CONTRACTS, FA 13

PROF. EIGEN
PRACTICE EXAM ASPIRATIONAL ANSWER

PRACTICE EXAM ASPIRATIONAL ANSWER

INTRODUCTION
To assess the issues relevant to both pending suits, it is first necessary to
determine whether there is a contract between Facetrest and Yabloo! or a
contract between Facetrest and Bloogle to sell Facetrest for some amount of
money. Second, it is necessary to determine what the terms of that contract are,
(assuming a contract exists). And, third, it is necessary to determine whether
there are any reasons why the contract (if one exists) would not be enforceable.
These issues are addressed in turn below.
(1) Has a contract been formed between Facetrest and Yabloo!, or, has a contract
been formed between Facetrest and Bloogle, in either case, to sell Facetrest for
some amount of money?
A.

Was Deenas first communication to Ron and Tory an offer on behalf of

Facetrest to sell the business for $10.5 million?
{CUT AND PASTED FOR YOUR EASE OF REFERENCE:}
Did you guys see the WSJ article? 10.5!! whoo hoo! LOL! (good thing they
dont know what the *REAL* number should beits been a crazy day today
remind me to tell you about it later). If I had that kind of cash, I would retire
tomorrow and be in the South of France by Sunday! ;-) Either of you guys want
to make that dream turn into reality?

To address this issue, a court or jury would decide whether her communication
objectively manifested an intention to offer to sell her business,1 Facetrest, for $10.5
million. To evaluate the objective manifestation of Facetrests intent here, courts look
at three broad areas: (1) the context of Deenas communication, (2) the substance of the
communication, (3) Deenas subjective intent.
(1)

Context of communication
(a) This was an informal means of communication. One would not reasonably
expect to offer to sell a business for $10.5 million in a text message. Like Lucy v. Zehmer,
the back of a restaurant check may not be the most common means of selling a farm, but
in that case, the informal context was a surmountable obstacle to a determination of
objective manifestation of intent. Further, Deenas conversation with Ron and Tory at
the dinner party indicated that the parties all conceived of this form of communication
as a legitimate means of doing big deals like this. This is actual evidence of the parties
shared perceived legitimacy and hence an objectively discernable intent to offer to sell. If

1
There may also be an agency issue herewhether Deena has the authority to make
offers on behalf of the company. As she is the owner of the business, I will assume that
she does.

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the parties share the view that the context is legitimate, then whatever other objectively
discernable ways of regarding the context to the contrary fall away as irrelevant.
Even though the Lucy v. Zehmer contract was written on the back of a diner
check, there was a high degree of formality (both parties signed the document, the
parties negotiated over the terms at length, etc.), evidencing an objectively reasonable
intent to sell the business. Here there is relatively little comparable formalism in the
context of the communicationit appeared more likely as a comment on the WSJ
article, coupled with an observation/opinion about the over-inflated assessment of the
worth of the company, and an unserious proposal to make Deenas dream of retirement
come true.
(b) The communication was transmitted to multiple (two) parties. In Nebraska Seed,
the court determined that the sellers communication to multiple parties lent the
impression that the communication was intended as an invitation to negotiate, or an
invitation for others to make offers to buy the seed being sold, not as an offer to sell.
Here, this argument seems even stronger given the fact that there is only one Facetrest,
but in Nebraska Seed, the sale was of a large quantity of seed, such that it could have
been possible to sell seed to more than one buyer.
However, it could also be said that the solicitation of offers in that case was sent
to numerous recipients, whereas here there are only two recipients of the
communication, one of whom is not a CEO or owner of the business (Tory, is the
manager of Yabloo!s dispute resolution department). So, in effect, it is really only being
communicated to one viable buyer.
Further distinguishing that case from the present facts is the lack of a specific
price and delivery term. In Nebraska Seed, the letter did not fix a specific amount. This
was an essential (material) term, and its omission caused the contract to fail. Here,
arguably, we have a more specific price term (10.5 million), so despite the sellers
communication being sent to multiple parties, it looks more like an offer and less like an
invitation to negotiate.
(2)

