Communication

To have an agreement, each party assents to the terms of the other party. The offeror must therefore communicate the offer to the offeree . An offer cannot be accepted if the offeree is unaware of its existence. From this general proposition, it follows that no contract can be legally binding unless an offer is in fact communicated to the offeree. If you write an e-mail to a friend with an offer to sell your car for a certain sum and then get distracted and forget to send it, no offer has been made. If your friend coincidentally e-mails you the following day and says that she wants to buy your car and names the same sum, no contract has been made. An offer is not effective until it is received by the offeree because that is the point at which the offer is communicated.

The requirement that an offer be communicated does not mean that every term must be communicated. You call up your friend and offer to sell him your car. You tell him the price and start to tell him that you will throw in the snow tires but will not pay for a new inspection, and that you expect to keep the car another three weeks. Impatiently, he cuts you off and says, “Never mind about all that; I’ll accept your offer on whatever terms you want.” You and he have an agreement.

These principles apply to unknown offers of reward. An offer of a reward constitutes a unilateral contract that can be made binding only by performing the task for which the reward is offered. Suppose that Bonnie posts on a tree a sign offering a reward for returning her missing dog. If you saw the sign, found the dog, and returned it, you would have fulfilled the essentials of the offer. But if you chanced upon the dog, read the tag around its neck, and returned it without ever having been aware that a reward was offered, then you have not responded to the offer, even if you acted in the hope that the owner would reward you. There is no contractual obligation to do so.

Although a completed act called for by an unknown private offer does not give rise to a contract, partial performance usually does. Suppose Apex Bakery posts a notice offering a one-week bonus to all bakers who work at least six months in the kitchen. Charlene works two months before discovering the notice on the bulletin board. Her original ignorance of the offer will not defeat her claim to the bonus if she continues working up to the six month requirement to collect, for the offer serves as an inducement to complete the performance called for.

Definiteness of Terms

The common law reasonably requires that an offer spell out the essential proposed terms with sufficient definiteness—certainty of terms that enables a court to order enforcement or measure damages in the event of a breach. Thus, a supposed promise to sell “such coal as the promisor may wish to sell” is not an enforceable term because the seller, the coal company, undertakes no duty to sell anything unless it wishes to do so. Such an offer would not be sufficiently definite, as essential terms of such an offer would certainly include the parties to the agreement, the price to be exchanged, and the subject matter of the offer – in this case the work to be done. But not every omission is fatal; for example, as long as a missing term can be fixed by referring to some external standard—such as “no later than the first frost”—the offer is sufficiently definite.

In major business transactions involving extensive negotiations, the parties often sign a preliminary “agreement in principle” before a detailed contract is drafted. These preliminary agreements may be definite enough to create contract liability even though they lack many of the terms found in a typical contract. For example, in a famous 1985 case, a Texas jury concluded that an agreement made “in principle” between the Pennzoil Company and the Getty Oil Company and not entirely finished was binding and that Texaco had unlawfully interfered with their contract. As a result, Texaco was held liable for over $10 billion, which was settled for $3 billion after Texaco went into bankruptcy.

Contracts with Alternatives

Offers that state alternatives are definitive if each alternative is definite. David offers Sheila the opportunity to buy one of two automobiles at a fixed price, with delivery in two months and the choice of vehicle left to David. Sheila accepts. The contract is valid. If one of the cars is destroyed in the interval before delivery, David is obligated to deliver the other car. Sometimes, however, what appears to be an offer in the alternative may be something else. Charles makes a deal to sell his business to Bernie. As part of the bargain, Charles agrees not to compete with Bernie for the next two years, and if he does, to pay $25,000. Whether this is an alternative contract depends on the circumstances and intentions of the parties. If it is, then Charles is free to compete as long as he pays Bernie $25,000. On the other hand, the intention might have been to prevent Charles from competing in any event; hence a court could order payment of the $25,000 as damages for a breach and still order Charles to refrain from competition until the expiration of the two-year period.

The UCC Approach

The UCC is generally more liberal in its approach to definiteness than is the common law. Section 2-204(3) states the rule: “Even though one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.”

The drafters of the UCC sought to give validity to as many contracts as possible and grounded that validity on the intention of the parties rather than on formalistic requirements. As the official comment to Section 2-204(3) notes, “If the parties intend to enter into a binding agreement, this subsection recognizes that agreement as valid in law, despite missing terms, if there is any reasonably certain basis for granting a remedy.…Commercial standards on the point of ‘indefiniteness’ are intended to be applied.” Other sections of the UCC spell out rules for filling in such open provisions as price, performance, and remedies. 

