GEORGE GEIS: All right. Good afternoon, everyone. STUDENT: Good afternoon. [LAUGHTER] GEORGE GEIS: Today,
we will discover-- we will continue our discussion
of offer and acceptance in contract law. And as we've been talking
about with a contract, you don't have one imposed
upon you by legal fiat. It's not like tort
law or criminal law. But you only enter
into a contract if there's a voluntary
agreement between two parties. And we've been looking at a
number of situations for us to figure out whether or not
you have something that can count as a real legal offer. And in a moment,
we'll get to what happens when you do
have a real legal offer and we're looking at what
it takes to actually accept the offer. First off, though, how do
you know whether you've got something that is an offer? We looked at two cases
last time that were pretty close factually. And I'm not sure I
would want to do this, but I guess if I was going
to try to distinguish the two cases or to justify why
one case came out one way and the other case came
out the way that it did, I guess I might try
to do it like this-- I'd say, if you remember
back to the Lonergan case, we have letters being exchanged
for real estate deals. In that situation,
there was no offer even in the final letter
that was sent over to the potential purchaser. Why not? Well the buyer
plaintiff should know by the language of that letter
that the seller was reserving a right of final approval. In other words, they
were reserving the right to make a final decision
on whether they really were willing to sell the land
over to the potential buyer. It wasn't a case where
the buyer could say, I accept, and know that
they were done with it. Rather, there was a
final round of assent. If that's true, it meant
it was not an offer and therefore you couldn't
have a real legal contract. Conversely, if we look at
the Southworth case, which was, again, very similar
factually, we could say-- although it's a close one--
we could say this case also came out correctly. Why? Well, the letter
was really detailed. It had a lot of the
key terms there. It was limited in audience. It only went to a
couple of people. And furthermore, we
might think that this was a situation, perhaps
based on the background discussions between the parties,
where a reasonable offeree could think that
they could say, I accept, and know that
they were done with it, know that everything
had been finished. In other words, in both
cases, the key question is whether the power
of approval-- the power of final approval had been
given over to the other side? If the power of approval is
given over to the other side, and they can just
say I accept and know that they're done
with it, then you've made them a real legal offer. If on the other hand,
you're reserving that right of final
approval with yourself, you haven't done something
that amounts to an offer yet. You're still just
in the situation where you're making a
preliminary negotiation or an invitation for
them to make you an offer that you can then
accept or not accept according to what you see fit. Now we're ready to
continue by looking at the case of Lefkowitz
versus Great Minneapolis Store. This is on page 219. Now, I don't know if you watch
that HBO comedy series Curb Your Enthusiasm
with Larry David. This case reminds
me of something that the actor Larry
David would do. I mean, in my mind, he is
my model for Lefkowitz. We've got a situation
where a store-- Great Minneapolis Store--
runs an advertisement one day in the newspaper I
think up in Minneapolis. And here's what it says-- Saturday 9 AM sharp,
3 brand new fur coats. Worth to $100. First come first served $1 each. Lefkowitz sees the ad. He decides that he's interested
in accepting the offer. So he gets up early
Saturday morning, marches over to the
Great Minneapolis Store, waives his dollar and
says I'd like to accept. And the store says, no, we're
not selling you anything. You should know,
Lefkowitz, that this offer was directed for women only. You can't accept it. A little more time goes by. Lefkowitz presumably is upset. Next week, he sees another ad. Same store--
Saturday 9 AM sharp. Two brand new
pastel mink scarves. Selling for $89.50 out they go. Each $1. One black lapin stole. Beautiful. Worth $139.50. $51 $1,
first come, first served. Same thing-- Lefkowitz gets
up early Saturday morning, marches over to the
store, waives his dollar and that store says,
Lefkowitz, you know our rules, you can't accept this offer. We're not giving you the stole. Lefkowitz decides that
he's going to sue. All right. Joey, let's think
this one through. Lefkowitz wants the value
of both furs presumably or products from both
of the advertisements. Let's start with the first ad. Is this an offer that
Lefkowitz can accept? STUDENT: I would say so,
although the court did not award him damages
for the first one. GEORGE GEIS: So the
court presumably said no, or they would have
awarded him some damages. But you think this is an offer. How do we know? STUDENT: Well, the
price is clearly defined in the advertisement. And also, it's specifically
directed at the first person to arrive in the
store in the morning. GEORGE GEIS: Does this worth
two $100 mean anything to you? I mean, does two
change anything? STUDENT: Yeah, that's
the issue that court found was that the actual price
of the coat was speculative. It was uncertain, so
they didn't know how much to award him in damages. GEORGE GEIS: And it might be the
case that the store hadn't even identified which
specific coat it was-- is designating to sell. We don't know whether the
advertisement was just saying we're going
to pick a few out, but we haven't decided
yet which ones, or if they've got a few
specifically identified coats. In either event, it's
a little bit indefinite whether they were
offering $100 coat or if they were offering
something worth much, much less, perhaps a cheaper coat. And so I think for that
reason, the first ad didn't count as an offer
according to the court. And that, by the way, is I
think consistent with what we had historically understood
advertisements as being. Advertisements--
remember we talked about last time--
are not generally understood to be offers. They're invitations
to make an offer. Hey, I'm selling
this kind of stuff. Make me an offer. I'll probably go-- I'll
probably accept it. I'm probably going to accept it. Now, you said you thought
this was an advertisement-- or this was an offer. Why do you disagree
with the court? STUDENT: So it has the
appearance of an offer as the other advertisement did. I'm thinking now that maybe
it wasn't specific enough with which coat, since they
didn't have a clear price for how much it was worth. It's possible that they hadn't
had the details worked out. So maybe it didn't
constitute an offer actually. GEORGE GEIS: So maybe not. I mean, it's close
but maybe not. The court didn't think it was. But let's jump up
to the second offer. You mentioned a
minute ago that that might be treated differently. Will Lefkowitz recover for this? STUDENT: Yes. GEORGE GEIS: Yes, he will. He will. He wins on this. Notice he doesn't
win the full $139.50. Notice he doesn't win the
right to get this specific stole through
specific performance. He gets the difference in the
dollar he would have had to pay and the $139.50 that presumably
this stole was worth. Or $138.50. But fundamentally,
for our purposes, the court says this actually
did count as an offer. Now, how can this be? How can an advertisement be an
offer when that is so counter to what we said before? STUDENT: Well, in
this circumstance, an advertisement-- usually
an advertisement is directed to the public-- no one in particular. So it's more of an
invitation for an offer as opposed to an offer
itself, because the store has limited inventory. So if everyone was to
come forward and try to accept the
offer, they wouldn't want to hold the store bound by
all those so-called contracts. But in this case, it was
specifically directed at the first person
to be at the store. So it was a lot more direct. GEORGE GEIS: So first
come, first served. We're telling you in
advance everything you need to do to accept it. And only one person is going
to be able to accept it, at least for each
of the products. This said first
come, first served. Why wasn't-- what's
the difference? STUDENT: So the second
ad is a lot more specific with what was being sold. It's specifically the black
