2) Formation Flashcards
formation of a valid k requires
1) offer (un-terminated)
2) acceptance
3) consideration
offer (elements)
1) outward manifestation
2) signal that acceptance will conclude the deal
outward manifestation can be
oral, written, conduct
outward manifestation EXCEPTION
reasonable person would consider much too good to be true –> not an offer
is a joke an offer?
yes, if seemingly serious
is an advertisement an offer?
no –> invitation for offer (responses could exceed supply)
is an ad an offer EXCEPTION
YES an offer if language identifies who gets goods if excess demand (first 10 customers, first come first served)
is a reward an offer?
yes
effect of terminating an offer
now can’t accept!
ways to terminate an offer:
1) lapse
2) death/incapacity
3) revocation by offeror
4) rejection by offeree
lapse (def)
too much time passes
how much time before a lapse? (terminates offer)
1) time stated in offer or
2) reasonable time
3) face-to-face conversation rule
reasonable time factors (for lapse)
1) subject matter / market conditions
2) degree of urgency / means of transmission
face to face conversation rule
offer in F2F conversation lapses at end of convo (unless stated otherwise)
death/incapacity (def) (re terminating offer)
death/incapacity of either party terminates power of acceptance
revocation (terminates offer): elements
1) must be revoked before acceptance AND
2) revocation must be communicated to offeree (indirect ok)
(and, not prevented)
indirect revocation: elements
1) offeror takes action inconsistent w intent to go through w the offer AND
2) offeree learns of the action from a reliable source
ways to PREVENT revocation:
1) option k (CL only)
2) firm offer (UCC only)
3) reliance/construction (kinda)
4) unilateral k: start performance
option k (as way to prevent revocation): elements
- CL ONLY*
1) separate promise to keep offer open AND
2) consideration (or other valid enforcement mechanism)
can offeror revoke if gave specific time to accept?
at CL YES unless an option k with separate consideration
reliance/construction (as way to prevent revocation)
courts will hold offer open if offeree has detrimentally relied (GC relying on subcontractor’s bid)
firm offer under UCC (as way to prevent revocation): elements
- UCC only*
1) offer by merchant AND
2) in writing signed by merchant AND
3) expressly states will be held open (max 3 mo)
how to prevent revocation: CL vs UCC
CL needs option k w consideration,
UCC can have firm offer, w/o consideration
merchant (def)
in the business of buying or selling goods
does email/etc count as a signed writing?
yes
UCC firm offer – open for how long?
1) amount of time it says,
2) reasonable time if dn say
BUT MAX 3 MO no matter what it says
begin performance on unilateral k (as a way to prevent revocation)
beginning performance creates option k, now can’t revoke. Must BEGIN performance, not just PREPARATIONS
rejection (terminates offer): ways
1) outright rejection
2) counteroffer
3) nonconforming acceptance (CL only)
CL vs UCC: nonconforming acceptance
CL: it’s a rejection and counteroffer bc mirror image rule
UCC: it’s an acceptance! (battle of the forms re terms)
effect of a counteroffer
rejection of old offer (terminates it) + new offer
counteroffer: exception
mere inquiry (“would you consider…”) dn terminate offer
mirror image rule
CL only: acceptance must mirror the terms. ANY variation is a counteroffer
mirror image rule: effect
since any variation is a counteroffer, any variation terminates the first offer
unilateral k (def)
offer accepted by PERFORMANCE
bilateral k (def)
offer accepted by PROMISE (exchange of promises)
unilateral k: who is bound when?
offeree: never
offeror: only when performance by other party is complete
bilateral k: who is bound when
after promises exchanged, both parties bound
Acceptance (CL): elements
1) must mirror terms of offer AND
2) must be communicated to offeror (exceptions)
acceptance (CL) must be communicated: exceptions
1) unilateral k: acceptance effective when performance complete (unless offer SAYS must notify)
2) mailbox rule
mailbox rule (CL)
acceptance is effective UPON DISPATCH if properly posted
mailbox rule: exceptions
1) not CL OR
2) the offer specifies otherwise
3) option k
mailbox rule: what communications does it apply to?
acceptances ONLY. Everything else is effective when RECEIVED
mailbox rule w an option k?