One of these sections, Section 2-306(1), provides that a contract term under which a buyer agrees to purchase the seller’s entire output of goods (an “outputs contract”) or under which a seller agrees to meet all the buyer’s requirements (a “requirements” or “needs” contract) must be made in good faith regarding the understanding of “outputs” or “requirements.” In other words, a party to such a contract cannot offer or demand a quantity that is “unreasonably disproportionate” to a stated estimate or past quantities.

Proposals That Are Not Offers

Advertisements

Most advertisements, price quotations, and invitations to bid are not construed as offers. The reason is  that terms are not sufficiently definite to meet the legal standard for an offer. A notice in the newspaper that a bicycle is on sale for $800 is normally intended only as an invitation to the public to come to the store to make a purchase. At the time the notice is published, it is uncertain who the parties to the offer will be, or if an offer will even result from the notice. Similarly, a statement that a seller can “quote” a unit price to a prospective purchaser is not, by itself, of sufficient definiteness to constitute an offer; quantity, time of delivery, and other important factors are missing from such a statement. Frequently, in order to avoid constructing a statement about price and quantity as an offer, a seller or buyer may say, “Make me an offer.” Such a statement obviously suggests that no offer has yet been made. This principle usually applies to invitations for bids (e.g., from contractors on a building project). An invitation for bid is a solicitation of bids from potential suppliers or contractors for the procurement of goods, services, or construction projects. While a bid submitted under an invitation for bid may meet the legal requirements of an offer, the invitation itself would not. Although advertisements, price quotations, and the like are generally not offers, the facts in each case are important. Under the proper circumstances with clear and sufficiently definite terms, an advertised statement can be construed as an offer, as shown in the well-known Lefkowitz case.

Despite the common-law rule that advertisements are normally to be considered invitations rather than offers, legislation and government regulations may offer redress. For many years, retail food stores have been subject to a rule, promulgated by the Federal Trade Commission (FTC), that goods advertised as “specials” must be available and must be sold at the price advertised. It is unlawful for a retail chain not to have an advertised item in each of its stores and in sufficient quantity, unless the advertisement specifically states how much is stocked and which branch stores do not carry it. Many states have enacted consumer protection statutes that parallel the FTC rule. It is noteworthy here that such remedies, when they exist, are not granted under contract law.

Invitations to Bid at Auction

Invitations to bid are also not generally construed as offers. At an auction, offering an item for bidding is not an offer, but rather an invitation for potential buyers (bidders) to make offers. A prospective buyer becomes an offeror when making a bid at the auction, typically indicating their interest in purchasing the auctioned item by raising a paddle, making verbal offers, or submitting bids by mail or online, depending on the type of auction.

When a bidder makes a bid, they are essentially making an offer to purchase the auctioned item at the bid price. The agreement is formed when the auctioneer accepts the highest bid by calling “Sold!” or otherwise indicating acceptance. At this point, a legally binding contract is created between the successful bidder (offeror) and the auctioneer (offeree).

3.3 Duration of Offer

An offer need not be accepted on the spot. Because there are numerous ways of conveying an offer and numerous contingencies that may be part of the offer’s subject matter, the offeror might find it necessary to give the offeree considerable time to accept or reject the offer. By the same token, an offer cannot remain open forever, so that once given, it never lapses and cannot be terminated. The law recognizes several ways by which the offer can expire (besides acceptance, of course): revocation, rejection by the offeree, counteroffer, lapse of time, death or insanity of a person or destruction of an essential term, and illegality. We will examine each of these in turn.

Revocation

Just as people are free to make offers, they are generally free to revoke those offers as they see fit. The general rule, both in common law and under the UCC, is that the offeror may revoke an offer at any time before acceptance, even if the offer states that it will remain open for a specified period of time. Thus, Neil offers Arlene his car for $5,000 and promises to keep the offer open for ten days. Two days later, Neil calls Arlene to revoke the offer. The offer is revoked and Arlene can no longer accept even though the 10-day period has not expired.

To be effective, the revocation must be communicated to the offeree. This means that the offeree must be made aware of the offeror’s decision to revoke the offer. So, if Neil had sent his revocation by mail it would not be effective unless it was received by Arlene. This means that if, before receiving a revocation, Arlene telephoned her acceptance, there would be a valid agreement. Revocation may be communicated indirectly. If Arlene had learned from a friend that Neil had sold his car to someone else during the 10-day period, she would have had sufficient notice. Any attempt to accept Neil’s offer would have been futile.