lapin stole worth $139.50. So they knew exactly
what the product was and how much it was worth. GEORGE GEIS: So we've got an
exception to our general rule that advertisements are
not normally offers. We see this at the bottom of
220, over to the top of 221. Where an offer is clear,
definite, and explicit, and leaves nothing
open for negotiation, it constitutes an offer,
acceptance of which will complete the contract. And I think they meant
where the advertisement is clear and definite. So if you have a really
clear advertisement, then it can count as an offer. And here, I think they
say exactly what it is and exactly how it
should be accepted. So Lefkowitz wins on the second
ad, but the second ad only. Now, Joey, does the
store have the right to withdraw the offer? STUDENT: If it's a
clear offer, they have a right to withdraw
before it's accepted. GEORGE GEIS: So when
does Lefkowitz accept? Suppose I'm Lefkowitz and you
see me walking towards you at the store, and I'm
waving the newspaper, and I've got my dollar. [LAUGHTER] Have I accepted yet? STUDENT: I think at the moment
that he appears at the store at-- I think 9 AM-- with the dollar, that would
constitute acceptance. GEORGE GEIS: So if
you're the store keeper, and you see me marching
across the parking lot, and you know that last week
I tried to accept this offer, you could get out your megaphone
and say, we revoke Lefkowitz. [LAUGHTER] Would I have a contractual
right if you did that? STUDENT: I'm not sure. I think the-- I think up to that
moment they would be able to withdraw the offer. GEORGE GEIS: If
you've revoked it and you've revoked it
before I've accepted it, then you've squashed that offer. I can't scrape it
back up and somehow turn it into a contract. It's gone. So timing is going to
be really important with a lot of these cases. If you don't want the offer
to be available anymore, you've got to pull it back. The store could have pulled
it back, but they didn't. And presumably
Lefkowitz accepted it when he showed up first
in line waving his dollar, claiming the stole. STUDENT: Does the-- I mean, you gave the
example of the megaphone. Does the publicity of
the revocation matter? Whether he whispers I revoke,
or whether he declares it, puts it in the
newspaper, et cetera. GEORGE GEIS: Yeah, I mean,
we'll talk a little bit about this-- general,
you've got to communicate it to the parties. And it might be easy if
Lefkowitz is marching over and you see Lefkowitz
trying to come and you want to revoke
it for Lefkowitz. It might be harder--
suppose you're the store, and you make this
offer out there, and then you realize that,
oh, boy, we really messed up. We don't want to make
this offer anymore. We want to try to
revoke it for everyone. That can be a little tricky. Because you could try to run a
newspaper ad again, but maybe everybody doesn't see that. And as we'll talk
about shortly, usually if you're revoking
an offer you've got to try to communicate that. Any ideas on what
you might try to do if you're revoking the offer? Yeah, Gillian. STUDENT: Put up a sign
up in front of the store. Like right-- so the person
would have to walk around the sign to get in. GEORGE GEIS: All right. So I think that's
not a bad idea. That newspaper advertisement
that we posted, that might be
construed as an offer, we revoke it right
now for everybody, including you, Lefkowitz. And maybe something like
that would allow you to argue that it revoked it. Now, by the way, there are some
special consumer protection problems that sometimes arise
in situations like this. The notes after the
case talks a little bit about some of the
special rules that have been enacted on
top of contract law to try to prevent against
deceptive trade practices. And maybe even something
like that wouldn't save you if you would engage in some sort
of a deceptive trade practice by trying to get
people in when you knew that you weren't ultimately
going to sell the product. But as a matter
of contract law, I think Gillian's idea
probably would work. You communicated your
revocation before the other side accepted it. Andy? STUDENT: Could we argue-- the court kind of
glosses over this, but the first time
when they told him that it was only
an offer for women and that these offers were
intended for women, in general, could that be a revocation
of the offer from Lefkowitz specifically? GEORGE GEIS: Joey, how
do we think about that? Lefkowitz knew that the initial
offer was only made for women. Shouldn't that preclude him
from accepting the second ad even if it was an offer? STUDENT: Well, once again,
the second advertisement didn't include any
stipulation like that. So in isolation, I would instead
say the second advertisement-- it just said whoever
is the first person at the store at 9:00 AM. GEORGE GEIS: So the court
says-- court thinks about that. It says they claim that this
wasn't directed at Lefkowitz. But they didn't say that
in the offer itself. Now, here's an interesting
question-- could they have said that
in the advertisement? This is directed for women only. Men, you're not
able to accept it. STUDENT: They could have
put it in the advertisement. And if they had,
Lefkowitz probably would not have been
able to recover. But they did not. GEORGE GEIS: Can you
make offers that are only available to one gender? STUDENT: I think so. GEORGE GEIS: Yeah. I mean, you can in some cases. It's a tricky and
developing area of the law. And there is some
federal law that says in certain situations-- housing, and employment, and
in certain special areas-- you actually can't discriminate
on the basis of gender when you're contracting. I think California has a pretty
broad prohibition on gender discrimination in contracting. But in many states, I
think it is all right if you want to direct your offer
for only a certain audience. And if they had done
it, then maybe this case would have come out differently. Here they didn't. They didn't say that. Maybe Lefkowitz knew
or should have known. But then again,
Lefkowitz could have thought that maybe that
was only for the first one, not for the second one. They didn't put it in. They can't change
it after the fact. He's already accepted
the contract. Therefore, it's
too late for them to try to modify
who it applies to. Christoff, your hand's up. STUDENT: I'm thinking
about the first case-- let's say a woman
coming to the store and she wants to buy this coat. We can still say that it's not
specific enough-- this offer is not specific enough. GEORGE GEIS: I
think that's right. I think if they didn't
want to sell it, they didn't have to sell it. I don't think gender mattered
one way or the other. I mean, I guess that was
motivating them maybe to not give it to
Lefkowitz initially. I really don't know
why they didn't just sell it to Lefkowitz
initially if that's what they wanted to do. But I think as a
matter of offer, the problem here was
that it wasn't specific, definite enough and left
nothing open to negotiation. It was still not enough to count
as a change to our normal rule that ads aren't offers. STUDENT: But we have a specific
price there-- $1 like each, right? GEORGE GEIS: Well,
we have a price, but we don't know exactly
what it is we're selling. At least that's how
the court saw it. What exactly are we selling? Three brand new coats
worth I think up to $100. Maybe it's a cheap one. Maybe it's a nice one. I think the problem
that's bothering the court is that here we don't
really know exactly what's being put on offer. Here we've got apparently
one specific thing in mind-- this one black lapin
stole worth $139.50. So that's what I think really
is the distinguishing factor between the two cases. With that, let's move on. I want to take a look at the
Statue of Liberty problem on page 223. And I think we can quickly
talk through this one. We've got a situation
where Congress is trying to raise some
money for Ellis Island and to restore the
Statue of Liberty. And they decide they're going to
issue some commemorative coins. And they decide they're going to
mail some advertising materials around to certain people
that have bought-- some collectors that have bought
coins from them in the past. Here's what the materials say-- the mint-- if the mint
received your reservation by December 31,
1985, you'll enjoy a favorable pre-issued
discount saving you up to 16% on your coins. And there's a huge
demand apparently. The [? Massaros ?]
