Aspen Study Contracts Flashcards
The _____ governs contracts for the sale of goods when the parties to a contract have places of business in countries that have adopted the Convention, which includes the United States.
CISG - United Nations Convention on Contracts for the International Sale of Goods
- It has the force of law because it is a treaty
- applies only when both countries have adopted the CISG
The CISG has the force of law because it is a treaty. However, the CISG does not apply to _________.
Consumer Transactions; CISG Article 2(a)
Describe Objective Standard
Would a reasonable person in the offeree’s shoes assume that a power of acceptance had been created in him? Note that this means that if the offeree knows or has reason to know that the offeror hasn’t made an offer (e.g., he’s joking), then there’s no offer.
Can offers made in jest (joke) ever be the basis of a contract?
It depends. As long as a reasonable person in the offeree’s shoes would believe that the “offer” was intended to create a power of acceptance in him/her, then the offer is effective.
However, if the offeree knows or has reason to know that the offeror is joking, then there’s no offer.
Owner owns several ocean-view properties. Friend is a friend of Owner, and has frequently expressed his desire to purchase one of the properties, Suite Sunrise. During dinner one night, the two discuss the Suite Sunrise property, including possible terms for its sale, over several bottles of wine. At the conclusion of the evening, Owner writes the following on an unused dinner napkin: “I agree to sell Suite Sunrise to Friend for $75,000, closing to occur tomorrow.” Signed: Owner. Owner then hands the napkin to Friend and says, “Good luck.” Friend subjectively (and reasonably) believes that Owner intends to be making an offer to sell the property. In fact, Owner, who is somewhat drunk but still lucid, is only joking. Friend responds, “Thanks, I accept.” The next day, Friend presents a check to Owner for $75,000. Owner laughs and says that he was joking and drunk; he refuses to consummate the transaction. Do the parties have a contract?
Yes. Owner manifested the willingness to enter into a contract with Friend. The hypo stipulates that Friend reasonably and honestly believed that Owner was serious. Therefore, the fact that subjectively Owner was only joking doesn’t prevent the napkin from representing an offer that could be accepted, as it was. This hypo is a good example of the objective theory of contracts: what counts is not the speaker’s subjective intention, but what the other party reasonably understands the speaker to intend.
The fact that Owner is “somewhat drunk” does not mean that he can make the contract void because of incapacity. In some limited circumstances, a party might be able to rescind a contract on the basis of incapacity due to intoxication. However, on these facts, Owner was still lucid and therefore not incapacitated.
See Lucy v. Zehmer, 196 Va. 493 (1954).
Mike and John knew one another socially for many years. John owns an expensive sports car worth over $50,000. Mike has always admired John’s sports car but could not afford such an expensive car. Over the years, Mike had joked with John that he would purchase John’s car for $5. John would laugh and turn Mike down. One evening at a party, Mike repeatedly asked John to sell him the car for $5. As always, John laughed and turned Mike down. Finally, Mike said that he would purchase the car for $10. John laughed again and said, “OK. You finally named the right price.” Is there a contract?
No. Although the objective meaning of their words suggests that there is mutual assent, the context suggests that both parties are joking. In this case, both the offeree and the offeror know that this was not a serious attempt to enter into a bargain; therefore, there is no offer.
Marie, an art student from France, ordered a set of colored pencils from American Pencil Co., a company based in the United States, and paid €20 (approximately $22) by wire transfer. Pencil Co. promised to deliver the colored pencils “no later than May 1,” but they only arrived in Marie’s mailbox in late July, too late for her to use in her studies. If Marie sues Pencil Co. for breach of contract, will the case be governed by the United Nations Convention on the International Sale of Goods (“CISG”)?
(a) Yes, because the United States is a party to the CISG.
(b) Yes, because both France and the United States are parties to the CISG.
© No, because colored pencils are not “goods” within the meaning of the CISG.
(d) No, because this was a consumer transaction.
D
Since Marie is an individual art student, rather than a merchant or a company, this is a consumer transaction and the CISG Article 2(a) does not apply to consumer transactions.