Substance of communication
(a) Was it a joke? Like Lucy v. Zehmer or Leonard v. Pepsico, if something is a
joke, and is understood to be a joke to the offerees, (or it should be recognizable as a
joke to the offerees) then it does not constitute an objective manifestation of intention to
be bound by the terms. She may not have intended to offer to sell the business, but her
mental assent is not requisite for the formation of a contract (Lucy v. Zehmer). If her
words have but one reasonable meaning, her undisclosed intention is immaterial,
except when an unreasonable meaning which she attaches to her manifestation is known
to the other party (Lucy v. Zehmer). Here, it seems that even if she didnt mean to offer
to sell the business, the recipients of the communication should have realized that Deena
was expressing surprise and making a joke, and not conveying a legitimate offer to sell
the company.
However, in Pepsico, the court reasoned that the impossibility of attaining
7,000,000 Pepsi points or the fact that a Harrier Jet is a complex piece of military
hardware made it such that a reasonable person should have construed the
communication as a joke. Here, such an impossibility-based argument seems less viable.
The amount in question is reasonable and all three parties remarked about huge deals in

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technology at the dinner party. Similarly, the Pepsico court argued that the Harrier Jet
portion of the ad should be perceived as a joke in part because a reasonable person
would not think that a multi-million dollar piece of military hardware could be obtained
for such a relatively small amount (in other words, that the deal was too good to be
true). Here, it could be argued that $10.5 million was far too much for the company,
because it was overvalued relative to the competition (Facebook came in second-place in
the WSJ ranking at $3 million), and the fact that the P2P system was hacked,
compromising the viability of the site.
Further, Deenas communication indicates that $10.5 is a disproportionately
high amountshe says, 10.5!! whoo hoo! LOL! (good thing they dont know what the
*REAL* number should be). It could be that humor is used, but the communication is a
serious one, like the Cat v. Fish commercial or in Pepsico, with respect to the other items
(shades, jacket, etc.). So, even though there may be humorous elements to Deenas
communication, or otherwise un-serious words, it could be reasonable to suggest that in
the context, Ron or Tory might construe it as manifesting an intention to sell in earnest,
and that interpretation would be a reasonable one. This is a question of fact that would
likely survive a motion to dismiss, to be determined by a jury.
The most reasonable read of the communication was Deenas reaction to the
news, coupled with her knowledge of the problems the company had on the same day,
but it remains unclear from the context whether this subjective intent was
communicated to the receiving parties. It is unclear whether the receiving parties would
be able to discern this. The burden would fall on Deena to explain it. Absent that
explanation, the question remains whether it would be reasonable for the parties
hearing the communication to understand it as a legitimate manifestation of an
intention to offer to sell the business.
(b)
Did the communication have the requisite specificity such that its
acceptance would conclude the bargain? Restatement 24 defines an offer as a
manifestation of willingness to enter into a bargain, so made as to justify another person
in understanding that his assent to that bargain is invited and will conclude it. Did
Deena manifest a willingness to enter into a bargain? Possibly not, for the reasons
discussed above. Did she structure an offer such that if Ron or Tory assented thereto,
they would understand that that would conclude the bargain? Probably not. Unlike
Embry v. Hargadine, where the parties had a pre-existing contract replete with specific
terms, here the parties have no such pre-existing agreement or other basis for a mutual
understanding of terms not expressly stated in the offer. There are numerous missing
terms here that would have to be specified to make it such that acceptance by Ron or
Tory would conclude the bargain given the scope of the contemplated transaction (the
sale of a huge business). This would similarly be problematic under 33 of the
Restatement (there needs to be reasonable certainty).
Alternatively, it could be argued that these are sophisticated business people,
who intend to transact big deals via this mode of communication. As such, it could be
the case that 2-204(3) of the UCC might apply (or more likely -- serve as persuasive
authority in this matter), which allows for contracts to be formed [e]ven though one
or more terms are left open if the parties intended to make a contract and there is a
reasonably certain basis for giving an appropriate remedy. In this case, because the
essence of the transaction is money (price paid) for the whole business (presumably), it
could be argued that the only terms lacking from Deenas communication that could be