send in the order form. I don't know how many
of these they order. Ultimately, they're told back
we can't process your order. We can't sell you the
commemorative Statue of Liberty coins. Sorry. They decide they're
going to sue. They thought they
had a contract. How do we analyze
this situation? Is there offer and
acceptance, such that there is a contract here--
the [? Massaros ?] should be able to win their case. Any thoughts? Yeah. STUDENT: I mean, I think
there's offer and acceptance. But what the thing
that they're getting is the 60% discount and
not the coin itself. So what they've
accepted the offer for is the opportunity to get a
discount if they buy one later, but not necessarily a guarantee
that they get the coin. GEORGE GEIS: So they had--
have they had a commitment that they're really-- are they really binding
themselves then? Are they really-- or does each
side still have a free way out? STUDENT: I mean, they're
binding themselves in that if they sell the coin, they have
to sell it at this discount. GEORGE GEIS: But
how is that locked into any real legal commitment
if they're free to sell or not sell as the mint sees fit? Yeah, I mean, there's
language in there certainly suggesting that
maybe they should be entitled to a discount. I guess the question
is, do they really have any legal entitlement
as a matter of contract law? Gillian? STUDENT: I'm just a
little confused by this. It says that they sent in
their credit card information. GEORGE GEIS: Yeah. STUDENT: So did they prepay
for the coin at a 16% discount or did they pre-order it? I didn't quite understand. GEORGE GEIS: I don't know
that we know for sure. But what I envision is we've
got one of these order forms. And they wrote in what
they want and the pricing reflected a 16% discount. They summed it up. And then it was one
of those things where you write in your credit card
and they send that all in. And then the mint said, sorry,
we won't process your order. And then they decide to file a
suit saying we had a contract. Is there a contract? Yeah. STUDENT: I think
that this situation is similar to the first
ad in the last case where the coat was
worth two $100. Because here it's saying you'll
get a discount up to 16%. And it doesn't seem
definite enough. GEORGE GEIS: So the
fact that it says-- let's get the language
exactly right-- [INAUDIBLE] saving
you up to 16%. You're bothered by that up. What if on the order
form it actually had a 16% price savings. STUDENT: I think that would
constitute an offer then, because they're being
clear [INAUDIBLE].. GEORGE GEIS: So what's
the offer, the order form coming from the mint? STUDENT: I think so. GEORGE GEIS: Other thoughts? Yeah. STUDENT: I think if they made
it clear that they were selling only a limited number, it's
kind of like that first come, first served issue, so even
if it were an offer, then only a certain number of people
would be able [INAUDIBLE].. So [INAUDIBLE]. GEORGE GEIS: So if
the plaintiffs here had been in the initial group
before they had sold out, does that mean that
the mint was compelled to give them the coin? STUDENT: I think so. GEORGE GEIS: I mean, that's
one way to understand it. We're giving you an offer. We'll sell you this
at a certain price, conditional or contingent
upon you accepting-- you can accept it by being one
of the first number of people through. STUDENT: Yes. Do we have a price here? Is the price specified somehow? We have just a discount, right? GEORGE GEIS: Yeah, I'd
like to see the order form. I don't know exactly what
was on the order form. My guess, based on my
exchange with Gillian, was that there actually was
a price listed that you were lining up how much you owed. But I'm speculating
a little bit. STUDENT: But wouldn't
if this is a contract-- and I've ordered clothes
from stores before and like had it in my cart,
processed the order, and then I get an email that
says like it's out of stock, never mind. Then they've
breached my contract. GEORGE GEIS: Well, that's
exactly the situation here. So can you sue them now, right? [LAUGHTER] STUDENT: So there
was [INAUDIBLE] I've never been, like,
man, I should really take this to court. [LAUGHTER] GEORGE GEIS: Well, should you? I mean, should you? Have they made you an offer
and then you've accepted it? STUDENT: Well, doesn't
then the issue of when I return merchandise,
too, like I'm in breach? GEORGE GEIS: Well, returns
are a little bit different, because they may have a
standing policy allowing or not allowing for returns. So that may be a part
of your contract. But I think your example
of you ordering something with either a written form
or maybe an online form, and then they're saying, no,
sorry, we can't give it to you, raises the exact
question of have you created a contract yet? Do you have an entitlement
to that specific product? Or are they OK
legally not giving you what you thought you
had purchased already? STUDENT: I could sue
so many companies. GEORGE GEIS: Maybe so. [LAUGHTER] Should she? Should we recruit a
legal defense fund and send money Carly's way? Tiffany. STUDENT: Well, I
was going to-- maybe they're defining-- yes,
they sent in their form, but maybe they needed
to accept the form before the actual reservation
could be complete? So maybe that's like the
wording could get them out of it, because
they made an offer, they sent it in, but had
the other person accepted? You do a lot of applications
and a lot of forms, but somebody has to process
it to actually become a [INAUDIBLE]. GEORGE GEIS: So you're
saying the offer didn't come from the mint to the buyers. That was an invitation
to make an offer. The offer came from the
buyers into the mint. And then the mint was
free to accept it or not accept it as they saw fit. Yeah, that's the way the court
saw it when they actually litigated this case. They said, you have
an open-ended form, there's an open-ended
quantity term on the form. That's important. You can't expect that
they're necessarily going to commit to selling
an unlimited number of these coins. So therefore, the invitation to
make an offer came from them. The offer then came
from the buyers. And the mint could accept it or
not accept it as they saw fit. Does that seem right to you? STUDENT: I don't-- I took issue
specifically with the portion that said they told them it was
because they couldn't process their credit. GEORGE GEIS: Yeah. That seems a little
bit sneaky, doesn't it? STUDENT: It does because
to me they're saying, oh, if you had done this correctly,
then our contract would have been valid. So to me there's some
sort of bad faith there. GEORGE GEIS: Yeah. That's an interesting question. I mean, they didn't
have to say that. They could have just
said, no, sorry, we're not going to
honor your award. But does the fact that they did
say that and it doesn't seem to be true, or we at least
would suspect that it's to change anything-- maybe
not as a matter of offer and acceptance, but that might
be a good example of bad faith where they're saying something
that doesn't seem to really be the truth. Kevin. STUDENT: I don't remember if
we already talked about this, but let's say the court
went the other way. Are they usually
a lot more lenient when it's something that
you could reasonably expect you'd run out of stock,
as opposed to a commodity? GEORGE GEIS: Are they
lenient in what way? More lenient about finding
an offer and acceptance? STUDENT: No, not that. In awarding damages--
would they say, a reasonable person
would have expected that this could of run out and
that almost first come, first served is implied? GEORGE GEIS: I don't know
that they would necessarily change the way that they
would understand it. I mean, in either
case, we've got to figure out is
there a contract or is there not a contract? I suppose the mint probably
could have and should have maybe been a little
more careful in the language that it used. And it limited it to
the while supplies last or put something like that. You see language like that. It's a way to protect yourself. If this had been an
offer from the mint down to the plaintiffs,
presumably they could have written in we'll
take 500,000 of these things, if they thought the price
was going to spike up, thought they had a
contractual entitlement, and then sued for
the price differences between what they would have
gotten and what they did get, which I guess was nothing. STUDENT: So last time I got
into an argument with a customer service rep about
cancelling my order, they actually said that they
specifically do not charge credit cards until the point
at which they ship the product, because the credit card charging
constitutes the acceptance of-- your acceptance of the offer. GEORGE GEIS: So you don't want
to raise the Carly Defense Fund that's going to get
us lots of money by-- [LAUGHTER] --suing all the companies
that don't send her the stuff. STUDENT: Yeah, I mean, they
have the right to revoke. GEORGE GEIS: Yeah, I think
that's how most companies would say it works. When you're sending in your
order, you're making the offer. STUDENT: But I think that
they run my credit card. I have gotten emails
saying here's your receipt, here's your order, and
then three weeks later it's like we checked and we
don't have it in inventory. Sorry, we're
