|
Two questions about contracts, one general, one more specific.
1. In general, Party A makes an offer. Party B accepts,
signs the contract and returns the contract for Party A's
signature.
Before signing, can Party A withdraw the offer?
If so, does Party A have any financial obligations to
Party B, for example payment of attorney fees?
Assume that there was no written or oral agreement regarding
obligations in the event that the deal falls through.
(In part, the answer might depend on what "consideration"
is exchanged and when. Assume that the consideration is the
promise to pay Party B in the future, if that is indeed valid
and sufficient "consideration".)
2. More specifically, Party B approaches Party A to create a
license agreement whereby Party A licenses the use of
intellectual property to Party B in exchange for royalties
on sales by Party B.
Party A draws up the license agreement and gives the
agreement to Party B. Party B signs the contract and returns
the contract for Party A's signature.
Before signing, can Party B renege on the deal?
If so, does Party B have any financial obligations to
Party A, for example payment of attorney fees?
Assume that there was no written or oral agreement regarding
obligations in the even that the deal falls through.
It is not clear to me who are the offeror and offeree in
this scenario.
I think this is basic contract law. But it has been 35 years
since my last business law class.
|
| |
| |
Two questions about contracts, one general, one more specific.
1. In general, Party A makes an offer. Party B accepts,
signs the contract and returns the contract for Party A's
signature.
Before signing, can Party A withdraw the offer?
If he can, it was not an "offer". "Acceptance" of an "offer" with
legally sufficient "consideration" is what creates a binding contract.
What you are referring to, if it was not signed by Party A when he
submitted it to Party B, is a "solicitation" or "proposal" from A,
asking _B_ to "make an offer" (by signing and returning the proposal).
However, Party A can withdraw the written offer BEFORE B SIGNS IT if
he communicates that withdrawal to B before the contract is formed.
What you are calling a "contract" is just a piece of paper, until both
parties have somehow or other indicated their assent to its terms.
Only then does it become a "contract".
If Party A had given Party B a paper, signed by A, containing all the
necessary terms for a definite agreement, and B then signed it, at
that moment a contract would have been created and A would have lost
the power to decide whether to contract or not. That's what happens
when a potential buyer submits an "offer" on a piece of real estate;
it's a form of contract signed only by the potential buyer, and it
becomes a binding contract when it is also signed by the seller
without any modifications. If the seller makes modifications on the
form, signs it and sends it back, that is considered a "counteroffer"
by the seller.
The "contract" is an abstract thing: an agreement between the parties,
a meeting of their minds. It either exists, or it doesn't. What
most foax call the "Contract" is just a piece of paper memorializing
the real "contract" in the parties' heads.
If so, does Party A have any financial obligations to
Party B, for example payment of attorney fees?
Depends on (a) whether you really have a "contract", and (b) what the
contract says. Under the "American Rule", even in case of an
intentional breach, each party bears its own legal costs unless the
parties have explicitly agreed otherwise. In countries following the
"English Rule", the loser pays.
Assume that there was no written or oral agreement regarding
obligations in the event that the deal falls through.
Then each party bears its own legal costs. But A would be liable to
B for the breach, and for all reasonably foreseeable damages flowing
therefrom, including lost profits, etc., not just for the cost of the
goods he would have shipped (or whatever).
(In part, the answer might depend on what "consideration"
is exchanged and when. Assume that the consideration is the
promise to pay Party B in the future, if that is indeed valid
and sufficient "consideration".)
No, the answer doesn't depend on the nature or amount of
"consideration". A contract that says the promises therein are given
for "one dollar and other good and sufficient consideration" can
expose the promisor to zillions of dollars worth of potential damages,
if those damages are foreseeable results from his breach. Of course,
if the breach simply amounts to the failure to pay a promised future
money consideration, then that amount may well be the measure of
damages or part of the measure of damages. But it has nothing to do
with whether one party has to pay the other party's legal costs.
2. More specifically, Party B approaches Party A to create a
license agreement whereby Party A licenses the use of
intellectual property to Party B in exchange for royalties
on sales by Party B.
Party A draws up the license agreement and gives the
agreement to Party B. Party B signs the contract and returns
the contract for Party A's signature.
Before signing, can Party B renege on the deal?
Depends in part on whether Party A and Party B have an enforceable
oral contract of which the written paper is a mere memorandum, or if
their negotiations specifically said they did not have a binding
contract until they both signed the paper.
If Party B backed out before A signed it, and communicated that
intention to A before A changed his position in reliance on the
apparent existence of a contract between them, then no contract was
formed and B has no obligation to A (at least none arising from the
written paper; there may be other bases of liability).
If so, does Party B have any financial obligations to
Party A, for example payment of attorney fees?
You already asked that. It's impossible to give more than just a
general answer without reviewing the entire specific contract and the
entire course of dealing between the parties.
Assume that there was no written or oral agreement regarding
obligations in the even that the deal falls through.
Ditto as in the general case.
It is not clear to me who are the offeror and offeree in
this scenario.
The one who presents a proposal that is capable of acceptance is the
"offeror". The one who accepts and creates a binding deal thereby is
the "offeree".
I think this is basic contract law. But it has been 35 years
since my last business law class.
Yes, it's pretty basic. But there are all kinds of things that can
result in a different outcome in a specific case. Don't rely on the
above as any kind of advice; you need to consult an attorney in
confidence and reveal all the pertinent facts in order to get real
advice you can safely act upon. Good luck,
--
This posting is for discussion purposes, not professional advice.
