Legal, ethical or business as usual?

[verbster]

I placed this scenario here because of possible implied contractual ramifications beyond what actions may be considered ethical or not.

For purposes of this scenario, assume there is no scamming and such.

A person (seller) gets an unsolicited offer to buy a domain for $300 via e-mail. (This is not through a parking service...just an e-mail from a person to the e-mail address on the seller's whois admin info for the domain.)

The seller replies to the potential buyer by e-mail and says, "The offer sounds good to me. Will contact you in the morning to discuss the details of payment and transfer."

In the morning, the seller finds an e-mail from an agent/escrow company (acting for the buyer) that says the buyer has made an offer of $300 for the seller's domain...and to click the link to accept the offer and proceed with the transaction.

In the same group of e-mail that arrived that morning, there is another legit offer for the same domain. The new offer is for $1500.

What does the seller do?

A. Is there a legal contract in place, implied or otherwise, that must be fulfilled?

B. If there were no legal obligation, is it a matter of ethics that the seller should turn down the better offer and accept the lower one? Would it still be this choice if the new offer was $30K or $300K?

C. Or does the seller accept the higher offer with no qualms? Is this fair? Or is this a situation in which there is no fair or unfair...it's just business?

 

[Gene]

Generally speaking, until both parties have officially agreed on the sale, neither party has a legal or ethical obligation (in my opinion). For this reason, I never agree ahead of time to sell at a given price. I'll set up an escrow, and when the client officially accepts the escrow transaction, it's a done deal. But if another party comes in with a higher offer before both parties have agreed, it's open game. By the same reasoning, if both parties HAVE agreed to the escrow transaction, it would be unethical to cancel this transaction based on a better offer. If that second offer is substantially higher, yes it hurts! But everyone has their own 'ethics line' of where a contract may be broken.

 

[DNQuest.com]

Legally and morally A.

Many people do C becuase they have no ethics.

As far as A is concerned, the buyer would need to go to court to enforce the contract. There was an offer, concideration and acceptance on teh part of both parties, thus a legal contract.

 

[homebuyer]

Knee-Jerk Analysis

In the morning, the seller finds an e-mail from an agent/escrow company (acting for the buyer) that says the buyer has made an offer of $300 for the seller's domain...and to click the link to accept the offer and proceed with the transaction.

I would argue that there was no contract because there was no meeting of the minds. The seller's initial reply statement uses language to suggest that it is nothing more than an invitation to continue negotiating over the remaining time constraints, method of payment and transfer, and fees, which are material parts of any domain purchase and sale agreement. Furthermore, the buyer's agent's email is an admission that the buyer understood this, and is now making an offer with all the material terms defined. The seller did not accept the offer so the seller is free to sell to someone else. Assuming that there are no past domain transactions between the buyer and seller, I don't see any ethical issues that should stop the seller from selling to the second buyer.

 

[DNQuest.com]

"unsolicited offer to buy a domain for $300 via e-mail."

offer and consideration... the domain for $300.00

"The offer sounds good to me. Will contact you in the morning to discuss the details of payment and transfer."


Acceptance

This is called a contract. All 3 parts are covered.

 

[AdoptableDomains]

The seller replies to the potential buyer by e-mail and says, "The offer sounds good to me. Will contact you in the morning to discuss the details of payment and transfer."

In the morning, the seller finds an e-mail from an agent/escrow company (acting for the buyer) that says the buyer has made an offer of $300 for the seller's domain...and to click the link to accept the offer and proceed with the transaction. ...

A. Is there a legal contract in place, implied or otherwise, that must be fulfilled?

Based on this statement, ""The offer sounds good to me. Will contact you in the morning to discuss the details of payment and transfer." I would say you have a verbal contract. A contract is an offer and an acceptance. Details and payment are only conclusions to that contract.

B. If there were no legal obligation, is it a matter of ethics that the seller should turn down the better offer and accept the lower one? Would it still be this choice if the new offer was $30K or $300K?