processing a refund. GEORGE GEIS: All right. We'll continue to ponder
then whether we're going to raise your defense fund. [LAUGHTER] We want to see the fine print
of exactly what's on these order forms for us to know whether
the offer and acceptance-- I mean, this is
a good discussion because it's not
always perfectly clear exactly when the offer
happens and exactly when the acceptance happens. And that's important
when you're trying to figure out
whether you even have something that you can accept. Here's another example. Think about this-- suppose you
attend an open outcry auction. You go to an auction and you're
interested in buying something. When's the offer
and the acceptance? How does that work in
an auction context? Selling a brand new Mercedes. Do I hear $40,000? Do I hear $50,000? [INAUDIBLE] STUDENT: Me raising
my hand and bidding is that I'm offering to pay that? And when the guy say,
going once, going twice, he's like giving me kind
of an opportunity to-- GEORGE GEIS: To revoke. I revoke. Never mind. [LAUGHTER] So when I say selling
the Mercedes $50,000, presumably that's not an offer. And if I want to I could
say, oh, never mind, I'm going to cancel the auction. But then when you bid
$40,000, $42,000, $43,000, those are all offers coming in. And I'm saying going once, going
twice, you say, stop, never mind, I didn't mean to do it. When is the acceptance? STUDENT: When he says sold. GEORGE GEIS: Sold-- the gavel. That's typically the
acceptance when you're dealing with an auction contract. What about eBay, like
an online auction site? When is the offer
and acceptance there? Carly? STUDENT: When the
timer runs out. GEORGE GEIS: When
the timer runs out. So who's making the offer? I put a product up on eBay. Is that an offer? STUDENT: I feel like
they are resuming the final right of
approval because there's been times when you can try to
purchase something on there, and they either don't like
how high the bids got or they decide after the fact they're
not going to actually sell it to you. I've had that happen to me. So I had to-- see that,
I should have sued them. [LAUGHTER] GEORGE GEIS: I mean, eBay
is an interesting one because there's lots of
different models that they use. And you can make different
choices, I think, about how you
actually put stuff, and buy stuff, and
sell stuff on there. Let's start with just
a traditional one-- you list an item. I think that
probably is an offer. You're making an invitation
to sell something just like when you're listing
an item out for auction. And then the bids come in. Those presumably are the offers. If you make a bid
and you win the item, are you locked into a contract? I think so, right? I think so. So I presume that when
the timer runs out, or when they say it's
over, then that now counts as the acceptance
and you're locked in unless there's some other
special arrangement there. STUDENT: So are you saying that
me as-- if I'm selling my car and I put it up on
eBay-- so I put up the car, that's the offer. GEORGE GEIS: No. STUDENT: The different bids
that come in, those are just considered acceptances, not-- GEORGE GEIS: No, I don't think
that can be the case the way it works. Otherwise you'd have lots
and lots of contracts. And you can't have that. You can't sell your car
to 20 different people. STUDENT: So we have two
offers then operating? GEORGE GEIS: I think when
you put your car up on eBay, you're inviting people
to make you offers. And you can set the terms. You could have a minimum
price, a maximum price. Is that how you see it? STUDENT: Yeah, I was
going to say [INAUDIBLE].. But then also it's confusing
if you have a "Buy It Now" feature on it. GEORGE GEIS: How does that work? Tell us. STUDENT: Because they would have
listed a price, which I think you can do an auction
and a "Buy It Now," so there's a minimum price. The minimum price
would be an offer and then me clicking
"Buy It Now" I would think would be an
acceptance of that offer. GEORGE GEIS: So if you want to
put something up for auction and you want to include
a provision that anybody can buy it immediately by
clicking the "Buy It Now" price, then I
think you're right. I think that the putting
it up for auction would count as the offer. Then the "Buy It Now" would
count as the acceptance. And you don't need the
timer to click down. The deal is over. So there's lots
of different ways. STUDENT: I guess this would be
assuming that you can't cancel the offer after you've
received the highest bidder after somebody
pressed "Buy It Now." In that case, wouldn't shipping
it be the acceptance then, or when you run the credit
card or whatever it is? Because I think-- I'm maybe wrong--
but I think maybe you can cancel it after
it's been processed or that timer has gone down. GEORGE GEIS: Yeah,
I'd need to know more about exactly what
your rights are to cancel to know whether
there's been a contract that's created that now has a
cancellation provision that's part of the contractual
relationship or whether you haven't yet
had an offer and acceptance. I think it might be the
former, but I'm not sure. STUDENT: I have a question
about the timing of revocation. So let's say we're living
not in the age of email, but in the age of letters. And so-- yeah-- [LAUGHTER] --I put out an offer
and before the person replies by letter saying that
they've accepted my offer, I've sent out my revocation
but they haven't received it. GEORGE GEIS: Yeah, so this was-- STUDENT: So does
the communication have to go-- have to be
received by the party or does it have to be sent by
the person who's rejecting? GEORGE GEIS: So this
is such a good question and in like two weeks
time we're going to spend a whole class
talking about something called the mailbox
rule which deals with exactly this problem. Because nowadays, if we're face
to face, it's not a problem. You say you accept
and I hear it. But if there's a delay,
and it could be mail, or it could be
email, it could be anything-- we've got to figure
out just which rule to pick. The shorter answer is that your
acceptance will be good as soon as it's sent by mail, regardless
of whether I hear it or not. But a revocation is not good
until it's actually received. But we'll come back--
we'll spend a lot of time on that because there's old
cases that really sort out with that problem. And it's a real problem. Timing is always really tricky. All right. A couple more. STUDENT: So would a silent
auction that's done in person work more like eBay? We used to do these
a lot where I worked. You would put out
a piece of paper and people would come
and just write their bid on a piece of paper. If I come back and
erase it, like-- [LAUGHTER] --does it count? GEORGE GEIS: I've always
wondered if you could do that. I mean, you write a
bid or your spouse goes around and writes a bid
and you want to cancel it out. [LAUGHTER] Thoughts on that? I mean, I think I would
analyze it that way. You're not making-- you're not
accepting when you're writing it down I don't think anything. How could you? Someone else could come in
after and write a higher amount. So wouldn't it be the case that
they're offering this item. Your writing is an offer. Someone else could
make a higher offer or you could go back and
cross out your offer. And then when the timer
runs out and whoever's working the auction comes
around and grabs the paper, that's acceptance I think. Does that make sense? STUDENT: Yeah. GEORGE GEIS: Yeah, I think
that's how it would work. I mean, there's lots of
different nuances here, though. There are some auctions that
are actually confirmed auctions where the sellers are
guaranteeing that they will sell the item and not withdraw
it at whatever the best price is offered. If that's the case,
maybe that looks more like an offer when you list
the item up for auction. So there's lots and
lots of different rules. STUDENT: Your eBay example
made me think of Uber. I mean, how should we think
about offer and acceptance with Uber? Because if I understand
it correctly, when a driver, quote
unquote, "accepts," he or she doesn't
know exactly where he's going to be
driving you or she's going to be driving you
until he or she picks you up. GEORGE GEIS: Don't they
know already when they-- I don't know enough about how-- STUDENT: They know
how much money-- GEORGE GEIS: --what
the Uber driver sees. STUDENT: --how much money
the trip is potentially going to pay. GEORGE GEIS: But they
don't know where to you? STUDENT: I think they know. [INTERPOSING VOICES] STUDENT: It's a price quote. GEORGE GEIS: Someone help us
out who knows a lot about Uber. [LAUGHTER] Nicholas, you look
like you know exactly. [LAUGHTER] [INTERPOSING VOICES] STUDENT: You don't
know where they're going when you accept the trip. I don't believe you always
also know how much money you're actually going to
get, because it varies depending on the time. GEORGE GEIS: So when are you in
a legal commitment as an Uber driver? STUDENT: Well, I can revoke
after I accept the trip if I want to before I get there. It's once they
get in your car, I believe, is when offer
and acceptance occur. When acceptance occurs is
when they get into your car. Because before that you can
drive off, you can cancel it. STUDENT: But they
can charge you. STUDENT: But I
think in your car-- if we're like in
