III. Contract Formation
We turn our attention now to a closer study of the process by which parties form a contract. In the sections that follow, we will learn how to identify an offer and what constitutes an acceptance. We will examine the special rules for offers of a unilateral contract and for firm offers. Finally, we will tackle the intricacies of U.C.C. §2-207 and debate the legal policies applicable to modern consumer contracting.
All of these rules derive from the fundamental principle that contractual obligations are based on consent. For centuries, courts applied a subjective test to determine whether each of the parties truly intended to form a binding contract. They spoke of “a meeting of the minds” between the parties. As we have already seen in discussing Lucy v. Zehmer, however, more modern decisions focus instead on the parties’ outward manifestations to determine their contractual intent. Older cases used various legal fictions and other devices to protect promisees who reasonably believed that a promisor had made a binding commitment. Thus, the Restatement (Second) of Contracts (1981) § 17 requires only “a manifestation of mutual assent” to an exchange. This so-called “objective theory” of contract finds expression in the Restatement (Second) and in the cases that follow.