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material are delivery time, terms of payment, inclusion of the P2P system or the
transferability of the highly valuable contracts between Facetrest and advertisers like
Nike. This seems sufficiently uncertain as to render the communication (if accepted),
not enough to create a binding contract, and hence, Deenas communication is not a
viable offer.
(3) Deenas subjective intentions
Deenas subjective intentions are relevant to the extent that they are used to
determine the objective intent reasonably discernable by Ron and Tory, as was the case
in Embry v. Hargadine. But things known only to her that are unknown, or not
communicated to Ron and Tory would not be relevant in the analysis. Her subjective
intention, at least from this initial communication, seems rather clearthat this was not
intended to be a genuine offer to sell. For one, she knew that $10.5 was not an accurate
number given her prior statement that the real value of the business was in the P2P
component, and Deena had learned earlier that the P2P system had been hacked.
Secondly, as discussed above, the nature of the communication itself seems to
lend itself less to a real offer, and more to a joke. Lastly, the substance of the
communication whoo hoo! and LOL and the general tone seem not to convey an
intention to legitimately offer to sell. So, it is likely the case that Deena didnt
subjectively manifest an intention to sell the business in this communication.
However, if the words or acts of one of the parties have but one reasonable
meaning, the undisclosed intention is immaterial, except when an unreasonable meaning
which she attaches to her manifestations is known to the other party (Lucy v. Zehmer).
Examining both Rons and Torys responses, it seems clear that one objectively
reasonable meaning is lacking. Rons response seems to indicate Rons doubt as to the
seriousness of Deenas offer, but Torys response seems to indicate his perception of
Deenas offer as legitimate and serious.
Assuming, nonetheless, that Deenas words and acts have but one reasonable
meaningin this case that she was not intending to sell Facetrest for 10.5 million
dollarsher undisclosed intention to REALLY sell it would be immaterial, unless Ron
and/or Tory knew that she really intended to sell it. It is possible, given the way that
the parties tend to communicate, and their previously mentioned opinions about doing
real deals on PDAs that this could be a REAL offer to sell in spite of an outward
appearance of a mere opinion about the outlandish assessment by the WSJ and a hope of
making a dream turn into reality. (Obviously, this analysis could be inverted, such
that Deenas real intention was not to sell)
B.

Was Rons communication an offer to buy Facetrest for $10.5 mill?

{CUT AND PASTED FOR YOUR EASE OF REFERENCE:}

Are you kidding? Bloogle would gladly offer $10.5 mil. for Facetrest, if
thats all-in. I just need to get confirmation from the Board, but thats a
formality. Can you give me 5 more days until I can work out the details of
the formal, boring stuff?
(1) Does Ron have authority to bind Bloogle?
As weve established from several cases, an agent is able to bind a principle as
long as he is acting on behalf of that principle and this fact is known to the other party

