Today we explore the concept of mutual ascent, by examining the case of Embry vs Hargadine, and some relevant provisions of the uniform commercial code. Mutual ascent describes an agreement between two parties that intend to form a contract. Before we take a look at Embry, let's discuss why mutual assent is such an important concept. As you know, parties often have extensive negotiations before signing the contract. These negotiations happen over time that are subject to the parties' choice and are not predetermined by law or circumstance. Parties can discuss everything from price, quantity, quality, the method of payment, which party will bear certain risks, the distribution of the relationship, the duration of the relationship, and so forth. At some point the parties will end the negotiations and might agree to be bound by contractual obligations. In other words, they might bring the contract into formal existence. Freedom from contract is just as important as freedom to contract. Individuals don't have to be bound by contractual promises unless they want to, so figuring out whether they want to be bound is important. As we go through the next few lessons, including this one, keep in mind this guiding question. How do courts tell when there's been sufficient agreement to form a contract? A contract usually is formed when there's mutual assent. I think of this as the moment the bell rings, a kind of trans-substantiation, that changes legal duties of the parties. Mutual assent describes the act of agreeing to the terms of the contract, and so a green to the exchange of promises. A related concept that is sometimes treated as a synonym is the meeting of the minds. Meeting of the minds describes a situation where there is a common understanding in the formation of the contract, a common understanding of what has been exchanged. Phrased differently, there's a meeting of the minds when both parties agree to the promised exchange. Mutual assent usually contains two components, offer and acceptance. Offer and acceptance are elements that traditionally were required for the formation of a legally binding contract. The person who makes an offer is often called the offeror, and the person who hears and considers the offer is the offeree. If I ask, would you like to buy this pen for $50, I am an offeror making an offer, you are the offeree. If you say yes, then that is an acceptance. With both offer and acceptance, there is also mutual assent. In this example, the two of us have mutually assented to the contract through the process of offer and acceptance. Then uniform commercial code, which governs the sale of goods has a number of provisions concerning mutual assent, as well as offering acceptances. We will now introduce these provisions and they are frequently cited in many of the cases we will learn, so it's good to be familiar with them. First let's look at UCC 2-204, it deals with contract formation in general, and it states, that a contract for a sale of good can come into being in a variety of ways as long as it's clear that the parties have reached agreement. The agreement can be found from conduct or behavior, so it does not always have to be in writing. The provision also states that agreement is enough to be a contract, even if we don't know when the contract started, when it was formed. The timing of a contract can be of crucial importance in some contract disputes, so it's always helpful to ask when the contract is formed, or as I sometimes think of it, when the bell rings. UCC 2-205 deals with what are called firm offers. If a merchant makes an offer in writing, and is explicit that the offer will be held open, then the offer is not revocable for a period of up to three months. It's going to be held open non-revocable for a reasonable time, but up to three months, and in this way, since the offer is not revocable, it's called fir. You'll notice that there's consideration in the case of a firm offer, because the offeree hasn't done anything, or paid anything, to make the offer firm, however, this provision is explicit that at least a merchant offeror is obliged to keep a firm offer open for this period of time of up to three months. Phrased differently, a firm offer is an irrevocable offer. This is an exception to the general rule that most offers can be revoked by the offeror at any time before they're accepted. UCC 2-206 is an unusual default rule which says that an offer invites acceptance by any reasonable means unless the offeror, or circumstances, unambiguously indicate otherwise. This suggest that courts require unambiguous evidence to overturn the strong presumption that offers intend to be acceptable by any reasonable means. The provision qualifies the common law idea that the offeror is master of her offer. At common law, if an offeror say, says something like, I'll sell you my car for $10, but you can only accept by skywriting across the sky in New York City, law and economics rocks, and you respond to this by saying, thanks, I accept, well, we don't have a contract, because you haven't met my conditions for acceptance. As master of my offer, I can condition your acceptance on you doing something crazy, like skywriting. Under the UCC, in contrast, I'd have to be careful as the