIS 243 (March 3, 1998)

WILLIS, J.

Respondents Kathy and Mark Thorson and the decedent, Helen Severtson,

were neighbors for approximately 14 years, during which time they became good

friends. After Severtson’s husband died in 1993, the Thorsons spent substantial time

with Severtson. Kathy Thorson visited with her almost daily when she took Severtson

her mail. Mark Thorson did odd jobs for Severtson when needed.

The Thorsons had told both Severtson and her husband on several occasions

that they would be interested in purchasing the Severtsons’ property if they ever

wanted to sell it. On February 16, 1996, Severtson and the Thorsons signed a typed

document that provides:

I, Helen Severtson, give Mark and Kathy Thorson first

option to purchase my farmsite, all buildings, including

the quonset home, rock quarry, including any leased

quarry rights, and adjoining farm land. * * * *