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to the deal (see, e.g. Hoffman v. Red Owl Stores). Here, Ron is Bloogles CEO, but as per
his communication, he doesnt have the final authority to buy without the Boards
approval. Deena knew that Ron was Bloogles CEO, and Ron made clear to Deena that
he needs confirmation from the Board.
(2) Was this an offer to buy Facetrest for $10.5 million?
What is more likely the case, given two statements in Rons communication, is
that Ron perceived Deenas statement as a solicitation of offers, and not an offer-proper.
Ron does not know at the time of the offer that the P2P system was hacked, so he is
presumably basing his assumption of the offered price on the value of the Wall Street
Journals assessment, or other market indicia beyond the scope of the facts as provided.
If Rons communication is an acceptance of Deenas offer, it is a contingent acceptance,
and because of the mirror image rule, would be considered as a rejection of her offer and
a conditional counter-offerin this case, hes confirming that thats all-in. But all-in
could be presumed to be included in Deenas communication. So, if Deenas
communication were a legitimate offer to sell, Rons acceptance could serve as
confirmation of an existing term. As such, it would seem quite distinct from Ardente v.
Horan, where the court found that the request that specified items remain with the real
estate was essentially a violation of 58 and 61of the Restatement. In Ardente, the
court said, an acceptance may be valid despite conditional language if the acceptance is
clearly independent of the condition. The condition of all in was likely more of a
confirmation of what Deena intended to communicate, and not an additional condition.
However, it could also be argued that the P2P software (and/or the valuable
contracts with advertisers like Nike and Coka-Cola) was what Ron meant by all in. As
such, if P2P2 were really a divisible, arguably separate component from the website, it
would be possible to interpret Rons words as imposing and additional condition, ie:
Facetrest plus P2P, and as such, it would be like Ardente, and therefore considered as a
rejection of the offer, and a counteroffer including the added condition(s). As per 61 of
the Restatement, an acceptance which requests a change or addition to the terms of the
offer is not thereby invalided unless the acceptance is made to depend on an assent to
the changed or added terms. Deena would have to accept the new condition if Rons
acceptance were dependent on the inclusion of P2P, which on the face of his words, it
seems to do.
(3) Was this an acceptance of Deenas offer?
(a) Assuming, arguendo, that Deenas communication above manifested an
objectively reasonable intent to offer to sell Facetrest for $10.5 million, Rons
communication would likely not be an acceptance of Deenas offer. First, as noted above,
24 of the Restatement requires that no further action be taken to conclude the deal.
There is actual evidence, from Rons communication itself that further action is
neededhe says, specifically, that he needs confirmation from the Board. Arguably,
however, because that is a mere formality, it could be the case that Ron could act to bind
the company irrespective of the Boards actions, and as such, no further action would be
necessary to conclude the deal. Ie: if the Board merely rubber stamps Rons decisions.

2
You could also discuss the transferability of the advertiser contracts. If they are
transferrable, and separate from the business, it might be more likely that Rons all in
comment meant to confirm the inclusion of these things.

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Second, it is unclear whether Deena intended to require performance (delivery of the

money) as acceptance of the offer, or if a return promise (to pay) would constitute
sufficient acceptance. It is rather difficult to discern from Deenas communication by
itself. [M]ake that dream turn into a reality is vague enough to support the acceptance
by return promise theory (as that is the default generally). But, if I had that kind of cash
could imply that performance is the necessary action required to accept the offer to
selli.e.: delivery of the cash itself is required. If there is doubt as to how to interpret
this communication as inviting the offeree to accept by promising to perform or by
rendering performance, 32 of the Restatement suggests that the offeree chooses. As
such, Ron would be able to choose whether to accept by paying or by promising to pay
if Deenas offer were unclear on which is required.
(b) Did Ron (obo Bloogle) objectively manifest an intention to buy Facetrest for
$10.5 million?
If Rons communication was an acceptance of Deenas offer, a contract would be
formed giving rise to an obligation by Facetrest to turn over the business, and a mutual
obligation by Bloogle to pay Facetrest $10.5 million.3 It seems from Rons
communication that Ron was uncertain as to whether Deena was kidding or not. He
was in doubt, and that is why he started by saying, are you kidding? Presumably, Rons
next words further indicate that Ron was not intending to accept what he perceived as
an offer to sell, but, was more likely offering to buy. He says, Bloogle would gladly
offer
(c) Was the means of acceptance (email) reasonable and therefore effective under
the circumstances?
Under Restatement 65, unless circumstances known to the offeree
indicate otherwise, a medium of acceptance is reasonable if it is the one used by the
offeror or one customary in similar transactions at the time and place the offer is
received. Here, Deena (the presumed offeror) texted the offer on her phone. Ron
replied by email on his Blackberry. Email and text are similar modes of communication,
but theyre not the same. However, because Deena and Ron both apparently use handheld PDAs to communicate, and could check text and email on their respective devices,
it would seem that there is an argument to be made that the means of communication
are similar enough due to the fact that the same kind of device is used to read and send
both kinds of messages, and they are transmitted in roughly equivalent formats and
time-spans. Further, given the parties communication at the dinner party about doing
deals over email and hand-held devices, maybe Ron knew that Deena would consider
this means of communication acceptable.