Short Answer:
Einstein, intending his statement as a joke, tells Oppenheimer, “I’ll sell you my chemistry set for $50.” Oppenheimer, who has no idea that the set’s plutonium alone is worth many times the $50 price (or that Einstein is joking) says, “I accept.” Is there a contract?
When analyzing whether a contract has been established, one uses the objective theory standard which poses the question, what would a reasonable person believe based on what was presented to them? A reasonable person may not know the cost of a chemistry set. Therefore, there is an offer.
(get this answer checked)
On April 1, Fay sends to Mort this signed fax message: “Mort — April is upon us. I need your services — this Wednesday, please, at 11 A.M. I’ll be ready with cash. Okay?” What additional circumstance, if proven, would most clearly mean that Fay’s message constitutes an offer?
(a) Mort is a skilled landscaper, mechanic, and carpenter, and at various times in the past Fay has hired him to perform services related to those skills.
(b) Every April for the previous twelve years Mort has trimmed the trees in Fay’s front yard, for which Fay has each time paid him $125.
© Fay does not know Mort, but has heard that he is a skilled landscaper.
(d) By signed writing, Mort responds to Fay: “Yes, I’ll be there.”
(e) By signed writing, Mort responds to Fay: “I’ll be glad to help you, but my fee is now $35 per hour.”
B
that circumstance - a reasonable person in Mort’s position would justifiably conclude that Fay once again wants her trees trimmed and that she’s ready to pay, as before, $125 in cash.
To determine that a given communication is an offer, what should one examine?
(a) the communication itself
(b) the circumstances under which its made
Then ask yourself: “Would a reasonable person receiving this communication understand that a definite bargain is proposed to him and that his assent will ‘seal’ the deal?”
Over the fourteen years, 2005 to 2018, Andrea has visited Frank’s diner for breakfast about four times weekly between 6:30 A.M. and 11:45 A.M., each time ordering two soft-boiled eggs with toast, and each time paying the menu price for those items. Also over these fourteen years, Andrea has come to Frank’s diner about three times weekly for lunch between 12:15 P.M. and 3:30 P.M., each time ordering two hard-boiled eggs with toast and paying the menu price. At noon sharp on January 3, 2019 Andrea steps into Frank’s diner and sits at a table. Which of the following additional facts would best justify the legal conclusion that on that day, Andrea has made an offer to Frank in which she proposes to buy soft-boiled eggs for the menu price?
(a) Unbeknownst to Frank, Andrea had breakfast today at 7:30 A.M. in another diner, which she also has frequented regularly for fourteen years.
(b) Unbeknownst to Frank or Andrea, Andrea’s wristwatch is running one hour slow, and Andrea believes the time to be 11:00 A.M.
© Frank does not serve breakfast after 11:50 A.M. and begins serving lunch at noon.
(d) A moment after taking her seat, Andrea says, “Eggs and toast, please.”
(e) A moment after taking her seat, Andrea says, “Another morning — the usual please.”
E
A 14-year history gives Frank every reason to know that Andrea has soft-boiled eggs for breakfast and hard-boiled eggs for lunch. On hearing the word “morning,” Frank should understand that Andrea proposes to buy toast and soft-boiled eggs for the menu price.
Remember, even with the facts added by E, Frank need not give Andrea what she wants. Andrea has made an offer, but since Frank has yet to accept it, the parties do not (yet) have a contract.
Vortech Inc. supplied industrial chemicals to a large number of customers, including Hartco Inc. After years of doing business with Hartco, Vortech sent Hartco this document:
> DEFINITIVE OFFER TO SELLWe have available a variety of alcohol- and ammonia-based cleaning products, many of which you’ve purchased in the past. We wish to sell some or all of the products in good quantities at favorable prices. Let us know, please, if you wish to purchase any now. Please describe specifically the product(s) you want to purchase and the exact quantities you wish to acquire. This is a definite offer, and we look forward to your acceptance.
Did Vortech make Hartco an offer?
(a) Yes, because Vortech described its message as a “definite offer”
(b) Yes, because Vortech did not restrict Hartco to purchasing any particular product and left it free to choose among many
© No, because a seller cannot bind a prospective buyer without that buyer’s assent
(d) No, because Vortech did not refer to cleaning chemicals by name
(e) No, because Vortech was nebulous as to the transaction it suggested
E
E means Vortech’s message fails as an offer because it’s too indefinite (“nebulous”) as to any exchange (“transaction”) it proposed (“suggested”). That correctly tells us why Vortech’s proposal is not an offer; it doesn’t adequately specify its terms.
