Colin Marks, ‘Not What, but When is an Offer – Rehabilitating the Rolling Contract’

To what degree are rolling, or layered, contracts binding? A number of courts, starting with the now infamous case of ProCD, Inc. v. Zeidenberg, have held that, rather than a contract for the sale of a good, such as a computer, being completed in-store, the contract is formed when deferred terms found inside the package are reviewed by the buyer and accepted by some act — usually use of the good (or declining to return it). This approach, which has been called the rolling contract, has been widely criticized by commentators as an abomination of contract law that ignores a true application of the Uniform Commercial Code (“UCC”) as well as the spirit of that code. The approach is not without its allure, however, as it permits contracts to be formed in an efficient manner that may very well appeal to consumers and merchants alike. However, too strict of an adherence to the approach threatens to impose terms upon parties that they never expected or agreed upon. But the opposite is also true – too strict of an adherence to traditional roles of offer and acceptance threatens to displace terms that were contemplated and not objectionable to the consumer. Thus, rather than relegating the rolling contract approach to a dark corner of contract law in favor of a more traditional approach, this article proposes that the rolling contract should be rehabilitated.

Existing contract law does a good job of defining contract offers. However, what is the trickier issue, particularly when a transaction involves an initial oral component, is identifying when the offer is actually made. In other words, when is it fair to say that an offer is made in-store by the buyer, and when is it fair to say that the in-store interaction is nothing more than a preliminary event to the actual offer, which comes later when the buyer gets home and opens the product? Legal realism, which was a foundational principle driving the drafting of the Restatement (Second) of Contracts, as well as the UCC, may offer some insights into how to approach the rolling contract theory. But so may a more recent approach to contract law — the relational contract approach. Relational contract theory, which essentially treats contracts not as isolated events but ongoing relationships, provides a useful way of making this determination.

Relational contract theory has its roots in the writings of Ian Macneil who believed most contracts were rarely, if ever, fully thought-out and expressed representations of the parties’ obligations. It would therefore seem to be a logical extension of both legal realism and relational contract theory that certain situations exist where the parties expect that a contract has not been fully formed in the store, but rather further terms, i.e., the formal “offer,” will come later. If parties to a contract know that there is more to the contract than simply the price and the good, then it should come as no surprise that more terms are to come, or that a more detailed offer will be forthcoming. Thus, in some scenarios, it is perfectly reasonable to assume that the contract has not been formed in-store, but rather a deferred offer will come later. Thus rolling contract theory can be explained under a legal realism approach, as influenced by a relational approach; however, this is not to say that all contracts are now subject to the rolling contract approach. As this article explains, some contracts really are formed at the point of contact under a relational contract approach. The challenge to the courts is to determine which will be which. This article describes how legal realism and the relational contract theory can be used to explain the rolling contract approach and makes suggestions for how this relational contract theory can be used to aid courts in determining which contracts involve a rolling or deferred offer.

Marks, Colin P., Not What, but When is an Offer — Rehabilitating the Rolling Contract (March 4, 2013).

First posted 2013-03-06 08:34:41

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