Anything you post on this Newsgroup is public information.
I am not your lawyer, and you are not my client in any specific legal
matter.
For confidential professional advice, consult your own lawyer in a
private communication.
Mike Jacobs
LAW OFFICE OF W. MICHAEL JACOBS
10440 Little Patuxent Pkwy #300
Columbia, MD 21044
(tel) 410-740-5685 (fax) 410-740-4300
|
| |
| |
Me wrote:
Two questions about contracts, one general, one more specific.
1. In general, Party A makes an offer. Party B accepts,
signs the contract and returns the contract for Party A's
signature.
Before signing, can Party A withdraw the offer?
Unless it's a "firm" offer, meaning that it includes a promise that it
will not be withdrawn before a certain time or event, it can be
withdrawn at any time before it is accepted. That will probably be
when B signs the contract, but that's not necessarily the case.
If so, does Party A have any financial obligations to
Party B, for example payment of attorney fees?
If A withdraws the offer after B accepts? A's obligation is to make B
whole. In other words, B is entitled to get what he should have
gotten under the contract with A. He may or may not get attorneys
fees, depending on state law and the terms of the contract.
Assume that there was no written or oral agreement regarding
obligations in the event that the deal falls through.
Ok, so what?
(In part, the answer might depend on what "consideration"
is exchanged and when. Assume that the consideration is the
promise to pay Party B in the future, if that is indeed valid
and sufficient "consideration".)
A promise is sufficient consideration to form a contract.
2. More specifically, Party B approaches Party A to create a
license agreement whereby Party A licenses the use of
intellectual property to Party B in exchange for royalties
on sales by Party B.
Party A draws up the license agreement and gives the
agreement to Party B. Party B signs the contract and returns
the contract for Party A's signature.
Before signing, can Party B renege on the deal?
It depends on exactly what went on before. B's signing could be the
formation of an offer to A, or it could be the acceptance of an offer
made by A. In the first case it can be withdrawn before A accepts.
In the latter case, the contract is formed when B signs.
If so, does Party B have any financial obligations to
Party A, for example payment of attorney fees?
See above.
Assume that there was no written or oral agreement regarding
obligations in the even that the deal falls through.
So what?
It is not clear to me who are the offeror and offeree in
this scenario.
It's not clear to me, either. You haven't included sufficient facts
to make that determination.
Stu
|
| |
| |
Two questions about contracts, one general, one more specific.
1. In general, Party A makes an offer. Party B accepts,
signs the contract and returns the contract for Party A's
signature.
Before signing, can Party A withdraw the offer?
Two issues: first, is what A provided really an offer, or is it an
invitation for B to make an offer? Advertising, informal price quotes,
and the like are often not offers but mere invitations to make an
offer. Quotes that look like a contract but say "subject to
acceptance" may not be offers but invitations.
Second, assuming it is an offer, what is the manner of B's acceptance?
How an offer is accepted makes all the difference: if A's offer
doesn't say how B should accept, and it would be reasonable for B to
mail the signed contract, the mailbox rule applies. You can get any of
a number of results from parties acting at cross-purposes when the
mailbox rule applies.
If the mailbox rule applies, B's acceptance is good when it is mailed,
unless B learned that A withdrew the offer before mailing it. Thus A
can withdraw the offer even after B has signed it, so long as B
receives A's notice before mailing the contract.
If so, does Party A have any financial obligations to
Party B, for example payment of attorney fees?
If there was a contract, A is liable to B for breach of contract, and
that would include any of B's costs (less whatever B saved by not
going through with the contract).
If it was reasonable for B to have proceeded to incur something like
attorney fees, even if B doesn't have a contract case, but may still
have a "promissory estoppel" or "detrimental reliance" case.
Assume that there was no written or oral agreement regarding
obligations in the event that the deal falls through.
(In part, the answer might depend on what "consideration"
is exchanged and when. Assume that the consideration is the
promise to pay Party B in the future, if that is indeed valid
and sufficient "consideration".)
If there was to be consideration, then the offer and acceptance would
amount to a contract. A promise can be valid consideration, even a
conditional sort of promise (otherwise, there could be no contracts
for insurance). The most interesting questions, the way I see it, are
whether there was an offer, and whether B's acceptance was timely.
2. More specifically, Party B approaches Party A to create a
license agreement whereby Party A licenses the use of
intellectual property to Party B in exchange for royalties
on sales by Party B.
Party A draws up the license agreement and gives the
agreement to Party B. Party B signs the contract and returns
the contract for Party A's signature.
To oversimplify the above, B invited an offer, which A made and B
accepted. At some point, B's acceptance becomes binding. If the
mailbox rule is in effect, it's when B mails (or otherwise sends) the
deal to A. Otherwise, it's when A receives it.
Since B asked A to prepare the agreement, rather than drawing up the
agreement himself, it sounds more like B inviting the offer. Had B
given A fairly specific terms under which B would deal with A, then it
could be read that B made the offer.
Before signing, can Party B renege on the deal?
Not after it's been communicated to A. At that point, B is bound, and
if he reneges, A has a claim for breach.
If so, does Party B have any financial obligations to
Party A, for example payment of attorney fees?
If it was reasonable for A to incur attorney's fees, these are among
the things B could be liable for. It's harder to say, but A may have a
case even if there was no contract.
--
Not a lawyer,
Chris Green
|
| |
| |
|
