13.2 Acceptance, Silence, Unilateral Contracts & the Battle of the Forms

13.2 Acceptance, Silence, Unilateral Contracts & the Battle of the Forms

Acceptance questions test three issues: whether the offeree manifested assent in a permitted way, when that assent became effective, and what terms the resulting contract contains when the acceptance does not match the offer exactly.

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Acceptance

Acceptance is a manifestation of assent to the terms of the offer made by the offeree in the manner invited or required by the offer.

A. Bilateral vs. Unilateral Contracts

• Bilateral Contract: Contract formed by an exchange of mutual promises. Unless otherwise stated, an offer is presumed to invite acceptance either by promising to perform or by beginning performance.
• Unilateral Contract: Contract formed where the offer invites acceptance only by full completion of performance. Beginning performance creates an irrevocable option under Restatement § 45, but full acceptance and contract formation occur only upon completion.

B. The Common Law Mirror Image Rule

Under Common Law, the acceptance must be the mirror image of the offer:

• The acceptance must match every term of the offer exactly.
• Any addition, deletion, or modification of the terms operates as a rejection and counteroffer.
• Example: Landlord offers to lease commercial space for $5,000/month. Tenant replies, "I accept, provided you install new carpeting." Under common law, no contract forms; Tenant's reply is a counteroffer.

C. The Mailbox Rule

Under the Mailbox Rule, an acceptance is legally effective upon dispatch (the moment it is placed in the mail or out of the offeree's possession with proper postage and address), rather than upon receipt.

Exceptions and Complications to the Mailbox Rule

1. Offeror Specifies Otherwise: The offeror is master of the offer and can stipulate: "Acceptance effective only upon receipt at my office."
2. Option Contracts: The Mailbox Rule does not apply to option contracts. Acceptance of an option contract is effective only upon receipt by the offeror.
3. Rejection Sent First, Then Acceptance: If the offeree mails a rejection first and subsequently changes their mind and mails an acceptance, the Mailbox Rule is suspended. Whichever communication the offeror receives first controls.
4. Acceptance Sent First, Then Rejection: If the offeree mails an acceptance first and then mails a rejection, a contract is formed upon dispatch of the acceptance. However, if the offeror receives the rejection first and detrimentally changes position in reliance before receiving the acceptance, the offeree is equitably estopped from enforcing the contract.

┌────────────────────────────────────────┬────────────────────────────────────────┐
│         Sequence of Dispatches         │            Governing Rule              │
├────────────────────────────────────────┼────────────────────────────────────────┤
│ Acceptance dispatched first            │ Contract forms upon dispatch.          │
│ (followed by later rejection)          │ (Offeree estopped if offeror relies on │
│                                        │ rejection received first).             │
├────────────────────────────────────────┼────────────────────────────────────────┤
│ Rejection dispatched first             │ Mailbox Rule suspended. Whichever      │
│ (followed by later acceptance)         │ communication RECEIVES first governs.  │
└────────────────────────────────────────┴────────────────────────────────────────┘

D. Acceptance under UCC Article 2: § 2-206 & § 2-207

Under UCC § 2-206, an offer to buy goods for prompt shipment can be accepted either by a prompt promise to ship or by the prompt shipment of conforming or non-conforming goods.

• Shipment of Non-Conforming Goods: Operates simultaneously as an acceptance AND a breach of contract.
• Accommodation Exception (§ 2-206(1)(b)): If the seller ships non-conforming goods and seasonably notifies the buyer that the shipment is offered only as an accommodation, the shipment operates as a counteroffer, not an acceptance. The buyer may reject or accept the counteroffer without breach.

E. UCC § 2-207: Battle of the Forms

UCC § 2-207 explicitly abolishes the Common Law Mirror Image Rule for sales of goods, preventing commercial buyers and sellers from escaping contractual liability simply because their pre-printed purchase orders and confirmation forms contain conflicting boilerplate clauses.

                     ┌────────────────────────────────────────┐
                     │  Offeree Sends Written Confirmation    │
                     │   with Additional or Different Terms   │
                     └───────────────────┬────────────────────┘
                                         │
               ┌─────────────────────────┴─────────────────────────┐
               │ Does offeree condition acceptance on assent       │
               │ to additional/different terms? (§ 2-207(1))        │
               └─────────────────────────┬─────────────────────────┘
                                         │
                       YES               │              NO
                        ▼                │               ▼
              ┌──────────────────┐       │     ┌──────────────────┐
              │   NO CONTRACT    │       │     │ VALID ACCEPTANCE │
              │  (Counteroffer)  │       │     │ (Contract Forms) │
              └──────────────────┘       │     └────────┬─────────┘
                                                        │
                                                        ▼
                                        ┌────────────────────────────────┐
                                        │   What happens to the terms?   │
                                        │          (§ 2-207(2))          │
                                        └───────────────┬────────────────┘
                                                        │
                        ┌───────────────────────────────┴───────────────────────────────┐
                        ▼                                                               ▼
              ┌──────────────────┐                                            ┌──────────────────┐
              │ At Least One     │                                            │  BOTH Parties    │
              │ Non-Merchant     │                                            │  are Merchants   │
              ├──────────────────┤                                            ├──────────────────┤
              │Additional terms  │                                            │Terms become part │
              │are PROPOSALS     │                                            │of contract UNLESS│
              │(require assent). │                                            │1. Offer limits   │
              └──────────────────┘                                            │2. Material alter │
                                                                              │3. Objection made │
                                                                              └──────────────────┘

1. Contract Formation (§ 2-207(1))

A definite and seasonable expression of acceptance operates as an acceptance even though it states terms additional to or different from those offered, UNLESS acceptance is expressly made conditional on assent to the additional or different terms.