[INAUDIBLE],, I'm like, oh, I'm going to Washington DC. And I don't want to drive
the person to Washington DC. Can I legally then
say get out of my car? [LAUGHTER] I GEORGE GEIS: Don't know. And that's a really
interesting question, right? I mean-- STUDENT: [INAUDIBLE]. GEORGE GEIS: I mean,
there's the law of contracts and then there's the practical
law of really are you willing to fight that through? We will see some examples of
this a little bit later on when we talk about
internet contracting. So we're not quite
done with this yet, but let's
pause for a minute here because I want to
turn to our next case. This is the case of
Leonard v. PepsiCo. And I think there's only
one way to fully appreciate what's going on here. [LAUGHTER] And that's to go to the tape. I think it's fair use
if it's educational. [VIDEO PLAYBACK] [BEEPING] - Introducing a new
Pepsi stuff catalog. Now the more Pepsi you
drink, the more great stuff you're going to get. - [INAUDIBLE] the boss. [LAUGHTER] [END PLAYBACK] [LAUGHTER] GEORGE GEIS: That's
our advertisement. Let me see if I can turn
the volume up a little bit. I want to play you one other
version of the commercial. There are actually
three versions of the commercial that were run. This is another version
of the commercial. I think it ran around the
time of the case or maybe a little bit after. See if you notice
anything different. [VIDEO PLAYBACK] [MUSIC PLAYING] - Introducing the new
Pepsi stuff catalog. Now the more Pepsi you
drink, the more great stuff you're going to get. - [INAUDIBLE] the boss. [LAUGHTER] [END PLAYBACK] GEORGE GEIS: Did you
guys see the difference? Hold on. Let me get my slides. All right. So everyone see the difference? 700 million instead
of 7 million. And there's a little just
kidding sign I think there too. All right. So let's try to think
this one through. Connor, let me come
down to you, if I can. Our hero, Leonard-- [LAUGHTER] --was tempted by
the blue shades. He was tempted by
the leather jacket. He was tempted by
the bag of balls. But no, he had to
have the Harrier Jet once he saw this commercial. Now, he quickly figured
out that he wouldn't be able to drink enough Pepsi. There was no way he could
drink 7 million Pepsis in time. But he read the fine print
and he realized that you could buy Pepsi points for-- I don't know what it
was-- $0.10 a point. And somehow he raised $700,000,
mailed the check in to Pepsi, and decided that he was going to
argue that he was in a contract for receiving the Harrier Jet. Now, Pepsi said, no, and
some humorous back and forth between the various
parties here. Ultimately, it
looks like Leonard was getting ready to
sue and Pepsi apparently was worried enough about
this that they decided to bring a lawsuit first,
bringing a declaratory judgment case so that they
could, I think, get the case in federal court
instead of in state court. Now, I guess we need to ask
the fundamental question-- does this ad comprise an offer? STUDENT: No. GEORGE GEIS: No. Why not? STUDENT: Because generally
ads aren't offers except for some exceptions. GEORGE GEIS: So why wouldn't
this be specific enough to count as an offer? STUDENT: Well,
there's no language that indicates a commitment
to supply the jet if you have 7 million points. GEORGE GEIS: So what then
should the offer and acceptance actually be? I mean, how would we think
about the offer and acceptance? Was there an offer and
acceptance here at all? STUDENT: No. It was an invitation to
make an offer almost. GEORGE GEIS: And
so if you wanted to try to get into a contract-- I mean, let's put aside the
Harrier Jet for a minute. Say you just wanted to
get the leather jacket. What would the offer and
acceptance look like there? STUDENT: Well, I guess
sending in enough points to get the jacket and then
they accept your points and supply the jacket. GEORGE GEIS: So we've
got the catalog. The catalog is just an order
form like the coin order form. And you write in I'd like this. You put your Pepsi
points in place. And then they could
say, no, we're not giving you the jacket, sorry. STUDENT: I guess it
depends if they-- I guess they could back out. GEORGE GEIS: I mean, I
think under that conception of the offer and acceptance,
they presumably could. You make the offer
when you send it in. All of this is like an
invitation to make an offer. Hey, we're running this contest. We're giving a bunch of stuff
out probably for Pepsi points. Send it in. Make us an offer. We'll probably accept it by
returning and sending you the jacket. But it's perfectly free for
us to either accept it or not accept it as we see fit. That doesn't sound
very well for Leonard. Does anyone want to try to
save his case from an offer and acceptance standpoint? Is there any other
way to look at this? Jack? STUDENT: Well, so
it's different from, for example, the advertisements
for a coat or something, because even by-- Pepsi's idea with
this is that it's going to get people to
go out and buy more soda. So they're getting something
from this to start with. So they're-- he's relying
on this advertisement. Pepsi is getting something
out of it to start with. And then he sent
them-- in theory he sends him these points
that he's gotten from cans. So it's not just that
they're putting out an offer and if they-- or that
they're receiving an offer and if they don't
accept it, nobody loses. Because in theory at least he's
already lost by buying Pepsi. GEORGE GEIS: Yeah. [LAUGHTER] I'm not sure they'd like
to think of it that way. [LAUGHTER] So just so I
understand you, are you arguing that a reliance
theory might work even apart from offer and acceptance,
coming back to an earlier part of the class? STUDENT: Yeah, maybe. He's actually incurring--
or at least the people who are buying the product
are incurring a detriment. GEORGE GEIS: So let's move
to the Harrier Jack context. It'd be reasonable to
expect that someone would see that commercial
and that would induce them to spend 700,000
points to get the Harrier Jet? STUDENT: I mean, I think you
should give the man his jet. [LAUGHTER] GEORGE GEIS: Maybe that theory
is more promising than offer and acceptance. STUDENT: I do think that the
objective standard at the end of the day-- so I
think that if you were to send in the points for
the jacket, for example, and then they said, no,
never mind, then that is an issue because you've
already bought their product, and you've accumulated
the points, and you've relied on
it to get the jacket. I think the objective standard
that the court relies on here makes the whole Harrier Jet-- GEORGE GEIS: So you're willing
to go to bat for Leonard for the jacket, but
if he really wants to try to get the jet,
which he wants to do, you're going to be nervous
about your reliance theory. Maybe so. Brian. STUDENT: Could you argue that-- so in the coin example,
you weren't held liable because they ran out of coins. But they had coins. In this example, it's
like the bait example that they were going
with the fur coats. They never had a Harrier Jet. They didn't have a single
one that they ran out of. [LAUGHTER] And they told you you
could buy a Harrier Jet and you couldn't
buy a Harrier Jet. GEORGE GEIS: Yeah. So I don't know if that would be
covered by our federal consumer protection statutes. I mean, I'm not sure
that it would be. As a matter of
contract law, though, I think we have to ask what
exactly is the offer, what exactly is the acceptance. I hear Connor saying that the
offer didn't happen until you sent in the order form. Because of that-- was there a
Harrier Jet in the order form? STUDENT: No. GEORGE GEIS: There
wasn't, right? Suppose there had
been a Harrier Jet. Down at the bottom, they decided
to push the joke a little bit further and they
had a Harrier Jet. 7 million Pepsi Points
and they had a big jet. Would that change the outcome? STUDENT: Yeah, it probably would
because the commercial referred to the catalog saying what kind
of things you an actually buy. So if they were dumb
enough to put it in there-- GEORGE GEIS: So
they get clever-- they put it at the bottom. Leonard-- oh, yeah,
I'll take one of those. Fills out a one, here's a check
for $700,000, sends it in. And then Pepsi's, oh, shoot,
someone actually did this. And then they say,
never mind, we're not giving you the Harrier Jet. Will Leonard win that case? STUDENT: I think it
goes back to what we were talking
about earlier where if you send in the points,
can they just say no, because I think if you're
sending in the points, you're making the offer. GEORGE GEIS: So if you
are making the offer, and you're sending
in the points, and even if the jet's listed
at the bottom of the circular, I think Pepsi could still say
we are not accepting your offer. Sorry, we're not
giving you the jet. And unless you've got some
sort of a reliance argument or something like
that, then I don't think you're going
to be able to win as a matter of
offer and acceptance as the court sees this. Carol. STUDENT: I feel like they do
stipulate that the catalog is what is the offer. So if you follow the
terms in the catalog, then that's their offer. And you sending in
your Pepsi points or your money, depending
on which way you go, that's your acceptance
of the offer. And they are then obligated to
send you whatever you order. So if they did jokingly