There is an exception to the rule providing for direct communication of revocation for offers made to the public through a notice or newspaper. Public offers are open to anyone who meets the criteria specified in the offer. They are not limited to a specific individual or a small, private group. The offeror typically communicates the public offer through various means, such as advertisements, announcements, postings, or other forms of public communication. The offeror may revoke a public offering by notifying the public by the same means used to communicate the offer. If no better means of notification is reasonably available, the offer is terminated even if a particular offeree had no actual notice.

Irrevocable Offers

Not every type of offer is revocable. One type of offer that is irrevocable (cannot be revoked) is the option contract. An option contract occurs when an offeree has provided consideration (usually a payment) to the offeror in exchange for a promise to keep the offer open for a specified period. Arlene tells Neil that she cannot make up her mind in ten days but that she will pay him $25 to hold the offer open for thirty days. Neil agrees. Arlene now has a 30-day option to buy the car for $5,000; if Neil should sell it to someone else during the thirty days, he will have breached the contract with Arlene. Note that the transactions involving Neil and Arlene consist of two different contracts. One is the promise of a thirty-day option for the promise of $25. It is this contract that makes the option binding and is independent of the original offer to sell the car for $5,000. The offer can be accepted and made part of an independent contract during the option period.

Partial performance of a unilateral contract creates an option. Although the option is not stated explicitly, it is recognized by law in the interests of justice. Otherwise, an offeror could induce the offeree to go to expense and trouble without ever being liable to fulfill his or her part of the bargain. Before the offeree begins to carry out the contract, the offeror is free to revoke the offer. But once performance begins, the law implies an option, allowing the offeree to complete performance according to the terms of the offer. If, after a reasonable time, the offeree does not fulfill the terms of the offer, then it may be revoked.

Revocability under the UCC

The UCC changes the common-law rule for offers by merchants. Under Section 2-205, a merchant can make a firm offer. A firm offer is a written and signed promise by a merchant to hold an offer to buy or sell goods for some period of time. A merchant’s firm offer is irrevocable. The offer must remain open for the time period stated or, if no time period is given, for a reasonable period of time, not to exceed three months.

Irrevocability by Law

By law, certain types of offers may not be revoked (statutory irrevocability), despite the absence of language to that effect in the offer itself. One major category of such offers is that of the contractor submitting a bid to a public agency. The general rule is that once the period of bidding opens, a bidder on a public contract may not withdraw his or her bid unless the contracting authority consents. The contractor who purports to withdraw is awarded the contract based on the original bid and may be sued for damages for nonperformance.

Rejection by the Offeree

When an offeree decides not to accept an offer from an offeror, the offeree will reject the offer. A rejection is a manifestation of refusal to agree to the terms of an offer, and is effective at the time that the offeror receives it. Arlene calls Neil to reject his offer. As soon as Neil receives the rejection, he is free to sell to someone else. Even if Arlene reconsiders the rejection, calling the next day to try to accept after all, there is no open offer, and therefore no agreement. Having rejected the original offer, Arlene, by her second call, is not accepting but making an offer to buy. Arlene is now the offeror, and Neil is free to accept or reject Arlene’s offer.

Counteroffer

A counteroffer in contract law is a response made by the offeree to the offeror that proposes different terms or conditions than those contained in the original offer. When a counteroffer is made, it essentially rejects the original offer and replaces it with a new offer. If Neil offers to sell his car to Arlene for $5,000, and Arlene would like to purchase the car but at a lower price, she may offer to buy Neil’s car for $4,000. Arlene’s counteroffer has rejected Neil’s original offer, and her offer is available to Neil who can then accept, reject, or even counter, Arlene’s offer.

When negotiating an agreement, an offeree may want to accept most of the agreement while changing a part of it. Normally this would result in a counteroffer which has the results described above. To avoid presenting a counteroffer, it is also possible to accept an agreement by requesting a change or an addition to the offer that does not require the offeror’s assent. In this case, the acceptance of the original offer is valid and does not constitute a counteroffer. Consider the following different scenarios. The broker at Friendly Real Estate offers you a house for $320,000. You accept but require as part of your acceptance that the deal include “the vacant lot next door.” Your acceptance is a counteroffer, which serves to terminate the original offer. If, instead, you had said, “It’s a deal, but I’d prefer it with the vacant lot next door,” then you have accepted the original offer and there is a contract, because you are not demanding that the broker abide by your request in order for you to accept the offer. If you had said, “It’s a deal, and I’d also like the vacant lot next door,” you have also have a contract under the original terms, because the request for the lot is a separate offer, not a counteroffer that rejects the original proposal.