3
Was there consideration for this contract? 71 of the Restatement and Hamer v. Sidway,
require that the offerors promise induce the return promise or performance, and that the
offerees promise or return promise induce or secure the offerors promise. In this case,
Deenas offer to sell Facetrest for 10.5 induced Ron to promise to pay 10.5, and Rons
promise to pay 10.5 was made to induce Deena to promise to deliver Facetrest (or to
secure her delivery of the business).

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C.

Did Deenas response to Ron coupled with Rons response back to Deena
create an obligation on Deenas part to leave open an option for Bloogle to
purchase Facetrest for $10.5 million?

Ron requested 5 days to work out the details of the formal boring stuff. This
could mean one of two things. Either the parties created an oral agreement to sell
Facetrest for 10.5 million, but the formal details will be memorialized later, OR, the
parties have not yet formed a contract, and Ron has requested an option to leave this
offer open for 5 days. Deenas response, sure, youve got 5 days to come up with the cash,
could indicate that Deena is making a promise, in the form of an offerif you, (Ron obo
Bloogle), deliver $10.5 million in five days, Ill convey Facetrest to you, all in. The key
to determining the acceptable means of acceptance of an offer is to examine the offer
itself and the character of the transaction, as the court explained in Carlill v. Carbolic
Smoke Ball. Here, Deena seems to suggest with her words, that if Ron performs
(delivers cash) within five days, he will have accepted her offer to sell.
(a) Was there consideration to support the proposed option, or was Deenas
promise to keep the offer open for five days a nudum pactum, such that it was revocable
at will any time prior to acceptance?
Options need to be supported by consideration to be valid and enforceable
(Dickinson v. Dodds). Ron didnt pay for the option to be left open at the time of the
request, but he did request that Deena notify him if she needed something more, or to
notify him if he needed to provide a check (presumably a down payment) to keep the
option open.
In essence, Ron was promising to give a down payment in exchange for Deenas
promise to keep the option open. Could Rons promise be construed as valid
consideration? Possibly. But it is unclear whether Deena acquiesced to this
arrangement. Could her silence be construed as acquiescence? It is possible for silence
to be acceptance, like in Hobbs v. Massasoit Whip Co., where acceptance of the goods and
silence constituted acquiescence to the terms of the offer. However, here, it would seem
unlikely that this is the case. We would need to know if the two (Ron and Deena) had
other dealings in which silence was considered acceptance, or other relevant course of
dealing evidence, such as information on whether the two understood from other
interactions that this situation would give rise to an obligation on Deenas part to reject,
and would otherwise be considered acceptance.
D.

Was Torys response to Deena an acceptance?

{CUT AND PASTED FOR YOUR EASE OF REFERENCE:}

Consider it done. Have your lawyers do the paperwork, Ill get you
$10.5 ASAP. Congratulations, as of Sunday, youll be drinking fancy wine
in France.
(1) Agency issue
Tory is a manager at Yabloo!, he is likely not in a position to bind the company.
Deena knows this. So, likely, his words above are insufficient to bind Yabloo! to
perform as promised.

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(2) If Deena offered to sell, then this communication is a promise to accept via delivery
of the $10.5 cash, presumably before Sunday. Whether a contract was formed hinges on
(i) whether Deenas original communication was truly an offer, and (ii) whether Deena
intended to permit acceptance of her offer via a promise to perform as opposed to
performance itself. If its the former, then a K is formed at the time of Torys making
this statement assuming that he has authority to bind Yabloo! (which he likely doesnt).
If its the latter, no contract is made unless and until Yabloo! delivers the $10.5 million
to Deena.
More likely, this is construable as an offer to buy Facetrest by delivering the
cash, along with the details as worked out by Facetrests lawyers.
E.