put the Harrier Jet in the catalog, which they
stipulated the catalog was-- the order form/catalog
is their offer. GEORGE GEIS: So is
that inconsistent with the last example with
the Statue of Liberty coins? If the offer was coming
on the order form, then wouldn't the
acceptance be when they decided whether or
not to take it and send you the product or not? Is there anything different
about this situation that would allow us to
distinguish that prior case? I mean, I think Pepsi was
arguing for exactly that. Andy? STUDENT: I think i would say
that the distinction lies, again, in what Lizzy was
mentioning about the up to 16% part. It wasn't definite enough
in the original one to be an actual offer. Whereas in this case, everything
was relatively definite. So if the Harrier Jet has
been included on the catalog, that would have been an offer. GEORGE GEIS: Did they tell
us what model of Harrier Jet? [LAUGHTER] There's a lot of options when
you're ordering a Harrier Jet, right? I mean, do you get it with
guided laser missiles or-- so I mean, we could always make
out an indefiniteness problem if we want to. Jeffrey. STUDENT: Well, he does
argue that there's a specific model that they're
offering-- the non-weaponized. GEORGE GEIS: The
non-weaponized one. [LAUGHTER] He says the non-weaponized
is available and maybe he assumed
that's the one. STUDENT: But I
agree with Caroline that this catalog is
their offer because of the previous discussion. It's almost like
the Southworth case where they've
discussed it before. This commercial was like
the initial like, hey, we're having this thing. This is our offer
in the catalog. GEORGE GEIS: All right. So if they put in
the Harrier Jet, then they're going to be bound if
Leonard sends in the money and accepts their offer. STUDENT: Yeah, I would
want to see the catalog. But that's what I took it as. GEORGE GEIS: It's--
yeah, I agree, I'd want to see the catalog. I think it's close. Caroline. STUDENT: Isn't the catalog is
a little more like shopping online or something? You're actually--
when you send in, that's your offering it to them. And they can still say, we don't
have that in stock anymore. And I know that they
can keep your money. So I feel like-- I don't know how in
this case, they would-- they could send
you the coins back and you can do something else. They sent his money--
his check back. They didn't deposit the check
and be like, oh, that's stupid. You sent us all this money. [LAUGHTER] So I feel like it's more
of an online shopping. GEORGE GEIS: So you see the
offer coming from the consumer, from the Leonard, and then
they can accept it or not. I mean, we're on the border. Christoff, how do you see it? STUDENT: Actually, I agree
with Jeff and Caroline, because it's a little bit
different than the example with the coin. He bought already all
this Pepsi, right? GEORGE GEIS: Yeah. STUDENT: He was
counting on collecting-- GEORGE GEIS: Well,
he bought some Pepsi. STUDENT: Yeah. Let's say he collected this-- I don't know what was the amount
that all this points by buying something-- buying Pepsi. He already spent his money. And they put the
jet in the catalog. So that would be an offer. GEORGE GEIS: All right. So let's assume the
jet's in the catalog. And let's assume that he didn't
spend all kinds of money buying Pepsi, but he's buying
points for $0.10 a point. And he's writing
the check for that. And he drank a couple of Pepsis. Connor, does that mean that
if it's in the catalog, it is a serious
intent to be bound? I mean, isn't this a joke? STUDENT: Yeah, it's
entirely a joke. GEORGE GEIS: It's
entirely a joke. It's not a serious
intent to be bound. Why not? How do we know? STUDENT: Well, the judge
lists like seven reasons. GEORGE GEIS: OK, hold on. [LAUGHTER] Should the judge
even decide this? Leonard says the judge
is not qualified. Judge Wood is a respected
judge, but she's not a member of the Pepsi generation. [LAUGHTER] She's not entrepreneurial
enough to understand. Should it go to a jury of
young Pepsi drinking peers? STUDENT: No, because it
has to do with a contract or granting summary
judgment, which is what judges deal with all the time. GEORGE GEIS: So judges
normally evaluate under the objective test whether
something should objectively be understood as a serious
intent to be bound. And here Judge Wood says
this is not a serious intent to be bound. It's a joke. Maybe even if it's
in the catalog, we should understand
it as a joke. Why is it a joke? STUDENT: You want me
to list the reasons? GEORGE GEIS: Well, don't
dissect the frog all the way. [LAUGHTER] But I mean, at least
give us a couple. STUDENT: Well, like a Harrier
Jet is $23 million it says. GEORGE GEIS: All right. STUDENT: So you
couldn't be expected to buy it for $700,000. GEORGE GEIS: Let
me stop you there. Now, I think that's a
clear reason why they do think it might be a joke. Now, I'm not that good at
math, but one thing we could do is take a look at the contract
price over the fair value of the item as a way
to try to figure out whether something's too good
to be true, and in that case, may be a joke. Now, what was the
contract price of the jet? About $700,000, right? And how much was the
fair value of it? STUDENT: It says $23 million. GEORGE GEIS: All right. So let's assume that
they're right. $23 million. If we do that ratio, we get
a number of about 1 to 34. So in other words, Leonard
would be getting it at 1/34 of the fair price. Come back to the case of
Lefkowitz and the stole. In Lefkowitz, the contract price
is $1 and the stole is $139.50. So he's getting
something at 1/140 almost of what the fair value would be. How come this isn't binding
because it's an obvious joke-- it's too good of a
deal to be true-- yet this one is legally binding? STUDENT: Because in--
well, in Lefkowitz there was that expectation-- a
reasonable person would expect that they-- if you come
first when it's first come, first served, that you
get one of the scarves. A reasonable person
doesn't think they're getting a Harrier Jet. GEORGE GEIS: So we
understand maybe why the store would
want to do this, even though on a ratio test
it's actually a better deal and maybe one we shouldn't
think is very serious here. But in this one it
is out of proportion. But there's got to be
some other reasons. So I think the price is one, but
there's some other things going on here too, aren't there? What else? STUDENT: He's flying
it without a helmet. GEORGE GEIS: All right. He's not wearing a helmet. [LAUGHTER] He's a teenager. I mean, I think most of us,
even if we were of the Pepsi generation, looking
at this from above would say this can't
be a real offer. And I'm not sure that much
changes if we actually have a line item for the
Harrier Jet at the catalog. That seemed to be just extending
the joke in a little way that that's not
terribly serious. Now let's think about this-- imagine that you've graduated. You've started your
own law practice. And you are sitting
around in your office one Thursday afternoon when all
of a sudden Mark Zuckerberg walks into your office. And Zuckerberg says, I just
saw the following video clip on YouTube and I
would like your advice on how I should
accept this offer. Can I accept it? And if so, how? [VIDEO PLAYBACK] [MUSIC PLAYING] - Do you control a large
percentage of the world's natural resources? Are there extremely
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state of the art features, such as a multifunction
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video player and so much more. But we won't bother
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million and we'll throw in your very
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a private island can offer, money can't buy. Think about it. $10.5 million. Now, that may not
sound like a lot, but we think you'll
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from your very own private island worth even more
than the price tag. - The BlackBerry 8830 world
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available for $199.99. Island offer available
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this exclusive offer. Buy before September 29, 2007. Offer valid with $100 mail-in
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and experience finding corporations, your island
cannot be a start-up country. Exclusive offer for the world's
100 richest people available only at Sprint.com/islandoffer. Restrictions apply. [END PLAYBACK] [LAUGHTER] GEORGE GEIS: What are you
going to tell Zuckerberg? [LAUGHTER] Is this a real offer? Can he accept it? You'd like to win him over
as a permanent client. [LAUGHTER] What do you think? STUDENT: Also, there's
two sides to this. One, there's a
website apparently where there are
maybe more terms. I think that would be
a good starting place. But two, it feels like
they took this way too far to just be a joke. [LAUGHTER] It seems different
from the Harrier Jet that they like
kept pushing on it instead of just mentioning
it once and having a [INAUDIBLE] youth,
as the casebook says, sitting in the jet. GEORGE GEIS: All right. So even near the end,
in the fine print, offer limited to the world's
100 wealthiest people. So this might not be a joke. It might be a serious