ANALYSIS. Think about the meaning of offer. Ask yourself: “Under these circumstances could Hartco reasonably see in Vortech’s message a proposal for a definite bargain — an explicit exchange?”
Vortech expresses its wish to sell a “variety” of products, in “good quantities” at “favorable” prices. Vortech doesn’t specify what it will sell or what price Hartco must pay for whatever it is. Hartco cannot justifiably believe that Vortech has contemplated a true exchange of specified terms. The writing is not an offer — it’s too vague.
Must a statement sufficiently identify the offeree to constitute an offer?
Yes, because it must create in the offeree an immediate power of acceptance. This is sometimes referred to as the “power of acceptance.” Although the offeree is often one person, it can be a class of persons and even the general public, as long as the terms are sufficiently definite and the offeree is clearly identified. Note, however, that the broader the “class” of ostensible offerees, the more likely a court is to find that the communication (e.g., an advertisement) was actually only an invitation for offers.
SIGNIFICANCE: No one except the offeree can accept an offer; so, for instance, if you’re in a bar and you overhear an offer being made to someone else, you can’t turn around and accept that offer because you’re not the offeree.
In determining whether an offer to enter into a contract has been made, is the context of the communication relevant?
Yes. Where the language itself is not definite, the relationship between the parties, prior practices, method of communication, and the like frequently can determine whether an offer has been made.
Two business acquaintances are talking. The first says, “I’m planning on selling my car for $400.” The second says, “I accept” and then offers $400 cash. Is there a contract?
No, because a reasonable person would conclude that the first person’s statement was merely a statement of intent, not a commitment to enter into a bargain. An offer is “the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” Rest. 2d §24. So the remark could not be an offer unless a reasonable person would interpret the first remark as indicating that they were giving the second person the right to conclude the bargain without the first person doing anything further. A statement that a person is “planning” to do a transaction on specified terms would not justify the listener in thinking that the speaker is ready to be immediately bound.
Collector has a large collection of ceramic figurines. One day, Neighbor was visiting, pointed to a particular figurine and asks, “Would you consider selling that ceramic bunny rabbit for $150?” Collector replies, “I accept.” Is there a contract?
No. Neighbor’s question is an invitation for Collector to negotiate (or for him to make an offer), not an offer in and of itself. For a statement to be an offer, it must be reasonably interpreted as creating in the listener an immediate power of acceptance. When a speaker says, “Would you consider . . . ,” this indicates an interest in negotiating, rather than a commitment to be immediately bound without further action by the speaker.
In its advertising circular, a supermarket advertises milk for $1 a gallon. Is this an offer?
No. Such public ads generally are construed as invitations for offers, stating prices at which the seller wishes to receive offers. These are not offers because the quantity term is missing, and there is no clear offeree.
A department store puts the following ad in a local newspaper: “Sale — Saturday only — 5 refrigerators. Worth $800, now only $100 each. First come, first served. Will open at 10 A.M.” The ad includes details on the model of refrigerator. Buyer sees the ad, camps out in front of the department store Friday night, and is the first one in on Saturday morning. Buyer says, “I accept your offer for the advertised refrigerator. Here’s my $100.” Is there a binding agreement?
Yes, because the department store’s offer was specific as to subject matter, quantity and price, stated to whom the offer was made (“first come”), and, in general, was worded as a “promise.” As such, it created an immediate power of acceptance in Buyer, and when he accepted, a contract was formed. Note that most ads are not as definite as this one, and, as such, are typically considered only invitations for offers
How do you determine whether a communication has the required amount of certainty to be considered an offer?
To be considered an offer, the terms have to be reasonably certain. The terms “are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.” Rest. 2d §33.
Not every term is necessarily required to meet this standard of certainty since a court could imply reasonable terms. However, if the parties leave one or more material terms open or uncertain, that “may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.” Rest. 2d §33.
The UCC is more flexible. Just because terms are missing, the agreement will not necessarily “fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.” UCC §2-204.