Was Deenas response to Tory an acceptance of Torys offer to buy Facetrest

for $10.5 million?

{CUT AND PASTED FOR YOUR EASE OF REFERENCE:}

Yeah, right, Ill believe it when I see a duffel bag full of cash or a cashiers check for 10.5! ;-)
You know darned well you cant make that happen like that. Nice try cowboy! ;-)
Deena knew that Tory is not authorized to make these kinds of offers on behalf
of Yabloo!. Hence, even though Torys response sounded serious, Deena perceived it as
joking or sarcastic. This is evidenced by the tone and substance of her response, yeah,
right and ;-) and Nice try cowboy! It could be construed as a dare, but not likely as an
acceptance that would give rise to an obligation by Tory or Yabloo! to fulfill any kind of
bargain. Subjectively, Deena does not manifest an intention to accept Torys offer given
this context. Objectively, one could argue that even if Deena secretly didnt intend for
Tory to take her seriously, he still could and if he does, then she might be bound to sell
the company. The same analysis of Deenas manifest intent to contract to sell Facetrest
for $10.5 from above applies here. She doesnt seem to think that Tory is a legitimate
agent, and does not take his response seriously. As such, no contract could likely be
said to exist yet.
F.

Yabloo!s delivery of the money, along with a Memorandum of Agreement.

(1) Is this an acceptance of an outstanding offer to sell Facetrest?
If there is an outstanding offer by Deena (obo Facetrest) to sell for $10.5
million, and that offer required acceptance by performance, delivery of the
10.5 million would constitute acceptance, and hence, the formation of a
contract would result. However, there are two problems with this:
(a) First, the Statute of Frauds might apply here (to any of the possible
contracts formed w/out a specific written memorialization of the terms).

The Statute of Frauds forbids enforcement of contracts unless there is a written

memorandum where there is a sale of goods for $500 or more (see Restatement
110(2)(a); class PPT slides re Riley v. Capital Airlines).

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Is this a sale of goods? It is unclear whether a sale of an entire business

constitutes a sale of goods. If it were, 2-201 of the UCC would apply, and sufficient
writing would be required. As apparently, none of the requirements of 2-201(2) is
satisfied here, are any of the exceptions applicable under 2-201(3)? Are the goods
specially manufactured? Facetrest was not specially made just for the buyer. 2201(3)(a) is inapplicable here. Has the party against whom enforcement is sought
admitted that a K for sale was made, under 2-201(3)(b)? In this case, has Deena
somehow admitted that a K was made? There is evidence of thisright after she
received the money, she emailed Ron and said, offer revoked. Presumably, she
revoked the outstanding offer to Ron because she believed that she was now
contractually bound to sell Facetrest to Yabloo!.
Is the writing requirement satisfied? Arguably not given the medium in which
the writings are in this casetext messages (phones), and email (composed and read on
a PDA), and voicemail (non writing). As such, there is a good chance that there is an
insufficient writing, even collectively to satisfy the Statute.4
(b) Second is the issue of whether the memorandum of agreement changed
the terms, violating the mirror-image rule, which would change the
acceptance into a conditional counteroffer, and could also trigger
application of UCC 2-207.
As made clear by Ardente v. Horan, acceptance must mirror the terms of the offer.
Does the memorandum of agreement impose new conditional terms on Facetrest, such
that it is not an acceptance of the offer to sell, but instead is a conditional counteroffer?
Presumably, the additional terms were not contemplated by Deena if she had previously
offered to sell (the value-assessment in particular; as well as the penalty clause), nor
could Deena have any reason to have notice of these terms from some prior transaction
with Yabloo!, at least not on the facts as presented. If Yabloo! and Facetrest have
entered into numerous contracts, and all of them have a similar set of clauses, maybe it
could be argued that, like the apple-purchase hypothetical posed in Register v. Verio,
Deena should be charged with constructive knowledge of these terms. However, the
penalty and assessment clause seem very specific to this transaction, making implied
imputation ring frightfully hollow.
Like the court in Step-Saver v. Wyse did, it is useful to determine whether the
memorandum of agreement is an integrated writing under UCC 2-202, a proposed
modification under UCC 2-209, or a written confirmation under 2-207. Like in that
case, it seems that a court would be most likely to analyze Yabloo!s memorandum of
understanding as a written confirmation under 2-207.
So, the question becomes whether 2-207(1) applies to Yabloo!s acceptance.
Klocek v. Gateway applies this section to a situation with only one form, so arguably, it
could be applied here. However, that was in a situation where the parties behavior and
performance demonstrates the existence of a contract. Here we may lack such behavior,
rendering this section inapplicable. Assuming it could be applied, is Yabloos
communication and memo a definite and seasonable expression of acceptance or a
written confirmation such that it operates as an acceptance, even though the terms of