I think there is a legal obligation, but verbal contracts are hard to enforce. However, if written in email, it could be construed as a written contract. Even so, I think ethics is a big issue. the least you could do is explain the situation and see what they say. If they insist you accepted their offer, the ethical thing would be to disregard the second offer. If they believe your story and don't think themselves you are bound, they may voluntarily up the offer.

The dollar amount has nothing to do with legality or ethics.

It could also be an offer from a rival or disgruntled employee just trying to hijack the purchase, and the whole thing could blow up into a mess.

C. Or does the seller accept the higher offer with no qualms? Is this fair? Or is this a situation in which there is no fair or unfair...it's just business?

I have been in a similar situation. I agreed to a price and got a higher offer the next day. I told the second offeror I committed to the first offer, but if it fell through I would give them first rights after that. I don't regret the decision and stand behind the ethics.

Say you win an ebay bid in the last second, the buyer gets a higher offer 1 minute later after the auction close. Should ebay or the seller be able to take that offer instead of yours? not much different really. Look at it from the buyers perspective.

 

[labrocca]

"unsolicited offer to buy a domain for $300 via e-mail."

offer and consideration... the domain for $300.00

"The offer sounds good to me. Will contact you in the morning to discuss the details of payment and transfer."


Acceptance

This is called a contract. All 3 parts are covered.

Phil beat me to it. He posted my exact response except I am cooler than him.

 

[liquidcherry]

"Sounds good to me" is not realy stating an agreement in my opinion.....even about an email the next morning like"i got another, better offer" are u willing to negotiate is not flying.....

I am coming up with this because i got a couple of so called agreements over the phone, basically they agreed to my terms(they wanted to have websites, services from me)....and then they backed out....so in my opinion it means nothing, of course i could have gone after them.....but why bother......

Anyway....as long u dont have a contract underwritten by the 3rd party.....go ahead and sell it to someone else........ that is just the sad part of the internet business......


Cheers

Frank

 

[Domagon]

In the scenerio you described, clearly option "C" ...

The "escrow" company acknowledges no agreement exists yet unless the seller clicked their link to agree to offer* and start the escrow process...

* It's important to note, as described in your scenerio, the "escrow" company is also acting as the buyer's agent.

If they were strictly acting as an escrow agent and nothing more, then the answer might be A or B, but in this instance it's clear they are seeking the sellers confirmation of agreeing to the offer ... as long as the seller doesn't do so, there's no obligation legally nor ethically for the seller to sell at that price or any price for that matter.

Ron

 

[DNQuest.com]

Phil beat me to it. He posted my exact response except I am cooler than him.

This just means I have a less of a real life than you

"Sounds good to me" is not realy stating an agreement in my opinion.....even about an email the next morning like"i got another, better offer" are u willing to negotiate is not flying.....

I am coming up with this because i got a couple of so called agreements over the phone, basically they agreed to my terms(they wanted to have websites, services from me)....and then they backed out....so in my opinion it means nothing, of course i could have gone after them.....but why bother......

Anyway....as long u dont have a contract underwritten by the 3rd party.....go ahead and sell it to someone else........ that is just the sad part of the internet business......


Cheers

Frank

Frank, not to pick you you directly... but this is the complete quote... "The offer sounds good to me. Will contact you in the morning to discuss the details of payment and transfer."

There is no way this is not an acceptance. Escrow is just merely a way to carry out the safe transfer of funds AFTER an agreement has been reached. Sorry, but your explaination does not fly. From what you mention, you had a contract, jsut because the other party backed out does not mean they were legally allowed to, it was your job to enforce the contract, you decided not to. This does come down to ethics.

In the scenerio you described, clearly option "C" ...

The "escrow" company acknowledges no agreement exists yet unless the seller clicked their link to agree to offer* and start the escrow process...

* It's important to note, as described in your scenerio, the "escrow" company is also acting as the buyer's agent.

If they were strictly acting as an escrow agent and nothing more, then the answer might be A or B, but in this instance it's clear they are seeking the sellers confirmation of agreeing to the offer ... as long as the seller doesn't do so, there's no obligation legally nor ethically for the seller to sell at that price or any price for that matter.

