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MBE Contracts > 2. Contract Formation: Offer & Acceptance > Flashcards

2. Contract Formation: Offer & Acceptance Flashcards

1
Q

What are the two requirements for a communication to constitute an offer?

A
  1. An outward manifestation (oral, written, or made by conduct);
  2. The signal that acceptance will conclude the deal.
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2
Q

Inward thoughts or subjective intentions are irrelevant UNLESS

A

they are reasonably apparent to the other party.

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3
Q

Manifestations of assent are sufficient to conclude an enforceable contract even though…..

A

parties manifest intent to memorialize their agreement in a writing that is not subsequently prepared.

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4
Q

What are the three elements of an offer?

A
  1. An expression of intent to enter a present contract;
  2. A sufficient articulation of the essential terms of the proposed bargain;
  3. Communication of that intent and those terms to an eligible offeree.
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5
Q

What situations fall short of constituting an offer due to withholding the privilege of further assent?

A
  1. Preliminary negotiations;
  2. An invitation for an offer.
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6
Q

When does a multiple offeree issue arise?

A

When a party’s communication proposes a deal to two or more persons at the same time.

There are three situations where this can occur:
i.) commercial advertisements(not an offer with ONE Exception)
ii.) reward offers(considered offers); and
iii.) Auctions(not an offer with ONE Exception).

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7
Q

Are commercial advertisements considered offers?

A

Generally treated as invitations for offers, with exceptions for specific language indicating an offer.

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8
Q

Exception where commercial advertisements can be offers

A

Language in the advertisement such as “first-come, first-served,” or “first 10 customers only,” identifying the means by which the goods or services will be allocated in the event of an excess of demand, eliminates the need for further assent from the advertiser and, thus,constitutes an offer.

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9
Q

What is a reward offer?

Are they considered offers?

A

A general offer that names a price for a service but does not specify an offeree.

They treated as offers because they are considered communications that promise a bounty in exchange for the performance of a specified task.

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10
Q

What are the two types of reward offers?

A
  1. Self-limiting rewards;
  2. Open-field rewards.
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11
Q

Does the offeree need to know about a reward offer to form a contract?

A

Yes. A contract can ONLY be formed if the offeree KNEW of the existence of the offer at the time of the alleged acceptance.

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12
Q

What does the auctioneer do in an auction?

A

The auctioneer invites offers, and the responsive bids are considered the offers.

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13
Q

What happens in an auction when goods are put up ‘without reserve’?

A

The auctioneer makes an offer to sell at any price bid by the highest bidder.

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14
Q

What effect does an offer create in relation to the offeree?

A

It creates the power of acceptance in an eligible offeree.

This gives the offeree the power to create a contract simply by accepting the offer.

When an eligible offeree exercises the power of acceptance before that power is terminated, a legally binding contract is formed between the parties.

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15
Q

What are the four ways to terminate the power of acceptance?

A
  1. Lapse of time;
  2. Death or incapacity of either party;
  3. Revocation by the offeror;
  4. Rejection by the offeree.
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16
Q

Lapse of Time

An offeree’s power of acceptance terminates______

A

at the time stated in the offer.

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17
Q

What if the offer does not specify the time of termination?

How is reasonable time measured for an offer?

A

If the offer does not specify the time of termination, then the power of acceptance will terminate after a reasonable time.

  1. Subject matter and market conditions;
  2. Degree of urgency communicated by the means of transmission.
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18
Q

Face-to-Face Conversation Rule

A

An offer made by one person to another in a face-to-face conversation remains open ONLY until the close of the conversation.

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19
Q

What is the effect of the supervening death of either party on an offer?

A

It will terminate the power of acceptance with respect to the offer.

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20
Q

What is the effect of the supervening incapacity of either party on an offer?

A

The supervening incapacity of either the offeror or the offeree, as evidenced by adjudication or the appointment of a guardian, will terminate the power of acceptanc

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21
Q

Can an offeror revoke an outstanding offer?

A

Yes. The offeror is free to revoke an outstanding offer at any time and for any reason, so long as the revocation:
i.) occurs PRIOR TO acceptance; and
ii.) is effectively communicated.

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22
Q

What is direct revocation?

A

The offeror communicates directly with the offeree that the offer has been revoked.

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23
Q

What is indirect revocation?

A

When the offeree learns from a reliable third party that the offeror has acted against entering the contract.

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24
Q

What occurs if the offeree rejects an offer?

A

The power of acceptance is terminated.

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25
Q

Revocation of an Offer Made to Multiple Offerees;

Functional equivalents rule

A

When an offer made through public advertisement or notification is revoked via a similar method, the power of acceptance ends, even if a potential offeree is unaware of the revocation, provided no better means of notification is feasible.