4
This is probably more analysis than I would expect regarding the Statute of Frauds. I
left it in for your reference.

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the memorandum of agreement state terms additional to those offered or agreed upon?
This depends on whether acceptance is expressly made conditional on assent to the
additional terms. In this case, it appears that Yabloos memorandum of agreement
imposed additional conditional termsthe inspection provision is particularly suspect
here; it appears that but for the addition of this clause, designed to ensure that the buyer
is not overpaying, that the buyer would not enter into the deal. As such, the
memorandum of agreement could most likely be construed as a conditional counter-offer.
At best, the additional terms contained in the memorandum could be considered
proposals for addition to the contract under 2-207(2). Because Yabloo! and Facetrest
are both sophisticated business entities, they could be considered merchants for
purposes of the UCC. As such, these additional terms would become part of the
contract unless any of the following are true: (a) the offer expressly limits acceptance to
the terms of the offer. This doesnt appear to be the caseDeenas offer does not
impose such limitations. (b) They materially alter itthis could be a problem. It
appears that the terms of the memorandum of agreement DO materially alter the offer.
Specifically, the value-assessment and penalty contingency materially alter the price
term. Arguably, this is merely a contingency to ensure that the business is
appropriately valued, and would not affect a material term (price) assuming that there
are no hidden problems (like the P2P system being hacked). (c) There is sufficient
notification of objection to the terms/ sufficient notice and a reasonable time given (5
days) to revoke. 5 days was the time frame to revoke in Klocek; it was 30 days in Hill v.
Gateway. These are two sophisticated merchants, not an individual, plus, given the
parties stated interest in conducting big deals quickly, five days seems like a reasonable
amount of time. So, it is possible that the terms of the memorandum could be
incorporated into the parties contract, but are more likely to be construed as a
conditional counter-offer for the reasons already stated.
G.

Did Rons communication create a binding contract obo Bloogle to buy

Facetrest for $10.5 million?

{CUT AND PASTED FOR YOUR EASE OF REFERENCE:}

OK, I have approval from the Board at $10.5, but that includes assurances that the
partner agreements are transferrable, and that the P2P system will work if we incorporate it into
Bloogles existing web architecture.
(1) Is Rons acceptance obo Bloogle conditional, such that it creates a counteroffer to buy Facetrest, or is it an acceptance, with a gratuitous request for reassurances?
In Ardente v. Horan, the buyers returned a signed sale agreement along with a
down-payment check and a letter stating that they were concerned that the following
items remain with the real estateI would appreciate your confirming that these items
are a part of the transaction, as they would be difficult to replace. On the facts, the
instant situation is similar. Ron has requested assurances (like the request for
confirmation in Ardente) that things that would be difficult to replace (here, the valuable
partner agreements, and the P2P system) would be a part of the sale. The Ardente court
found that this letter was conditional, operating as a rejection of sellers offer because
the acceptance violated the reasoning of Restatement 58 (1st restatement), or 61 of the
Second Restatement, which puts the emphasis on whether the acceptance is made to
depend on an assent to the changed or added terms. The court cites Corbin as saying