attempt to be bound. Sara. STUDENT: I think the fine
print is really important because whereas in like the
actual commercial itself you may be able to
understand this as a joke, I think most of the time,
even in a commercial setting, most of us understand that
when you get to the really fast-speaking fine
print part, that's like the real information
that you need. [LAUGHTER] That you would tune into. So I think-- I
agree with Greg, I think they're taking
this way too far to a point where
you may actually want to be able to pursue this. GEORGE GEIS: Serious
intent to be bound-- if you're advising Zuckerberg,
say call them up and say I accept. Or maybe look at the fine print. If the fine print is
consistent with what you've seen all along, say you accept. Chris? STUDENT: I think it all depends
on the context in which you're watching this. I think, honestly, if
I was watching that ad during a football
game, I would think the whole thing was
ironic even the fine print alleging to be serious. But because we're watching
this in a contracts class-- [LAUGHTER] --maybe it is [INAUDIBLE]. I don't know. I think a reasonable person
would see it as a joke. GEORGE GEIS: It's a joke. STUDENT: It's a joke. GEORGE GEIS: It's not real. It's a joke. Steven. STUDENT: I agree with Chris just
on that, as well as there's not been any terms on what type
of island you're going to get and where's this location
and how large is it. There's a lot of terms that
just are completely left out. GEORGE GEIS: All right. So an island could be
really, really nice. An island could be
really, really lousy. We might have a little bit of
a Lefkowitz ad part one type problem, where we're not
really sure what island you're going to get. Caroline. STUDENT: Yeah, so where it
says actual island may very, it could literally
be a kitchen island. GEORGE GEIS: Yeah. [LAUGHTER] STUDENT: It could be anything. GEORGE GEIS: That starts
pushing the objective test and the objective
understanding of island. But I mean, we'll see cases. It's not that different than
the Peerless case in some ways if you want to try
to argue for that. STUDENT: If I am one of
the 100 richest people-- GEORGE GEIS: Yeah,
and you're going to be after we raise
that legal defense fund. [LAUGHTER] STUDENT: Yeah. I am taking this
as a legit offer. I would pursue this
all the way through. If I go to that website and
it has photos of islands, like I am getting
one of those islands. [LAUGHTER] It is like-- yeah, like I agree
with what people were saying. It's gone too far. Like they-- [LAUGHTER] --the price of
like $10.5 million is probably not going to buy
you an island, but it's close. Like we're getting
pretty close to it being a reasonable expectation. GEORGE GEIS: All right. And you're really
going to like it if you've got pictures
of islands like this. If you've got these little teeny
islands that are small things, then maybe you might
get nervous about it. STUDENT: It's not small,
but it's still an island. GEORGE GEIS: I'd probably-- [LAUGHTER] --I might have that
for $10 million, depending on where it's located. Quinn. STUDENT: I'm wondering
how the reasonable person test works with
this, because for all of us who think this is crazy-- if you see what Kanye
West spends on some stuff, we're also like that's crazy. For people in that top
tier, it is reasonable. So how do you-- is there a difference or
how do we subject that-- GEORGE GEIS: I mean,
that's a hard question because it gets into the
heart of the objective test by saying what context
matters when we're thought-- when we're
thinking about what a reasonable person would say. This is limited to 100 people. That's clearly the case. Do we care what the 100th
richest people would think about whether it's
a serious offer or not, and does that differ
at all from what the average person would think? I don't know that we can
put our finger on that. It's going to depend I
think a little bit about how a court objectifies the
test, and what the judge is willing to do, and how far
they're willing to dial back the zoom lens to figure out who
we should be focusing on here. STUDENT: Oh, to Quinn's point,
I think that the objective test listens and what
makes it such a joke is that I think
most people would say that Apple runs the
world and that Blackberry hasn't been as successful. [LAUGHTER] I really think that
that is the context of what makes it a joke. GEORGE GEIS: Yeah. So this commercial-- so
that may be true now. This was an old commercial. It ran probably
10, 12 years ago. So maybe back
then, people would. Nowadays, if you're trying
to pitch a BlackBerry phone, maybe that is much
more of a joke. Carly. STUDENT: Did any of the
rich people act on this? GEORGE GEIS: I don't know of
any rich people that acted. But I've got to--
these are so fun, I've got to do one more
if you'll indulge me. [LAUGHTER] Let me make sure I
can find it here. Let's see if I've got the link. All right. Here it is. Did any of you see
this commercial that someone put on YouTube
a couple of years ago? It involved Greenie-- Greenie. Take a look at this and see if
you think it's a real offer. [VIDEO PLAYBACK] [MUSIC PLAYING] - You-- you're different. You do things your way. That's what makes
you one of a kind. You don't need things. You're happy with who you are. You don't care about money. You have everything
you've ever wanted. You don't do it for appearances. You do it because it works. And this-- this is not a car. This is you. It's a lifestyle, a choice. Your choice. Introducing a used
1996 Honda Accord, the car for people who have
life figured out and just need a way to get somewhere. Luxury is a state of mind. [END PLAYBACK] [LAUGHTER] GEORGE GEIS: Is that an offer? Can you accept that? What do you think? STUDENT: So I like everything
except for the starting at $499. I feel like that is
actually the rock bottom. [VIDEO PLAYBACK] - Locking your keys
inside the car. [END PLAYBACK] GEORGE GEIS: Oops. [LAUGHTER] This is really dangerous,
isn't it, playing YouTube. [LAUGHTER] Playing YouTube ads when
we're recording the class. [LAUGHTER] STUDENT: I'm not sure
[INAUDIBLE] But I mean, if it said at $499, I will
sell you this green Accord, I don't think that
was enough of a joke to actually negate the offer. But the starting ad
is the lock bottom. GEORGE GEIS: And why
does that bother you? STUDENT: Because it's
merely an invitation to start negotiating. That's like the rock
bottom in [INAUDIBLE].. GEORGE GEIS: So if you saw
that and you said, I accept, should you think that
the power to accept had been conveyed over to you? Maybe not, right? Maybe it's like some
of our earlier cases where you didn't
quite have the power to just say I accept and know
that you were done with it. Rather we should understand this
like our real estate listing cases where you're putting this
out there, I'm selling this. Make me offers, I'll
probably accept. Start at a certain price. That's my minimum. But I want to hear what offers
are going to come in on Greenie and then I'll decide
whether or not we'll take those offers or not. I think that's probably right. They got a response. [VIDEO PLAYBACK] - To the guy who posted the
video for the 1996 Honda Accord and his
girlfriend, now fiancee-- [END PLAYBACK] GEORGE GEIS: I'm sorry. [VIDEO PLAYBACK] - To the guy who posted the
video for the 1996 Honda Accord and his
girlfriend, now fiancee, I've been authorized
by CarMax to make a legal and binding
offer for Greenie, the aforementioned Accord. Now, CarMax doesn't play
games, haggle, or pull the wool over anyone's eyes. And with our same price for
everyone policy, we can't-- nay won't-- get into a
bidding war for the car. But believe me when I tell
you that your commercial has made a 1996 Honda Accord
size hole in our heart. And we will not rest
until we filled it. So here's what we're
prepared to offer. We'll buy the Accord, obviously. We'd also like to buy
the cat for $5,000. [LAUGHTER] We're cat people. That old passenger seat
coffee pot, we want it. Let's say $3,500. Mexico mug-- need it. $2,000. Also, your fiance's fuzzy
sweatshirt jacket thing looks comfy, so let's call it
another couple of cozy geez. And at the end when
she's eating a sandwich on the cliff at sunset,
if there's any leftover, we want that too. We'll give you $500. $400 if if has mayonnaise. That's right. We want it all. Our offer-- let's round
up and call it $20,000. This offer is redeemable
at any of our 188 CarMax locations for the
next seven days like all our written offers. The Mexico mug is
non-negotiable. The cat is optional. At CarMax, we buy all the cars. And sometimes the jackets
and sandwiches too. [END PLAYBACK] STUDENT: Wow. GEORGE GEIS: Is that an offer? Can she go back
and say I accept? And if you're nodding, how come? How do we know? STUDENT: It's specific. GEORGE GEIS: It's specific. STUDENT: It was directed to her. GEORGE GEIS: It was
directed at her. Was it serious? Was it a serious intent to
be bound or was this CarMax joking around? STUDENT: I think a
reasonable person could interpret that being serious. GEORGE GEIS: All right. So she sees it. She sees Greenie. She thinks it's serious. STUDENT: What about
the [INAUDIBLE] music, the strange offer inside
a YouTube video and-- [LAUGHTER] They're in the actual business
of buying cars, though. That's great advertisement
