§ 1.12 Simultaneous Expressions of Assent: Contracts Without Offer and Acceptance

It is quite possible for two persons to reach an agreement and to express that fact in words or other conduct, without going through the specific process of an offer made by one, followed by a separate and independent acceptance by the other. For example, the terms of an agreement between two persons, A and B, might be prepared in advance by a third person, C, and communicated by C in completed form to A and B. Thereupon, A and B stand in each other's presence and repeat in unison, ''We mutually agree in accordance with the terms prepared for us by C.'' This scenario is purely hypothetical, but something much like it sometimes occurs where C, a mediator, makes a proposal that is accepted by both A and B. In such a case, the party first assenting to the proposal can be deemed the offeror, and the second party the offeree. In this context, as in others, however, it frequently will be apparent that although mutual assent has been reached, no identifiable moment of conclusion of the contract can be reconstructed and no offeror or offeree identified.n1

The model of offer and acceptance does not describe all contract formation. There are certain large and well-defined classes of cases in which a promise is held to be a binding contract even though there has been no expression of assent by the promisee. Such are practically all the cases in which a promise is enforceable because of some ''past consideration'' that constituted the motivating reason for which the promise is made.n2 Also, contracts formed under the doctrine of ''promissory estoppel'' are not made by the process of offer and acceptance.n3

The Uniform Commercial Code provides in Section 2-204(2) that: ''An agreement sufficient to constitute a contract of sale may be found even though the moment of its making is uncertain.''n4 There are also many cases at common law, not governed by the Uniform Commercial Code, where it is clear that a contract has been formed, but the process of offer and acceptance-if there was one-cannot be reconstructed. This may be true in a bargaining contract where agreement is reached in bits and pieces.n5 It is frequently true in a contract inferred from the parties' conduct over a long period of time.n6 As to contracts formed by conduct, the Uniform Commercial Code is explicit. It provides in Section 2-204(1) that: ''A contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of the contract.''

In modern business transactions of large scale it frequently happens that the parties, often not just two, but a multiplicity of enterprises, negotiate a transaction with the understanding that the parties will not be bound until their agreement is finally and completely articulated in written documents that are signed and exchanged. The documents are drafted, usually by lawyers, and reviewed by all of the interested parties. The parties arrange to meet at a ''closing'' where the documents are signed more or less simultaneously and exchanged.n7 Such closings depart from the model of offer and acceptance. Similarly, a proposed contract may be drafted, each party signing one copy. Upon the simultaneous exchange of the documents, a contract may be formed without there being an identifiable offeror or offeree.n8

There are also contracts to which there is no assent to the terms of the contract. Through the use of a fiction, tortious acts of conversion are transmuted into contracts.n9 Also certain contracts are made without assent by operation of law as where a lease is renewed by a tenant's holding over.n10

Despite the existence of contracts for which no process of offer and acceptance has occurred, or for which the process cannot be reconstructed, it is doubtless true that most contracts are made by the acceptances of offers. Third party beneficiary contracts are an interesting group in this respect. In nearly all of the cases in which a third party beneficiary has an enforceable right, the beneficiary's own expression of assent is not a necessary factor in making the promise enforceable.n11 In these cases, the contract is made by two other parties (promisor and promisee); with respect to them the rules as to offer and acceptance are applicable.

Legal Topics:

For related research and practice materials, see the following legal topics:

Contracts LawFormationExecutionContracts LawSales of GoodsForm, Formation & ReadjustmentFormationOffer & AcceptanceContracts LawFormationOffersGeneral OverviewContracts LawFormationMeeting of MindsContracts LawFormationAcceptanceGeneral OverviewCommercial Law (UCC)Sales (Article 2)Form, Formation & ReadjustmentGeneral Overview

FOOTNOTES:

(n1)Footnote 1. 2 Formation of Contracts: A Study of the Common Core of Legal Systems 1586 (Rudolph Schlesinger ed. 1968).

(n2)Footnote 2. See Chapter 9, dealing with Past Consideration.

(n3)Footnote 3. See Chapter 8, dealing with Reliance on a Promise as Ground for Enforcement.

(n4)Footnote 4. Accord, Restatement of Contracts (Second) § 22(2).

(n5)Footnote 5. E.g., Metro-Goldwyn-Mayer, Inc. v. Scheider, 40 N.Y.2d 1069, 392 N.Y.S.2d 252, 360 N.E.2d 930 (1976) . Numerous cases of indefinite agreements which became binding contracts because of subsequent conduct or discussion are good illustrations of contracts without an identifiable process of offer and acceptance. See § 4.7 below. See also Restatement of Contracts (Second) § 22, comment b.

(n6)Footnote 6. E.g., Wilhoite v. Beck, 141 Ind.App. 543, 230 N.E.2d 616 (1967) , one of countless cases of an implied contract to pay for food and lodging, and Bourisk v. Amalfitano, 379 A.2d 149 (Me.1977) , one of the countless cases of an implied contract to pay for construction work done. Neither case seems to have involved an identifiable process of offer and acceptance.

(n7)Footnote 7. See 2 Formation of Contracts, note 1 supra at 1583-85.

(n8)Footnote 8.

Ga. - Whitley v. Patrick, 226 Ga. 87, 172 S.E.2d 692 (1970) .

Ky. - D.L. Walker & Co. v. Lewis, 267 Ky. 107, 101 S.W.2d 685 (1937) . The court said: ''Appellant contends that the paper in question was no more than an offer by appellee, and that there was no acceptance. Looking to the papers exhibited, it appears that while the names of both parties were not signed to either of the papers, they were exact duplicates written at the same time; one signed by appellant and one by appellee. A written agreement of which there are two copies, one signed by each of the parties, is binding on both to the same extent as if each party had signed on one paper. Duplicates are treated as originals, although one may be called 'original' and another 'copy.' 13 C.J. 304, § 126. We have frequently held exchange of telegrams, postcards, or letters to constitute a valid contract, if upon consideration together they evidenced a meeting of the minds.''

N.Y. - Besser v. K.L.T. Associates, 42 A.D.2d 725, 345 N.Y.S.2d 659 (1973) , aff'd, 34 N.Y.2d 687, 356 N.Y.S.2d 295, 312 N.E.2d 478 .

Ut.- Aspen Acres Association v. Seven Associates, Inc., 29 Utah 2d 303, 508 P.2d 1179 (1973) , where it was properly held that mere execution of the duplicates without an inquiry into the parties' other expressions of intent is insufficient to establish that a contract had been made.

(n9)Footnote 9. See § 3.8 below.

(n10)Footnote 10. See 2 Formation of Contracts, supra note 1, at 1587-89.

(n11)Footnote 11. See Chapter 41, Third Party Beneficiaries.

Occasionally a court, not realizing or not approving the development of third party beneficiary law, has discovered a fictitious ''privity'' between the promisor and the third party. In such cases the third party's ''assent'' may be long after the making of the promise.

See:

Mass. - Gardner v. Denison, 217 Mass. 492, 105 N.E. 359 (1914) .

N.Y. - Kessler v. Haile Motor Co., 127 Misc. 413, 217 N.Y.S. 182 (1926) .

Eng. -The Satanita, [1895] P. 255, [1897] A.C. 59; McCannell v. Mabee Maclaren Motors, Ltd., 36 B.C. 369 (1926).