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that the way that the acceptance would avoid this conditional counter-offer situation is
if it accepted the offer unequivocally on its stated terms, but included a request or
suggestion that some addition or modification be made. Here, it seems from Rons
language, that an additional condition is being imposed: I have approval from the Board
at $10.5, but that includes assurances The key word is but. It would seem that that
renders the acceptance as a conditional counter-offer because Rons response is
dependent on Deenas assent to the terms. The only way that that would not be the
case is if the original offer contemplated the inclusion of the items (then the terms would
not be added or changed), or if it could be argued that Ron meant merely to request
or suggest that those things be included. However, because they would not ordinarily be
included (probably), it is likely the case that this is a conditional counter-offer.
(2) Did Deena reject her offer before Ron could accept?
Assuming, arguendo, that Rons acceptance was clear and unequivocal, and
included a mere request or suggestion, and did not impose any additional conditions on
the offer, Ron emailed his acceptance to Deena AFTER Deena emailed Ron with her
revocation of the offer. However, Ron had not yet received Deenas revocation. The
Mailbox Rule is that a contract is formed upon dispatch of the acceptance. Therefore, it
would seem that if the Mailbox Rule applies, and Ron was not accepting under an
option contract, that Rons acceptance would have created a binding contract.
(a) Does the Mailbox Rule apply to these communications?
Restatement 64 says that acceptance by telephone or other medium of
substantially instantaneous two-way communication is governed by the principles
applicable to acceptances where the parties are in the presence of each other. Does
email qualify as such a communication or is it more like traditional mail? Adding to the
difficulty of this question is the fact that both parties used PDAs to check their email,
making the communication more like a phone than paper mail. It would seem that email
sent and received this way is more like the kinds of communications intended to be
covered by 64, but more research in this matter would be needed to be sure.
(b) Was this an acceptance of an option contract?
If this were an acceptance via an option, then, as per Restatement 63(b), an
acceptance under an option contract is not operative until received by the offeror. As
such, Deenas revocation would trump Rons acceptance, and no contract would be
formed. As discussed above, it is unclear whether this is an option contract, because
there may or may not be adequate consideration in support thereof. If it is, then no
contract would be formed upon dispatch of the email, even if email is included in the
Mailbox Rules parameters.
CONCLUSIONS
1. Will Yabloo! prevail on its suit to recover $13.5 million?
Ultimately, even though it may be challenging to determine the actual time
when the contract was formed, this is not necessarily a barrier to contract

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formation. As such, Yabloo!s recovery hinges in large part on whether the

terms of the Memorandum of Agreement are incorporated into a contract
between Facetrest and Yabloo! under UCC 2-207. If they are, then it would
seem that the independent assessment of the business for $2.6 (which is less than
$10 million), would obligate Deena to return the $10.5 in cash, and possibly
require the payment of $3 million.5 As per the analyses above, this is likely the
case.
2. Will Bloogle prevail on its suit to compel the sale of Facetrest for $2.6 million?
As Rons last response was most likely a conditional counter-offer, Deena would
have had to accept it unequivocally before a contract could be formed. If she did
accept it, (not in the facts, but a question that must be asked and answered), then
the sale price would be $10.5 million, not $2.6. If Ron can prove that Deena
knew about the P2P systems catastrophic failure at the time of contract
formation, he could assert that Deenas failure to disclose that fact amounted to
fraudulent misrepresentation. Certainly, however, it is unlikely on these facts
that Bloogle could compel Facetrest to sell the business for $2.6 million because
there simply was no contract to sell at that price. As price is indisputably a
material term to the sale, no contract could be formed.

5
There are other damages-related issues on the payment of the $3 million that are
omitted here because we havent covered them yet.

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