The UCC and Counteroffers

The UCC is more liberal than the common law in allowing contracts to be formed despite counteroffers and in incorporating the counteroffers into the contracts. This UCC provision is necessary because the use of routine forms for contracts is very common, and if the rule were otherwise, much valuable time would be wasted by drafting clauses tailored to the precise wording of routine printed forms. A buyer and a seller send out documents accompanying or incorporating their offers and acceptances, and the provisions in each document rarely correspond precisely. Indeed, it is often the case that one side’s form contains terms favorable to it but inconsistent with terms on the other side’s form. Section 2-207 of the UCC attempts to resolve this “battle of the forms” by providing that additional terms or conditions in an acceptance operate as such unless the acceptance is conditioned on the offeror’s consent to the new or different terms. The new terms are construed as offers but are automatically incorporated in any contract between merchants for the sale of goods unless “(a) the offer expressly limits acceptance to the terms of the offer; (b) [the terms] materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.”

An example of terms that become part of the contract without being expressly agreed to are clauses providing for interest payments on overdue bills. Examples of terms that would materially alter the contract and hence need express approval are clauses that negate the standard warranties that sellers give buyers on their merchandise.

Frequently, parties use contract provisions to prevent the automatic introduction of new terms. A typical seller’s provision is as follows:

Amendments – Any modification of this document by the Buyer, and all additional or different terms included in Buyer’s purchase order or any other document responding to this offer, are hereby objected to. BY ORDERING THE GOODS HERE FOR SHIPMENT, BUYER AGREES TO ALL THE TERMS AND CONDITIONS CONTAINED ON BOTH SIDES OF THIS DOCUMENT.

Section 2-207 of the UCC, liberalizing the mirror image rule, is pervasive, covering all sorts of contracts, from those between industrial manufacturers to those between friends.

Lapse of Time

Offers are not open indefinitely; even offers that do not have a date, day, or time of expiration will lapse after some period of time. In the absence of an expressly stated time limit, the common-law rule is that the offer expires at the end of a “reasonable” time. Such a period is a factual question in each case and depends on the particular circumstances, including the nature of the service or property being contracted for, the manner in which the offer is made, and the means by which the acceptance is expected to be made. Whenever the contract involves a speculative transaction—the sale of securities or land, for instance—the time period will depend on the nature of the security and the risk involved. In general, the greater the risk to the seller, the shorter the period of time. Karen offers to sell Gary a block of oil stocks that are fluctuating rapidly hour by hour. Gary receives the offer an hour before the market closes; he accepts by fax two hours after the market has opened the next morning and after learning that the stock has jumped up significantly. The time period has lapsed if Gary was accepting a fixed price that Karen set, but it may still be open if the price is market price at time of delivery. For unilateral contracts, both the common law and the UCC require the offeree to notify the offeror that he has begun to perform the terms of the contract. Without notification, the offeror may, after a reasonable time, treat the offer as having lapsed.

Death or Insanity of the Offeror

If the offeror dies before the offeree has accepted the offer, the offer is automatically terminated; the offer is said to die with the offeror. The same is true of the offeree. If the offeree dies before accepting the offer, the offer is automatically terminated. Similar to death, if either the offeror or the offeree becomes legally insane or mentally incapacitated to the extent that they cannot understand the terms of the offer or the nature of a contract, the offer is typically considered terminated. Notice, however, that these rules apply to attempts at offers, and would not necessarily apply to a contract between parties made prior to death or insanity.

Destruction of Subject Matter Essential to the Offer

Similar to the rule above, if the subject matter of the offer is destroyed, the offer is terminated. You offer to sell your car, but the car is destroyed in an accident before your offer is accepted; the offer is terminated.

Postoffer Illegality

Finally, it is possible for an offer to become illegal only after that offer is made. For example, an offer to sell a quantity of herbal weight-loss supplements will terminate if the Food and Drug Administration subsequently outlaws the sale of such supplements.

3.4 The Acceptance

To result in a legally binding contract, an offer must be accepted by the offeree. Just as the law helps define and shape an offer and its duration, so too does the law govern the nature and manner of acceptance. The Restatement defines acceptance of an offer as “a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.”  In showing that there is an assent to an offer, the acceptance will reflect back the intention and terms of the offer, either by the making of a mutual promise or by performance or partial performance of a requested action. If there is doubt about whether the offer requests a return promise or a return act, the Restatement, Section 32, provides that the offeree may accept with either a promise or performance. The UCC also adopts this view; under Section 2-206(1)(a), “an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances” unless the offer unambiguously requires a certain mode of acceptance.

