Bar - Contracts Flashcards
Main issues
What is the rule for your first issue on governing law that you have to answer at the start of every contract essay?
Article II of the UCC applies to goods (tangible, moveable objects) while the common law applies to all other contracts including those for land and services.
How is a merchant defined?
A merchant is one who regularly deals in the goods of the kind sold, or who holds themselves out as having special knowledge or skills as to the goods involved.
Remember: Article II applies to all sellers, even friends/non merchants.
What is the overall rule for contract formation?
Contract formation requires offer, acceptance, consideration, and no defenses that would invalidate the otherwise valid contract.
What are the 3 elements to an offer?
(1) Manifestation of an intent to be bound;
(2) To definite and certain terms; AND
(3) Communicated to the offeree.
What are examples of insufficient offers?
Ads, catalogs, price quotes, solicitation of bids, negotiations, offers made in jest or exaggeration
What are examples of sufficient offers?
o Customer says “I found you through your website” and site has prices
o Reward offers if clear who can accept and win (offer for unilateral contract)(“first come first served” or “only one can win”)
o Auctions (auctioneer is inviting offers)
o Bids (count as offers except where “without reserve”)
What are definite and certain terms?
Required terms are
- Parties
- Subject
- Quantity (except in output or requirement contracts)
- Price for real estate contracts
What is a requirement contract?
In a requirement contract, a supplier agrees to supply all of the goods a customer requires.
What is an output contract?
In an output contract, a buyer agrees to purchase all of a supplier’s output.
Note
Sample question: If supplier shuts down output, even if contract provides that either party can terminate at any time, the decision must be made in good faith, so there is a decision for the jury of whether the decision was made in good faith. Thus, MSJ should not be granted.
o Note: ‘Quantity’ term is NOT required in either requirement nor output contracts because court can figure out the number
o Note: Output or requirements must approximate a reasonably foreseeable figure (good faith agreement)
Under the requirement of ‘communicated to the offeree’, what is important?
The offeree must have knowledge of the offer.
What are the 5 ways an offer can be terminated?
(1) Rejection of offer by offeree
(2) Counteroffer
(3) Revocation of the offer
(4) Lapse of Time
(5) Termination of offer by operation of law (death/incapacity, destruction of subject matter, illegality)
Some notes on a counter offer
“Would you take less…” is an inquiry, not a counteroffer
Period = counteroffer
Question mark = counteroffer
Conditional acceptance = counteroffer (e.g., Obama says I agree on the condition that…–> this rejects the offer and is a counteroffer
What is the regular will on revocation of an offer?
An ordinary offer is revocable at the will of the offeror, prior to acceptance, even if has promised not to revoke for a certain period.
How can a revocation be communicated?
Directly through unambiguous words or conduct (e.g., selling goods to another party)
Indirectly by receiving correct information from a reliable source
When is revocation effective and the exception?
Revocation is effective upon receipt.
Exception: if revocation is by publication, in which case it is effective when published, but if it is through publication, it must be through the same magazine.
o Note: Communication does not have to be read to have been received.
o NOTE: Do NOT bring up mailbox rule when talking about revocations.
What are the 4 exceptions where an offer is not revocable?
(1) UCC Firm Offer
(2) Option contract
(3) Detrimental Reliance
(4) Unilateral contract
What are the 3 requirements for a UCC Firm offer?
(1) Signed in writing;
(2) By a merchant; AND
(3) To hold offer open for a specified or reasonable time, but in no case may period exceed 3 months
o Note: For 3 months, offeror cannot revoke offer, after three months, offeror can revoke. If he doesn’t revoke, it will remain open and can still be accepted.
o Note: Seller can attach additional condition that must also be met like, “buyer acceptance must be received on or before X date.”
o NO payment/consideration required
What is the rule for an option contract?
An option contract requires consideration and the offer is revocable for the stated period.
o Recall - Exception to Mailbox Rule
An acceptance of an option contract (when the offeree decides to accept the offer) is not effective until received by the offeror.
What is the rule for detrimental reliance and the scenario it plays out in in revocation of offers?
An offer is irrevocable if the offeree has detrimentally relied.
Example: Subcontractor (offeror) makes the big. Offeree general contractor accepts to his detriment.
What is the rule on revocation for a unilateral contract? When does acceptance occur? When does payment occur?
An offer for a unilateral contract is irrevocable once performance begins. Acceptance occurs through performance. Payment occurs upon completion of the act.
o Exam tip
Painter takes one stroke of paint
Walker takes one step
In both of these, offer not revocable.
However, mere preparation (buying paint) is not sufficient and offer can be revoked, but offeree if spent $10K on supplies can seek restitution claim for $10K
What is the rule on lapse of time and offers?
An offer remains open for a reasonable time or when the offeror states it does.
What is the reasonable amount of time for an oral offer? An email or mail? Accepting a reward offer?
An oral offer expires at the end of the conversation.
An email or mail offer expires by the next day.
A reward offer doesn’t expire for a long time, can be up to years.