Introduction
Thank you for asking and taking the time to consolidate your knowledge. In this email, I will try to explain the basic building blocks of a contract in the United States and what laws and rules govern those agreements. I will divide the email into several subsections to facilitate your understanding. At the end of the email, I will outline how these contract elements apply to the cases you previously described. Bear in mind that the primary provisioners for contracts in the United States are common law and the UCC. The former governs the sale of real estate and services, and the latter regulates contracts that involve the sale of goods.
Mutual Assent
Enforceability of a contract depends on many nuances and is eventually ruled by the court’s decision. However, all contracts should contain three essential elements to be enforceable – offer, acceptance, and consideration (Poole, 2016). The foundational building block of any contract is a mutual assent between the offeror and the offeree (Hunter, 2015). Offer and acceptance are the two elements that form a mutual assent (Beale et al., 2019). There must be a clear intent to be bound by the terms of the agreement, and these terms must be defined adequately in order for an assent to be established.
The intent is always subject to an objective test, which determines whether an intent to be bound can be perceived from the offeror’s words and whether the offeree believed in the offer’s legitimacy (Knapp, Crystal, & Prince, 2019). When ruling a case on whether there was an intent to be bound, courts often rely on several factors. They assess the language of the preliminary agreement and the context within which the negotiations took place (Cochran v. Norkunas, 2006). The terms of the contract and the performance are also considered – courts determine where there are any terms that are left open and whether there was a partial performance.
Offer
Offer is made when the offeree gives the other party an opportunity to get involved in a contractual relationship. In other words, a valid offer is when the offeree believes that his or her decision has the power to conclude the bargain (Beale et al., 2019). When a legitimate offer is made, the offeree has the capability of acceptance – in the case where the offeree accepts the offer, an enforceable contract is made.
There are several ways an offer can be terminated – rejection, revocation, lapse, and death (Snyder & Burge, 2017). Rejection can be direct or indirect – for instance, proposing a counteroffer implies that the offeree does not agree with the terms and thereby rejects it (Snyder & Burge, 2017). The offeror may also revoke the offer; however, it is only possible if there has not been any acceptance made (Snyder & Burge, 2017). The offer may lapse when the time period specified in the terms expires. In cases when time is not stated explicitly, courts will lean on the notion of reasonableness.
Acceptance
Some form of performance should be undertaken in order for an offeree to accept the offer. For instance, the offeree may provide an oral or written statement. There are several rules that must be adhered to in order for acceptance to take place and form a contract. The Mirror Image Rule states that the offeree must accept all terms of the offer. If his or her acceptance modifies one or more of the items in the offer, then the acceptance is not considered valid, and the contract is not made.
UCC, however, adds several modifications to this rule – when the offeree modifies the initial offer, the altered version may serve as the proposal for a new agreement that can be accepted by the initial offeror (U.C.C. §2-207, 2002). One last rule to consider is the Mailbox Rule, which states that the acceptance is valid as soon as the offeree agrees to it and sends the required papers (Cochran v. Norkunas, 2006).
Consideration
Consideration is binding in most contracts – it ensures that each party in the agreement receives some benefit in exchange for his or her actions (Hunter, 2015). It works in the other way as well – the first party must forfeit something in exchange for the other party’s actions (Knapp, Crystal, & Prince, 2019). Consideration is the final element of the contract, and it must be mutual for the agreement to be enforceable.
Your Cases
In both of your cases, there is a valid contract. In Gilda’s case, she was presented with an offer that granted her the power of acceptance. Accepting the proposal means that a valid and enforceable contract is formed. When she signed the papers, she immediately became legally bound to the agreement because of the Mailbox Rule. Sid’s case is governed by the UCC, which allows offerees to modify offers and make new proposals. Because Bouncy Co did not explicitly reject the new proposal and shipped the goods, it can be considered that Bouncy Co accepted the new terms.
References
Cochran v. Norkunas, 919 A.2d 700, 708-09 (Md. Ct. App. 2006).
Hugh Beale, Bénédicte Fauvarque-Cosson, Jacobien Rutgers, & Stefan Vogenauer, Cases, Materials and Text on Contract Law (3rd ed. 2019).
Howard Hunter, Modern Law of Contracts (2015).
Charles L. Knapp, Nathan M. Crystal, & Harry G. Prince, Problems in Contract Law: Cases and Materials (9th ed. 2019).
Jill Poole, Textbook on Contract Law (13th ed. 2016).
Franklin G. Snyder & Mark E. Burge, American Contract Law for a Global Age (2017).
U.C.C. §2-207 (2002).