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26
Q

Rejection by the Offeree;

The power of acceptance can be terminated if the offeree refuses to accept the offer.

There are three ways that rejection can be effected

A

(1) outright rejection;
(2) rejection via a counteroffer;
(3) rejection via nonconforming acceptance

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27
Q

STILL ACCEPTANCE: De minimis variation rule:

A

1) if the minor variation is implied in the offer or suggests a new term; or

2) if the variation is raised in bad faith to avoid contract obligations.

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28
Q

Outright rejection

Can an offeree change their mind after outright rejection of an offer?

A

No, once rejected, the offeree cannot accept the offer.

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29
Q

What is a counteroffer?

A

An offer made by the offeree that rejects the initial offer and proposes new terms.

It is made on the same subject matter and operates to simultaneously reject the initial offer.

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30
Q

No Counteroffer

A

Offeree makes a “mere inquiry” by statement or question about the offeror’s willingness to negotiate.

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31
Q

What is the rule regarding revival of an offer?

A

An offeror can revive a rejected or lapsed offer by communicating the revival to the offeree by:
i.) restating the offer; or
ii.) giving the offeree more time to make a decision.

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32
Q

What is the rule for an common law option contract?

A

An offeror cannot revoke an enforceable option contract if it includes:

  1. an offer,
  2. a subsidiary promise to keep the offer open, and
  3. a valid method to enforce this promise.
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33
Q

What is an option promise?

A

An option promise, which makes an offer irrevocable during the time stated, requires consideration to be enforceable. Even if consideration is not furnished, however, the offer can be accepted by the offeree unless the offer lapses or the offeree receives notice of revocation by the offeror.

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34
Q

What is the most common way to keep the offer open?

A

The most common way to keep the offer open is by giving consideration in return.

Consideration can be in the form of:
i.)a performance (e.g., payment for the option); or
ii.) a promise of performance (e.g., where a buyer of real estate promises his best efforts to obtain financing in exchange for the option).

35
Q

Option Contract-Special Rule for Construction Contracts

A

An implied option contract, based on promissory estoppel, arises when a general contractor bases their bid on a subcontractor’s bid, PREVENTING the subcontractor from WITHDRAWING the bid even without a formal promise or consideration to keep it open.

When a subcontractor submits a bid to the general contractor, who then relies upon it in figuring out his own overall bid, the subcontractor’s bid is usually held irrevocable for at least the time necessary for the general contractor to obtain the job and then accept the subcontractor’s bid.
Substantial Reliance!
The appropriate measure of recovery for the subcontractor’s breach is expectation damages.

36
Q

What is a firm offer under UCC 2-205?

A

Under the UCC 2-205, a merchant can make a firm offer (i.e., an irrevocable offer) to either buy or sell goods without consideration so long as the offer:

  1. Made by a merchant(a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction);
  2. Writing signed by the merchant; and
  3. Gives explicit assurance that the offer will be held open.
37
Q

What is the maximum duration of a firm offer under UCC?

A

No more than three months, after which it becomes revocable, but still enforceable.

38
Q

Any firm offers that state longer than three months will ONLY be irrevocable for _____

A

the first three months.

39
Q

A merchant can establish an irrevocable offer for longer than the three month period by creating a __________

A

valid common law option contract.

40
Q

If the firm offer does not state a period of time, it will be held irrevocable for ____________.

A

a reasonable time.

41
Q

If the three-month period lapses and no consideration is given to support an option, then the offer can be revoked AT ______.

A

ANY TIME before acceptance (or before it lapses)

42
Q

What is the rule regarding acceptance under bilateral contracts?

A

A promise is exchanged for a promise, and both parties are bound once mutual promises are exchanged.

43
Q

What characterizes acceptance under unilateral contracts?

A

Acceptance is through performance of an act, becoming irrevocable once the offeree begins performance.

44
Q

Unilateral Contracts

The offeror is bound ONLY when the offeree __________.

A

completes performance in accordance with the terms of the offer.

45
Q

Unilateral Contracts

True or False: The offeree is required to give the offeror notice that he has begun the requested performance,

A

False

46
Q

Unilateral Contracts

True or False: The Offeree IS required to notify the offeror within a reasonable time AFTER performance has been completed.

A

True

47
Q

Unilateral Contract

In order for the acceptance to be effective, the offeree must give seasonable notice of acceptance to the offeror if the offeree _____________.

A

has reason to know that the offeror will not learn of the acceptance without notice.

48
Q

Unilateral Contract

True or False: The offeree is NEVER bound to perform and is free to abandon the performance at any time and even to not undertake the performance at all.

A

True.