just for them, so that's kind of why they
could take it as being serious. GEORGE GEIS: Yeah. STUDENT: Yeah, I
liked something that was said in the PepsiCo case. They said if a person
makes extravagant promises, he probably does so
because it pays him. An extravagance of the
promise is no reason in law why it shouldn't be bound. They're doing it obviously
for the publicity and they're making far more
than $20,000 by making this. GEORGE GEIS: So you see a reason
why they might be doing it, like the first store might
be doing it in the second ad perhaps. It's a good offer, but they're
enjoying the publicity. May I ask for a vote? How many of you think
this is a serious offer and the seller of Greenie could
go back to CarMax and say, I accept your offer? Almost everybody. Guess what-- they did. [LAUGHTER] They said, we accept. And CarMax said, OK, and
they concluded the deal. Everyone asks, did
she sell the cat? [LAUGHTER] $5,000 is $5,000. [LAUGHTER] CarMax didn't actually
make her sell the cat. It said, we're going to donate
the $5,000 on top of everything and you don't have
to sell the cat. So she got the $20,000 and she
got to keep the cat as well. But I like that example,
because we've now run the gamut from a
complete joke, I think, in the Pepsi case, all the
way to a situation where you could conceivably
have a video be an offer. But I think it's got to
be something like that. And I think all of us see that
may or may not be serious. We can debate it. But probably it seems serious. We can understand why. It was specific. It was directed at a
single person, not anybody. So maybe in circumstances like
that, we can understand that and did understand it legally,
I think, as being a real offer. Yeah. STUDENT: Does the
fact that they said this is a legally binding offer
that we actually wanted to make have any effect on that? Like they said clearly
we actually mean this. GEORGE GEIS: Yeah. STUDENT: Does that have-- GEORGE GEIS: I
mean, I don't think it hurts if you're trying to
make out an objective test argument that it's an offer. Now, the PepsiCo case, Connor,
said offer not available in all places. Offer not available. They called it an
offer there too, right? Does that make it an offer? STUDENT: No, probably not. GEORGE GEIS: Probably not. So I don't think
it's dispositive. And that actually might
cut the other way, right? If it's not available
in all places, how do you know it's
available to you, Leonard? So I don't think the
fact that you call it an offer means it's over, but
I think the fact that they said they were making an offer
would at least to me lead it to be more of a
reasonable serious thing that they're doing. All right. Let's try the case of the his
and her Mercedes on page 233. This is another example of
one of those sneaky insurance companies trying to
get out of a contest. Let me set out the
facts, then I want to give you about 30
seconds to talk this over with your neighbor and see if
you can come to a resolution. We have an insurance
company that decides it's going
to sponsor a contest. And they say that if
one of the employees picks the best
new slogan, then-- and they decide that they're
going to use the slogan, then, quote, "Here's
what you could win. His or her Mercedes, an all
expense paid trip for two around the world, additional
prizes to be announced. All prizes subject
to availability." Mears submits the slogan, "At
The Top and Still Climbing." The insurance company
picks the slogan and uses it for all of
their various advertising events at the convention. However, they tell
Mears, we're sorry, the Mercedes are not available. Here are some restaurant
gift certificates that you can have instead. Take a minute or two and talk
it over with your neighbor. And try to figure out does
Mears have a good argument that there's been an
offer and acceptance here that should entitle
Mears to the cars or to some other
lucrative prize? [SIDE CONVERSATION] All right. Let me stop you here. How do we resolve
this situation? Do you want to take
up the case for Mears or should Mears just
go out to dinner and enjoy his gift
certificates at his restaurant? What would we argue? Sam. STUDENT: I'll take up
the case for Mears. [LAUGHTER] So I'd say in this
case here that when he submitted the slogan,
that constituted the offer. And when Mercedes told him-- or the insurance, I guess-- told him that he won the contest
and would receive a Mercedes, that constituted the acceptance. Then the insurance used the
slogan for their convention but didn't perform their end of
that legally-binding contract. Therefore, they're in breach. The advertisement is
not the offer, though. So that's-- that would be-- so
in this then Mears is perfectly entitled to the cars. GEORGE GEIS: Later
he was informed that he had won the contest
and was told that he won two Mercedes-Benz automobiles. And so you don't see that here's
what you could win languages as limiting things at all. STUDENT: No, because
that's not the offer. GEORGE GEIS: Other thoughts? Chris? STUDENT: I see this as really
similar to the hole in one case that we spent a lot
of time on last time. Except it's even clear
because in this case the car dealership sees
the hole in one, goes yep, you win the car, and then
goes ha, ha, no, just kidding. So I see it as-- I don't know that-- I think this is an
offer with conditions. He fulfills the conditions. Then the company recognizes
that the condition was fulfilled and then backs out. GEORGE GEIS: What do we make
of the-- here's what you could win-- all prizes subject
to availability. Phil. STUDENT: I think a
reasonable person would read that to mean you could win
these prizes if your slogan is selected. So a reasonable person would
expect that they would not put a prize in
this list that they had no intention of giving. Because that's just not
reasonable I don't think. GEORGE GEIS: Who decides
whether a prize is available? Steven? STUDENT: Well, my thing is
like later on after he's told when they said these are
the prizes you're going to get, it's like they additionally
went on and specifically stated these are the
prizes out of that pool that you're now going to get
for having won this contest. Like if they had said, you
won the trip around the world instead, then that's
what they would have been obligated to do. GEORGE GEIS: But
you think the fact that they actually made a
statement along those lines-- I mean, I think that's to
Sammy's understanding, too, of when it happened. Or maybe the contract
was created first and this is now something
that's happened after the fact. Christoff? STUDENT: I'm just wondering
how these prizes couldn't be available, because it's
one person winning, right? GEORGE GEIS: Yeah. STUDENT: So they have the prize
or they don't have the prize. So they were lying or-- [LAUGHTER] --they had a car
at the beginning. GEORGE GEIS: I mean, available
is a pretty slippery word. CeeCee, how do you see it? STUDENT: Well, I
think that's why I'm confused because when
they try to back out, they say that he
might not receive it because the theme might change
not because the cars aren't available. And then they go ahead
and use his thing anyways. GEORGE GEIS: So does that argue
that Mears should get the car? STUDENT: I think so. GEORGE GEIS: Yeah, so here's
how the case came out. The jury found for the
plaintiff-- found for Mears. The court basically reversed-- JNOV'd the case and
said, nah, sorry, these weasel words are
enough that they're going to let the insurance
company back out. Appellate court reinstated
the case for the plaintiff and Mears got his car. Now, this may stretch the
language of the objective test a little bit, because
to me those words that-- availability and here's
what you could win-- are almost like a [INAUDIBLE]
provision that we talked about. But that's not how the
appellate court saw this case. Let me try to pull this together
by talking a little bit more about the acceptance
of an offer and where we're going to go next time. We've now talked through
what it takes to have a legally binding offer. You've got to have something
that basically gives you the power to say I accept and
know that you're done with it. Next, we're going to turn
to talk about what it takes to actually accept the offer. Once you've got an offer,
how do you accept it? Now, remember again,
that the place to start is by looking at the
terms of the offer itself. Masters-- the offeror
is master of the offer. If you're making
the offer and you want to dictate exactly
how acceptance must happen, you've got the right to do it. Remember I offered
[INAUDIBLE] my house if he's willing to flip
up on a handstand and come down and accept it. That's how he's got to do it. He doesn't have to
do that, of course. He doesn't need to
accept my offer, but he wants to accept my offer. You want to start by
looking at the very terms of the offer itself. Now, beyond that, though,
there are often three ways that you might accept. You can often accept
by a return promise. I accept your offer. You might be able to accept
by a return performance. Or in some cases, you might
be able to accept by silence. And you say, ah, how
could I ever accept an offer by silence? But you'll have to
wait till next week. We'll talk about that tomorrow.