The person to whom a promise is directed is ordinarily the person whom the offeror contemplates will make a return promise or perform the act requested. As such, in the typical case, the offeror directs the offer to the offeree, and that party is then in the position to accept the offer, or decide not to accept. Under the common law, whoever is invited to furnish consideration to the offeror is the offeree, and only an offeree may accept an offer. Yet in some situations, a promise can be made to one person who is not expected to do anything in return. In this case, consideration necessary to weld the offer and acceptance into a legal contract can be given by a third party. A common example is sale to a minor. George promises to sell his automobile to Bartley, age seventeen, if Bartley’s father will promise to pay $3,500 to George. Bartley is the promisee (the person to whom the promise is made) but not the offeree; Bartley cannot legally accept George’s offer. Only Bartley’s father, who is called on to pay for the car, can accept, by making the promise requested. And notice what might seem obvious: a promise to perform as requested in the offer is itself a binding acceptance.

When Is Acceptance Effective?

As noted previously, an offer, a revocation of the offer, and a rejection of the offer are not effective until received. However, the same rules will not apply when evaluating whether an acceptance is effective. When communications are instantaneous, such as in a face-to-face negotiation, the precise moment of acceptance is not in question. So, too, would be negotiations taking place over telephone or other means of communicating in real time such as Facetime, or Zoom. But disagreements can arise in contracts that are negotiated via means that are not in real time, such as via email.

Stipulations as to Acceptance

One common situation arises when the offeror stipulates the mode of acceptance (e.g., return mail, fax, or carrier pigeon). If the offeree uses the stipulated mode, then the acceptance is deemed effective when it is sent. Even though the offeror has no knowledge of the acceptance at that moment, the contract has been formed. Moreover, according to the Restatement, if the offeror says that the offer can be accepted only by the specified mode, that mode must be used or any acceptance by an alternative mode is invalid.

If the offeror specifies no particular mode, then acceptance is effective when transmitted, as long as the offeree uses a reasonable method of acceptance. It is implied that the offeree can use the same means used by the offeror or a means of communication customary to the industry.

The “Mailbox Rule”

The use of the postal service is customary, so acceptances are considered effective when mailed, regardless of the method used to transmit the offer. In other words, under the mailbox rule, an acceptance is generally effective and binding on the parties at the moment it is sent or deposited in a mailbox.

The mailbox rule may seem to create particular difficulties for people in business. As the acceptance is effective when sent, the offeror is unaware of the acceptance. The offeror will eventually become aware of the acceptance when it is ultimately received, but that will be after the agreement is formed. It is even possible that the letter notifying the offeror of an acceptance is lost and never arrives. Despite this concern, the law recognizes that in contracts negotiated through correspondence, this burden will always fall to one of the parties. So, if the rule were that the acceptance is not effective until received by the offeror, then the offeree would not be able to rely on the existence of an agreement. As between the two, it seems fairer to place the burden on the offeror, since he or she alone has the power to fix the moment of effectiveness. All the offeror need do is specify in the offer that acceptance is not effective until received.

The mailbox rule eliminates an additional burden of acknowledging the acceptance in order for the agreement to become effective. But note that the offeree must use a mode of acceptance that is reasonable—acceptance is deemed effective only when received.

Acceptance “Outruns” Rejection

When the offeree sends a rejection first and then later transmits a superseding acceptance, the “effective when received” rule also applies. Suppose a seller offers a buyer two cords of firewood and says the offer will remain open for a week. On the third day, the buyer writes the seller, rejecting the offer. The following evening, the buyer rethinks his firewood needs, and on the morning of the fifth day, he sends an e-mail accepting the seller’s terms. The previously mailed letter arrives the following day. Since the letter rejecting the offer had not yet been received, the offer had not been rejected. For there to be a valid contract, the e-mailed acceptance must arrive before the mailed rejection. If the e-mail were hung up in cyberspace, through no fault of the buyer, so that the letter arrived first, the seller would be correct in assuming the offer was terminated—even if the e-mail arrived a minute later. In short, where “the acceptance outruns the rejection” the acceptance is effective.