49
Q

Unilateral Contract

True or False: Offeree is NOT entitled to the benefits of the offeror’s promise UNLESS and UNTIL offeree renders the required performance.

A

True.

50
Q

Unilateral Contract

Where an offer does not specify whether it must be accepted by a promise or a performance, the offeree _____________. BUT ________

A

is free to choose the means of acceptance.

BUT

The offeree MUST accept via performance where the terms of the offer or the surrounding circumstances make it clear that a performance is required.

51
Q

Revocation of the Offer in a Unilateral Contract;

Rule #1: An offeror can revoke where _____________

Rule #2: An offeror cannot revoke once ____________.

A

Rule #1: An offeror CAN revoke where the offeree is engaged in “mere preparation” to perform rather than the beginning of performance itself.

Rule #2: An offeror CANNOT revoke once an offeree begins performance.
The task must be completed in accordance with the terms of the offer in order for the offeree to accept the offer and bind the offeror to his performance obligation.

52
Q

What is the mailbox rule in the context of unilateral contracts?

A

If an offer to enter a unilateral contract was mailed to the offeree, then the offeror CAN revoke the offer EVEN IF the offeree has placed the acceptance in the mail.

53
Q

What are the two general requirements for effective acceptance?

A
  1. Must mirror the terms of the offer;
  2. Must be communicated to the offeror.

the offer stipulates a particular means of communicating acceptance, then the offeree MUST utilize those means in order to make an effective acceptance.

If the offer is silent as to the means of communication, then the offeree is free to use any reasonable means of transmission.

54
Q

What are the three instances where the requirement that acceptance be communicated to the offeror may NOT apply:

A
  1. acceptance by silence;
  2. acceptance by performance; and
  3. acceptance by mail or other.
55
Q

What are scenarios where acceptance by silence may be deemed valid?

A
  1. Benefiting from services with a chance to reject;
  2. Offeror indicates silence implies acceptance;
  3. Prior dealings suggest acceptance.
56
Q

When is acceptance by performance effective in a unilateral contract?

A

In a unilateral contract, the offeror can require communication of acceptance as part of the performance.

However, if not specified, acceptance is effective upon the offeree’s completion of the requested performance, regardless of notification to the offeror.

57
Q

What does the common law mailbox rule state?

Offers, revocations, rejections, and counteroffers are all effective only __________.

A

Acceptance by mail is effective upon dispatch if properly posted.

upon receipt by the other party.

58
Q

Revocation of an Offeror once Acceptance Has Been Dispatched

A

The offeror CANNOT revoke an offer once acceptance has been dispatched by offeree.

59
Q

Offeree Withdrawing Acceptance once it has been Dispatched

A

Once the offeree dispatches acceptance, the parties have a binding contract and the offeree CANNOT withdraw their acceptance.

60
Q

No Acceptance Upon Dispatch

A

When an offer states that the offeror’s acceptance MUST be received on or before a specified date, the mailbox rule does NOT apply and acceptance will NOT be effective upon dispatch.

61
Q

Acceptance is lost in transmission

A

The parties are bound even if the acceptance is lost in transmission and the offeror has no knowledge of that acceptance.

62
Q

Mailbox Rule Does Not Apply(Offeree dispatches a REJECTION AND ACCEPTANCE)

Two situations under the mailbox rule involve an offeree who dispatches two responses to an offer:
i.) purporting to reject the offer; and
ii.) purporting to accept it.

In these cases, the mailbox rule DOES NOT apply.
The parties’ obligations will depend on which of the offeree’s communications reaches the offeror first.
If the acceptance reaches the offeror first:_______________.
If the rejection reaches the offeror first: ________________.

A

If the acceptance reaches the offeror first: acceptance is effective upon receipt and the parties are bound to the contract.

If the rejection reaches the offeror first: the offeree’s power of acceptance is terminated and the subsequently arriving acceptance becomes a counteroffer, which the original offeror is free to accept or reject.

63
Q

What is the rule for acceptance by performance in a unilateral contract?

A

Acceptance is effective upon the offeree’s completion of the requested performance, regardless of notification to the offeror.

64
Q

Under the common law mailbox rule, when is acceptance by mail effective?

A

Acceptance by mail is effective upon dispatch as long as it is properly posted with the correct address and postage.

65
Q

True or False: The offeror can revoke an offer after the offeree has dispatched acceptance.

A

False

66
Q

What happens if an offeree dispatches both a rejection and acceptance?

A

The parties’ obligations depend on which communication reaches the offeror first.

67
Q

According to UCC 2-206, how can acceptance be made?

A

Acceptance may be made in any manner and by any medium reasonable under the circumstances.