• If the offeree includes a proviso stating: "Acceptance is subject to and expressly conditioned upon buyer's assent to all terms herein," no contract is formed; it is a counteroffer.

2. Treatment of Additional Terms (§ 2-207(2))

• Between Non-Merchants (or one merchant and one non-merchant): The additional terms are treated as proposals for addition to the contract. They do not become part of the contract unless the offeror expressly agrees.
• Between Merchants: Additional terms automatically become part of the contract UNLESS:
  1. The offer expressly limits acceptance to the terms of the offer;
  2. The terms materially alter the contract—meaning they would result in surprise or hardship if incorporated without express awareness. Official Comment 4 gives examples of material alterations, such as clauses negating the standard warranties of merchantability or fitness, requiring guaranteed full deliveries where trade usage allows leeway, or allowing the seller to cancel if the buyer fails to pay an invoice when due. Comment 5 gives examples that usually are not material, such as fixing a reasonable time for complaints within customary limits, providing for interest on overdue invoices, or setting standard credit terms within the range of trade practice. Courts divide on arbitration clauses: some treat them as material as a matter of law, while others decide case by case; OR
  3. Notification of objection to the terms has already been given or is given within a reasonable time after notice is received.

3. Treatment of Different (Conflicting) Terms

When terms in the acceptance directly contradict terms in the offer (e.g., offer specifies a 90-day warranty; acceptance specifies a 30-day warranty):

• Knockout Rule (Majority Rule): The conflicting terms knock each other out. Neither party's term becomes part of the contract, and the gap is filled by the standard UCC statutory gap-fillers.
• Minority Rule: The different terms are treated like additional terms under § 2-207(2).

4. Contract Formed by Conduct (§ 2-207(3))

If the writings do not establish a contract (e.g., offeree made acceptance conditional, but offeror never assented), but the parties nevertheless perform (goods shipped and paid for), a contract is recognized by conduct.

• The Terms: The terms consist of those terms on which the writings of the parties agree, supplemented by any applicable UCC statutory gap-fillers.

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Other Acceptance Rules

Manner of Acceptance and Notice

• Implied-in-fact contracts: Assent may be shown entirely by conduct. A patient who makes an appointment and receives treatment from a physician has impliedly agreed to pay the reasonable fee even if no one mentioned price.
• Accepting by performance: When an offer lets the offeree choose between promising and performing, beginning the invited performance is an acceptance and operates as a promise to finish (Restatement § 62).
• Notice of performance: No notice is needed to accept a unilateral offer by performance unless the offer requests it. But if the offeree has reason to know the offeror cannot learn of the performance with reasonable promptness and certainty, the offeror's duty is discharged unless the offeree uses reasonable diligence to notify the offeror, the offeror learns of the performance within a reasonable time, or the offer says notice is not required (Restatement § 54).
• Notice of a return promise: An acceptance by promise requires the offeree to use reasonable diligence to notify the offeror (Restatement § 56).
• Knowledge of the offer: Identical offers that cross in the mail do not form a contract, because neither was made in response to the other.

Silence as Acceptance (Restatement § 69)

Silence and inaction operate as acceptance only when:

1. The offeree takes the benefit of offered services with a reasonable opportunity to reject them and reason to know they were offered with the expectation of compensation;
2. The offeror has stated or given reason to understand that silence will be acceptance, and the offeree, by remaining silent, intends to accept; or
3. Because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if it does not intend to accept.

In addition, an offeree who exercises dominion over offered property—for example, by using or reselling goods—is bound on the offered terms unless they are manifestly unreasonable.

Electronic Communications

Communications by telephone or other substantially instantaneous means are treated as if the parties were in each other's presence (Restatement § 64). Under the Uniform Electronic Transactions Act, an electronic record is sent when it leaves the sender's control and received when it enters the recipient's designated system, so the gap between dispatch and receipt that drives the mailbox rule is usually very short.

Auctions (UCC § 2-328)

• The auctioneer's call for bids is an invitation; each bid is an offer, and the sale is complete when the auctioneer announces it by the fall of the hammer or in another customary way.
• Auctions are with reserve unless the goods are explicitly put up without reserve. With reserve, the auctioneer may withdraw the goods at any time until announcing completion. Without reserve, once the auctioneer calls for bids on an item, it cannot be withdrawn unless no bid is made within a reasonable time.
• In either type, a bidder may retract a bid until the sale is announced complete, but retraction does not revive any earlier bid.
• If the seller bids or procures a bid without notice that it reserved that right, the buyer may avoid the sale or take the goods at the last good-faith bid before the sale ended.

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Comparison: Common Law vs. UCC Formation Rules