Figure 3.1 – Summary of Rules for Timing of Offer and Acceptance

Electronic Communications

Electronic communications are increasingly common. Many contracts are negotiated by e-mail, accepted and “signed” electronically. Generally speaking, this does not change the rules. The Uniform Electronic Transactions Act (UETA) was promulgated (i.e., disseminated for states to adopt) in 1999. It is one of a number of uniform acts, like the Uniform Commercial Code. As of June 2010, forty-seven states and the U.S. Virgin Islands had adopted the statute. The introduction to the act provides that “the purpose of the UETA is to remove barriers to electronic commerce by validating and effectuating electronic records and signatures.” In general, the UETA provides the following:

• A record or signature may not be denied legal effect or enforceability solely because it is in electronic form
• A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation
• If a law requires a record to be in writing, an electronic record satisfies the law
• If a law requires a signature, an electronic signature satisfies the law

The UETA, though, doesn’t address all the problems with electronic contracting. Clicking on a computer screen may constitute a valid acceptance of a contractual offer, but only if the offer is clearly communicated. In Specht v. Netscape Communications Corp., customers who had downloaded a free online computer program complained that it effectively invaded their privacy by inserting into their machines “cookies”; they wanted to sue, but the defendant said they were bound to arbitration. They had clicked on the Download button, but hidden below it were the licensing terms, including the arbitration clause. The federal court of appeals held that there was no valid acceptance. The court said, “We agree with the district court that a reasonably prudent Internet user in circumstances such as these would not have known or learned of the existence of the license terms before responding to defendants’ invitation to download the free software, and that defendants therefore did not provide reasonable notice of the license terms. In consequence, the plaintiffs’ bare act of downloading the software did not unambiguously manifest assent to the arbitration provision contained in the license terms.”

If a faxed document is sent but for some reason not received or not noticed, the emerging law is that the mailbox rule does not apply. A court would examine the circumstances with care to determine the reason for the nonreceipt or for the offeror’s failure to notice its receipt. A person has to have fair notice that his or her offer has been accepted, and modern communication makes the old-fashioned mailbox rule—that acceptance is effective upon dispatch—problematic. 

Silence is Not Acceptance

Ordinarily, for there to be a contract, the offeree must make some positive manifestation of assent to the offeror’s terms. The law does not impose on the offeree a duty to speak. Therefore, an offeror cannot usually word his offer in such a way that the offeree’s failure to respond can be construed as an acceptance.

Exceptions

The Restatement recognizes three situations in which silence can operate as an acceptance. The first occurs when the offeree takes a benefit from the offeror and avails himself of services proffered by the offeror, even though he could have rejected them and had reason to know that the offeror offered them expecting compensation. The second situation occurs when the offer states that the offeree may accept without responding and the offeree, remaining silent, intends to accept. The intention of the offeree is key. The third situation is that of previous dealings, in which only if the offeree intends not to accept is it reasonable to expect him to say so. To illustrate these three exceptions, suppose Emma subscribes to a cloud-based software service, and her subscription is up for renewal. If Emma continues to use the software and benefits from it after the renewal without objecting to the fee or canceling the renewal, she has accepted taking the benefit. If the original terms of use and agreement between the parties explicitly state, “Your subscription will be automatically renewed after one year unless you notify us within 30 days that you wish to cancel,” and Emma receives a notice about the renewal but doesn’t respond or cancel her subscription within the specified timeframe, this is acceptance as allowed in the offer. Finally, if Emma has been using this software for several years, and every year the software company sends her a renewal notice with similar terms, and she has never canceled her subscription in the past, the software company would base Emma’s acceptance on the history of their previous dealings.

References

Adams v. Lindsell, 1 Barnewall & Alderson 681 (K.B. 1818).

Barnes v. Treece, 549 P.2d 1152 (Wash. App. 1976).

Clow Water Systems Co. v. National Labor Relations Board, 92 F.3d 441 (6th Cir. 1996).

Did AOL send bogus bills? (2002). CNET. https://www.cnet.com/tech/services-and-software/did-aol-send-bogus-bills/

Restatement (Second) of Contracts, Section 24.

Sherrod ex rel. Cantone v. Kidd, 155 P.3d 976 (Wash. Ct. App., 2007).

Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002).

Uniform Commercial Code, Section 1-201(3).

Uniform Commercial Code, Section 2-204(1).

Uniform Commercial Code, Sections 2-305 through 2-310.

Uniform Commercial Code, Section 3.

Samuel Williston, “Freedom of Contract,” Cornell Law Quarterly 6 (1921), 365.