Ron

REad what I said to Frank, Escrow is merely a safe way to transfer of funds AFTER an agreement has been reached. Also, read my post on what the contract was. Too many people do not know exactly what a contract is. In this senario, there is no doubt there is a contract here. The seller can break it, then it would be up to the buyer to enforce it by taking him to court. And then the buyer will sound like you saying how deals are broken all the time. The reason deals are broken all the time is because they are a lot of people with no ethics.

 

[Domagon]

Presumably the buyer, in the hypethical scenerio, is NOT dealing strictly with an escrow company, but rather probably something more akin to Sedo or Afternic... that's why the seller is explicitely asked to click a link if they accept the offer.

There is no meeting of the minds, as another poster explained - perhaps an attorney experienced in business law will be kind enough to chime in to explain that concept further...

Ron

 

[verbster]

Some hypothetical clarity:

The following morning, the e-mail was from Network Solution's "Certified Offer Solutions." The link takes the seller to a page where he must accept to abide by NetSol's conditions before the transaction can continue.

 

[DNQuest.com]

Are we confusing using escrow to give an unsolicited offer and using escrow for the safe transfer of funds of a previously agreed contract? I bet we are.... (and there are different laws covering each)

I guess my 20 years of writing contracts, RFOs, 8 years of being incorporated, and business classes means absolutely nothing... sigh

 

[verbster]

I guess my 20 years of writing contracts, RFOs, 8 years of being incorporated, and business classes means absolutely nothing... sigh

I've written an RFP or two, but an RFO must be something special.... :D

 

[BoutiqueMusic]

Morally, I would consider my statement "sounds good to me" to be acceptance. I am so used to poor timing that I would have a good laugh and even tell the person I sold the domain to of the new offer.

I am a huge believer in Karma and this is one of those situations that would require great character. You all know that most verbal contacts can not be enforced so the legal issue is pretty moot. At this point it is your word at stake here.

I can look myself in the eyes knowing I always take the high road.

 

[homebuyer]

Here's a cite used by law students that might help you in your analysis:

THE RESTATEMENT OF CONTRACTS

§32. REQUIREMENT OF CERTAINTY IN THE TERMS OF AN OFFER
1. An offer must be so definite in its terms, or require such definite terms in the acceptance, that the promises and performances to be rendered by each party are reasonably certain.

§207. SUFFICIENCY OF A MEMORANDUM
1. A memorandum, in order to make enforceable a contract within the Statute, may be any document or writing, formal or informal, signed by the party to be charged or by his agent actually or apparently authorized thereunto, which states with reasonable certainty,
(a) each party to the contract....
(b) the land...or other subject matter to which the contract relates, and
(c) the terms and conditions of all the promises constituting the contract and by whom and to whom the promises are made.

*You can read about Restatements here:
http://www.law.harvard.edu/library/services/research/guides/united_states/basics/restatements.php

CAVEAT: I believe the correct Section is 33, and not Section 32. The above might be the law students summary of Restatement (Second) of Contracts, Section 33. Certainty.

A credible link to selections from the Restatement (Second) of Contract can be found here:

www.okcu.edu/law/academics/pdfs/AppBExcerpts-R2d.pdf

 

[Ronald Regging]

Especially when it comes to buying and selling domains, the method of payment/transfer can be a determining factor. For instance, what if you reach an agreement as far as price goes, but than the parties can not agree on a method of payment? If I agree to sell a domain for $5,000, am I legally or ethically obligated to sell the domain if the buyer insists on using Paypal?
I'm not sure any of us would feel ethically obligated to conduct a $5,000 sale via Paypal

I think the method of payment should be an element that must be agreed upon before "acceptance" is established, because it quite often is a condition of the sale.

 

[jberryhill]

"The offer sounds good to me. Will contact you in the morning to discuss the details of payment and transfer."

Acceptance

Hey, I can say, "Your sister looks good to me." That doesn't mean I'm marrying her.