no! acceptance must arrive by end of option period
mailbox rule: what if offeree first rejects, then accepts
whichever arrives first is effective – letters race to the offeror (so, no automatic acceptance per the usual mailbox rule)
Acceptance (UCC): elements
IF buyer offers to purchase goods for prompt or current shipment, then seller can accept by:
1) promise OR CONFIRMATION (nonconforming dx ok)
2) ship conforming goods
3) ship nonconforming goods
acceptance by promise (UCC): exception
conditional acceptance
conditional acceptance (UCC) (def)
offeree’s “acceptance” specifically conditioned on offeror first agreeing to additional terms in acceptance. Result: NOT a k, a counteroffer
conditional acceptance (UCC) result
no k is formed, it’s a counteroffer
conditional acceptance (UCC) –> so there’s no k, but what if they ship goods anyway?
contract by conduct
contract by conduct (UCC) (def)
parties’ conduct recognizing the existence of k is sufficient to establish k (even when writings don’t)
contract by conduct (UCC): what are the terms?
1) terms where parties’ writings agree AND
2) default terms from UCC
shipping nonconforming goods (UCC): result
yes is acceptance, so yes there’s a k, but in breach
shipping nonconforming goods (UCC): exception
if seller sends NOTICE OF ACCOMMODATION w the goods, then it’s a counteroffer, not an acceptance/ contract
battle of the forms (UCC) (scenario)
buyer and seller each had their own boilerplate. But nonconforming acceptance OR CONFIRMATION still = acceptance, still a k. So now, whose terms control?
battle of forms (UCC): whose terms control? ADDITIONAL terms
if merchants: additional terms become part of the k (exceptions)
if consumer: additional term does not apply unless expressly accepted
battle of forms (UCC) ADDITIONAL terms / merchants: exceptions
1) offer expressly limits acceptance to its own terms
2) offeror objects to additional terms w/in reasonable time
3) terms would materially alter the k
battle of forms (UCC) ADDITIONAL terms: when does a term materially alter the k?
1) warranty disclaimer
2) clause that materially shortens dl for raising complaints
3) arbitration clause
4) clauses that change industry practice or past course of dealing
battle of forms (UCC): whose terms control? DIFFERENT terms
different terms on the same topic knock each other out
consideration: general concept
no enforceable k unless promise is supported by consideration
consideration: majority rule
bargain theory
bargain theory (def)
consideration = bargained-for exchange (promise made to obtain something else of value)
consideration: minority rule
benefit/detriment test
benefit/detriment test (def)
need a benefit to promisor and/or detriment to promisee
legal detriment (def)
promisee is:
1) doing something he had a legal right NOT to do, OR
2) forgoing activity he had a legal right TO DO
does the amount of the consideration matter?
no! courts don’t police
kinds of NOT consideration
1) illusory promises
2) gratuitous promises
3) past/moral consideration (usually)
illusory promise (def)
promise of performance leaves performance to unlimited discretion of promisor (NOT consideration) (“if I feel like it”)
gratuitous promise (def)
promise to make a gift (NOT consideration)
gratuitous promise exception
gratuitous transfer: once you’ve already MADE the gift, it’s legally binding
past / moral consideration (def)
promise in exchange for something already given or done –> NO consideration (dn do it in order to get)
no consideration –> how to enforce it anyway?
1) past/moral consideration exceptions
2) promissory estoppel
past/moral consideration exceptions
1) written promise to pay a debt barred by SOL or bankruptcy (only to extent promised ex. 1/2)
2) material benefit test
(both YES enforceable)
past/moral consideration exceptions: result
these ARE enforceable
material benefit test (Def)
(minority rule): yes yes enforceable if:
1) promisee conferred a past MATERIAL benefit
2) directly on YOU the promisor
exception to normal rule that past “consideration” is not consideration and not enforceable
promissory estoppel (elements)
yes enforceable if:
1) promise
2) foreseeable reliance
3) actual reliance
4) injustice w/o enforcement
promissory estoppel elements: promise (def)
firm commitment (specific enough)
promissory estoppel elements: actual reliance
the reliance must have been induced by the promise (not something you were going to do anyway)
promissory estoppel elements: injustice w/o enforcement: factors
1) strength of proof of other 3 reqs
2) blameworthiness or willfulness of breach
3) relative position/equities of parties
4) extent to which reliance detrimental
5) availability of alternatives short of enforcing the promise