offeror to unambiguously make skywriting the only means of accepting the contract. We just went through three very important provisions of the uniform commercial code. It's okay if you're confused or didn't keep track of everything perfectly. Let's answer two questions to review. Number one, I offer you a pen for $100, and you nod, and pay me the $100, and take the pen. Do we have a contract, and which section of the UCC applies? Well the answer is this is an valid contract. UCC 2-204 states that conduct is sufficient for agreement. All right, number two. A merchant posts an ad to sell a pen for $100 and states the offer is good until next Friday. You show up on Tuesday, and the merchant has raised the price to $120. What price are you supposed to pay, and which section of the UCC applies? Well, the answer is that you should be able to buy the pen for $100. The merchant made a firm offer and is bound by that under UCC 2-205. Let's turn now to the case of Embry vs Hargadine. In this case Embry, the plaintiff, is an employee of the defendant Hargadine. Embry told the president of the company that he would quit his job if he were not given a renewed employment contract for the following year. According to the plaintiff, the president replied, "go ahead, you're all right, get your men out, and don't let that worry you". At this point, the plaintiff believed he had an employment contract. The president argues he never intended for this to be a contract and plaintiff was an employee at will throughout this period. An employee at will is somebody that can be fired for good, bad, or no reason. When employment was terminated early the plaintiff sued for breach of contract. The trial judge instructed the jury that to find for plaintiff they had to find both that the president uttered the aforementioned phrase, and that both parties intended by having such conversation to contract for plaintiff's reemployment. The jury found for the defendant, and the instant court reversed, and remanded to find out what words were actually used by the employer. So, is this an implied-in-fact, or an express contract? While, not the main focus of the opinion, note that this case lies somewhere in the middle of the spectrum between implied-in-fact contracts and express contracts. The employer did not expressly say that he was rehiring Embry, so it's probably better to think of this as an implied-in-fact contract, that his words, and conduct, if anything, suggested, or implied a promise. So, under the plaintiff's theory of the case, who is the offeror here? Well, the answer is that the plaintiff, Embry, is the offeror, who offered to be rehired for another year, presumably at the same rate of pay, and under the plaintiff's theory, Hargadine accepted the offer by saying, go ahead, you're all right, get your men out, etc. The main issue in this case is this, if the plaintiff was reasonable in interpreting defendant's behavior, is it still necessary for the defendant to have an intention to contract for the contract to exist, or in other words, is it what you say, or what a reasonable listener would have understood you to mean that determines whether a contract exists? The court held that it is not necessary for the defendant to have an intention to contract. What matters is the expressed intention. Although a meeting of the minds is the usual requirement of the contract formation, plaintiffs will be held to their expressed intention, even if they secretly harbor contrary thoughts. The court is clear that it's really the objective manifestation of consent that controls. What the speaker subjectively meant, or what the listeners objectively believed the speaker to mean, doesn't count. Parties that intend, but don't manifest, don't have a contract. Parties that don't intend, but do manifest, do have a contract. Evaluating people's objective manifestation of intent might make a lot of sense at first. Imagine if you agree to a contract, but crossed your fingers behind your back. We certainly don't want you to be let out of the contract, that would be a gross injustice, however, the reasonable person standard that the court adopts can create a lot of ambiguity. The court says that the plaintiff's version of events, if true, was sufficient to be taken by any reasonable person as an assent to the demand. Do you think that's really true? Some might view the president's speech as a polite brush-off rather than the offer, or the acceptance, of the employee's offer. Also, notice that the court took the decision away from the jury. It found the issue as a matter of law, because no reasonable juror could find differently. This seems quite an extreme position to take given the ambiguity in what the president actually said. Today, we examine the question of mutual assent. Mutual assent describes an agreement between two parties to create a contract and is a necessary condition of most contracting. We took a look at important provisions in the Uniform Commercial Code, which we will encounter many more times in the rest of this course, the provisions defined offers and acceptance, and when they constitute the formation of a contract. Finally, we discussed the Embry case, which held that the test for agreement is the objective, reasonable listener.
