The purpose of this reading and lecture is to help us understand how the court interprets “assent”, that is, agreeing to a contract.
Intention to be bound
Ray v. William G. Eurice & Bros., Inc.
Maryland Court of Appeals 201 Md. 115, 93 A.2d 272 (1952).
Ray is the plaintiff while Eurice is the defendant. The plaintiffs lost in the trial court and appealed
Question
Did the trial court apply the right standard when considering assent?
Rule
“Absent fraud, duress or mutual mistake, that one having the capacity to understand a written document who reads and signs it, or, without reading it or having it read to him, signs it, is bound by his signature in the law.”
Additionally,
“The test in such case is objective and not subjective.”
Holding
The ruling of the lower court is wrong, reversed and damages are to be paid.
Facts
The plaintiffs were looking at building a home on a plot of land. They looked at several companies for a bid including Eurice. They sat down with Eurice who made changes to the specifications in an original contract (no signatures). Ray asked if they could have their lawyer draft up a contract and Eurice agreed. The lawyer did so, and the agreement was signed at the bank. However, when it became close to building, Eurice looked closer at the agreement and found the specifications unreasonable. He believed that the new contract was going to maintain the specifications of the old contract. He refused to build and was sued.
The trial court said that the parties failed to come to a “meeting of the minds.” Meaning, Ray thought they were signing for one thing and Eurice thought that he was signing for another. Therefore, the lack of agreement constitutes a failure to assent.
Analysis
The court disagrees with the trial court. The trial court used a subjective fact pattern which relies on the minds of the parties involved. Instead, the court here says adopts an objective standard. If a reasonable person would find that the parties had signed and thus assented to the agreement, there would be an agreement made.
Here, Eurice signed the agreement, thus providing his assent, and breached when he failed to deliver. He should be held liable for damages.
Why should we care?
The court, at least in this case, is going to use an objective, not subjective, standard when evaluating assent. You may not have agreed to what you thought you were agreeing to, but you signed and are therefore liable.
Although there was no meeting of the minds, we don’t care, neither does the law. Instead, we want to follow a reasonable standard of assent. What happened happened. You signed, you said “yes, I agree.” Why might this be the better standard? Well, people lie. You can’t always trust the intent of a parties claims. Therefore, we follow an objective, not subjective standard.
We want to look at the manifestation of assent. If there is a manifestation of assent by an objective standard, then the contract is binding.
Sometimes we may see the court saying that there was no meeting of the minds. They simply mean that there was no objective manifestation of assent.
Bilateral Contracts
Bilateral contracts do not refer to the number of parties in an agreement. Instead, they refer to the exchange of promises between the parties.
Lonergan v. Scolnick
California District Court of Appeal 129 Cal. App. 2d 179, 276 P.2d 8 (1954).
Lonergan is the plaintiff and Scolnick is the defendant. Plaintiff lost in trial court and appealed.
Question
Did the correspondence constitute an offer?
Rule
“There can be no contract unless the minds of the parties have met and mutually agreed upon some specific thing.”
Holding
There was no offer made so the judgement of the trial court is affirmed.
Facts
Defendant placed an ad asking for 2,500 cash for land. Plaintiff reached out and went to confirm the land. The defendant responded saying the the plaintiff had found the right place but that he had another buyer so the plaintiff would need to act quickly if he was interested. Before the plaintiff could respond, the defendant sold the land to a third-party. The plaintiff had put a downpayment on an escrow agent expecting a deed to come. No deed came and the plaintiff filed suit.
He claims that an offer was made by the correspondence of the defendant.
Analysis
No offer was made because a reasonable person could assume that the correspondence was preliminary, only seeking to see if there was any interest. Therefore, after interest was obtained, the defendant would have needed to provide a further manifestation of assent, which he did not do so. Because the plaintiff should have realized that this was a first come first serve basis, he would have needed to wait for the defendant to respond before taking any action.
For context, an escrow agent is someone who holds the property then delivers it to the parties (keeps people honest).
Under section 26 of the Second Restatement of Contracts deals with preliminary negotiations. With larger contracts, you need to work out all the details. The contract is not final until the negotiations are complete and an official offer is made.
Why should we care?
We learn a little more about what it takes to be considered an assent. Both parties need to make a promise. Here, one party never promised to sell the land, so there was no offer and no contract involved.
Normile v. Miller
Supreme Court of North Carolina 313 N.C. 98, 326 S.E.2d 11 (1985).
Normile is the plaintiff and Miller is the defendant.
Question
Did the defendant leave an “option” to the plaintiff Normile? Does the plaintiff have the ability to accept an offer after it has been revoked?
Rule
A counteroffer results in the rejection of an original offer and a proposal of a new offer to be either accepted or rejected.
Holding
There was no option to hold the offer. Additionally, a counteroffer was made, the revocation is fine. Therefore, the ruling in the trial court is upheld.
Facts
Normile made an offer for a defendant’s house. Defendant provided a counteroffer. Normile believed that the counteroffer left the property off the market and he would have until 5pm the next day to decide whether or not he wanted the property. During Normile’s thinking time, another party made an offer which the defendant accepted. The defendant then notified the plaintiff Normile that the offer was revoked. However, Normile went to the broker’s office, payed the deposit, and accepted the offer. The dispute is now about “who gets the property.”
The trial court said that there was no option and that there was a counteroffer. Therefore, the plaintiff Normile cannot require specific performance.
Analysis
The court first address the issue of an option. The defendant had to accept an offer by a certain time. They returned a counteroffer during that time. However, they did not provide a statement saying that the plaintiff had to sign before a time, leaving the house open to other markets. Although it is unfortunate for the plaintiff that this is the case, there is no getting around it. Therefore, the defendant was able to review and accept other offers.
Second, the court discusses the matter of counteroffers. A counteroffer results in the rejection of the first offer and making a new offer. Additionally, because there was not “option” the defendant was free to revoke this counteroffer at any time. As long as the revoke was made before the oferee attempts to accept the offer, then the oferee cannot accept the offer.
Why should we care?
We learn two concepts from this case. What is an option contract? This is where a party holds an offer for only one party until a given time is provided. We also discuss bargaining principles including acceptance, rejection, and counteroffers.
Although there wasn’t a double acceptance in this case, it is possible. If both parties accept an offer prior to a revocation, the offeror may be liable to all those who accepted. So, best practice is to revoke the offer to those you do not want to make the offer towards. Even indirect, but reliable, information is enough to revoke an offer.
Additional Notes
Bilateral contracts are the “classical” conception of offer and acceptance.
Classical offer and acceptance
- Acceptance must be unequivocal and unqualified.
- Qualified acceptance is a counter offer, and thus a rejection of the original offer.
- Power of acceptance is terminated by rejection. Can’t accept after rejecting.
- Attempt to accept is treated as an offer.
An offer’s power of acceptance may be terminated by:
(a) Rejection or counter-offer by the offeree, or…
(c) Revocation by the offeror, or…
These two are the ones that we will spend most of our time focusing on.
Option: Requires all terms to be fixed. Only thing missing is the optionee’s election to exercise the option.
Right of first refusal: Terms aren’t fixed at time of grant. Terms are fixed by a third party and optionor.
Disclaimer
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.