"The offer sounds good to me." You know, $500 sounds like a good offer for the Brooklyn Bridge, but you don't see me reaching for my checkbook either. Plenty of offers can "sound good".

It's a good idea not to make "acceptance-like noises" when negotiating, but there is some ambiguity here. This could have been an "I'll sleep on it", and not a "sold!"

Morally, I would consider my statement "sounds good to me" to be acceptance.

Hey, I'm selling a ten million dollar house for one million dollars. Sound good to you?

Are we confusing using escrow to give an unsolicited offer and using escrow for the safe transfer of funds of a previously agreed contract? I bet we are...

Good point. I get probably two or three calls a week these days from folks seeking to "enforce" escrow.com's agreement, when the evidence of an underlying contract to sell the domain name ranges from non-existent to ambiguous.

Compared to the folks who are trying to weasel out of a sale due to a higher offer, it's running about 50/50 these days.

 

[DNQuest.com]

John, with this scenario, I have to disagree. Though I could see the ambiguity argument you are trying to make, he then goes on to say "Will contact you in the morning to discuss the details of payment and transfer.". That only reinforces that he is acceptiong the 300 offer and went as far as discussing transfer.

 

[homebuyer]

John, with this scenario, I have to disagree. Though I could see the ambiguity argument you are trying to make, he then goes on to say "Will contact you in the morning to discuss the details of payment and transfer.". That only reinforces that he is acceptiong the 300 offer and went as far as discussing transfer.

Not quite. The statement "Will contact you in the morning to discuss the details of payment and transfer." is evidence that the seller is saying that both parties still need to have a meeting of the minds over the other material parts of the contract, i.e., time and method of transfer, escrow fee splitting, and, if paypal is used, who pays their fees, which could be quite substantial in a high priced domain sale. See: Section 207(1)(c) below.

Now don't forget the rest of the Restatement:

§207. SUFFICIENCY OF A MEMORANDUM
1. A memorandum, in order to make enforceable a contract within the Statute, may be any document or writing, formal or informal, signed by the party to be charged or by his agent actually or apparently authorized thereunto, which states with reasonable certainty,
(a) each party to the contract....
(b) the land...or other subject matter to which the contract relates, and
(c) the terms and conditions of all the promises constituting the contract and by whom and to whom the promises are made.

There is no evidence in the fact pattern that the seller has been identified with reasonable certainty.

1) The buyer could be under 18. I would never sell a valuable domain to a minor, who would then be in a position to "undo the deal" anytime he wanted to until he reaches the age of consent.

2) Identifiying the buyer in a domain sale is a must because of jurisdictional issues.
- Where do you sue for breach? A domain sale to the person in your town is easier to enforce than one on in China.
- Which state's laws do you want to apply in case of a breach? Some jurisdictions have found a domain to be property, while others say it is not a thing.

3) The buyer could be suspect. I research the identity of my buyers all the time to determine if they are likely to reverse charges after the the domain is transferred to them. Furthermore, the buyer could be a scammer using a stolen credit card.

A credible buyer, like a law firm, gets the following instructions from me:

You may access the godaddy acount to verfiy that xxxx.com domain is in it and in your name. By accessing the account, you agree not to make any changes whatsoever until after I have recieved proper payment. No lawyer is going to risk being disbarred over a felony conviction for a computer crime. This access agreement really makes for a smooth transaction with lawyers.

On the other hand, my suspect buyers go through the most thorough of escrow.com procedures to ensure that the buyers don't weasel out of the deal should they have buyer's remorse or decide to cheat me.

I would suspect that these are the some of the same reasons that Network Solutions requires that the seller click that agreement email for the transaction to continue.

Lastly, what about the "signed by the party..." element? Some jurisdictions might deem an email to be a signature while others do not. Also, some jurisdictions have more domainer-friendly judges.

You see, price is not the only issue, except that failure to consider the other issues as well may cost you in more ways than one.

Let's agree on one thing, any domainer worth his salt knows that the price is not the only material issue in a domain purchase and sale agreement.