68
Q

Seller’s Shipment of Conforming and Nonconforming Goods

What are the three ways a seller can accept a buyer’s offer under the UCC?

A

Under the UCC, a seller can accept a buyer’s offer to purchase goods for prompt or current shipment in one of three ways:

i.) a promise to ship goods in conformity with the terms of the offer(acknowledgment of order form sent to the buyer);

ii.) a prompt or current shipment of the goods in conformity with the terms of the offer; or

iii.) Shipping nonconforming goods (the shipment is an acceptance AND at the same time a breach).

69
Q

Buyer’s Remedies When Seller Ships Nonconforming Goods

What remedies does a buyer have when nonconforming goods are shipped?

A

The buyer may:
1. Accept the nonconforming goods(recover the contract price of the goods, reduced by any reasonable losses that resulted from the seller’s breach); or

  1. Reject the nonconforming goods, which he can then sue for breach.
70
Q

What is the rule for nonconforming goods shipped as an accommodation?

A

The shipment will NOT result in a breach if the seller notifies the buyer that it is only an accommodation to the buyer.

71
Q

Buyer Accepts Seller’s Accommodation Shipment

A

The buyer can choose to accept the accommodation shipment, which is NOT considered an official acceptance this is a:
i.) counter-offer of the goods that have shipped as they are; AND
ii.) a contract for the goods as they are will be formed.

72
Q

Buyer Rejects Seller’s Accommodation Shipment

A

If the buyer chooses to reject the accommodation shipment:
i.) NO contract will be found to have formed at all; and
ii.) the buyer CANNOT sue the seller for breach.

73
Q

Does the UCC impose upon the buyer a duty to return nonconforming goods?

A

The UCC does not impose upon the buyer a duty to return nonconforming goods.

It is the seller’s obligation to retrieve the goods or provide instructions to the buyer as to how the goods are to be returned.

74
Q

Under UCC 2-207, what happens if a seller’s acceptance contains different terms from the buyer’s order?

A

The seller’s response constitutes a nonconforming acceptance, which can still form a valid contract, UNLESS acceptance is expressly made conditional on assent to the additional or different terms (i.e., a conditional acceptance)

75
Q

Dickered versus Boilerplate Terms

A

Typically, the forms will be in agreement as to the dickered terms (i.e., those specific to the transaction), BUT may vary with respect to the boilerplate terms (i.e., standard terms that appear on the parties’ respective forms regarding issues such as arbitration and warranties).

76
Q

Transaction Involving a Consumer;

A

Under UCC 2-207(2), when at least one party to the transaction is NOT a merchant, the additional or different terms are construed as proposals for addition to the contract.
Thus, they are NOT part of the contract UNLESS the offeror expressly agrees to the additional terms.

77
Q

Transactions Where Both Parties Are Merchants;

A

In a transaction between merchants, there is a distinction between additional terms and different terms.

Additional terms: provisions address an issue or topic NOT addressed in the original offer.

Different terms: offer says one thing about a particular issue and the would-be acceptance says something else.

Implied warranties are NOT additional or different terms.

78
Q

What distinguishes additional terms from different terms in a merchant transaction under UCC 2-207?

A

Additional terms address issues NOT covered in the original offer; different terms contradict the original offer.

79
Q

Under UCC 2-207(2), when are additional terms automatically part of the contract?

A

Additional terms become part of the contract unless:
* The offer expressly limits acceptance to its terms
* The offeror objects to the additional terms
* The additional terms materially alter the contract

80
Q

What constitutes a materially altering term under UCC 2-207?

A

terms that materially alter the contract are those that would result in surprise or hardship if incorporated without the express awareness of the other party.

Examples of clauses that would materially alter the contract include:
1. a clause negating standard warranties, such as that of merchantability or fitness for a particular purpose in circumstances in which either warranty normally attaches;

  1. a clause requiring that complaints be made in a time materially shorter than customary or reasonable; and 
  2. any clause that would vary in a significant way from an established usage of trade or a course of past dealing between the parties.
    -MINOR differences or alterations will NOT rise to the level of “material.”
81
Q

Fill in the blank: The knockout rule applies when _______.

A

different terms are included in both parties’ acceptances.

82
Q

What is the effect of written confirmations in a contract between merchants?

A

Additional terms in confirmations are automatically part of the contract unless they materially alter the contract or are objected to.

83
Q

What is a conditional acceptance under UCC Section 2-207?

A

A definite acceptance that is expressly conditioned on assent to additional or different terms, resulting in no contract until the offeror assents.

84
Q

What does UCC 2-207(3) state about contracts formed by conduct?

A

The parties’ conduct can establish a contract even if their writings do not.

MBE Contracts (9 decks)

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