CL Formation Flashcards
Applicable Law
Common Law - Contract for Services
UCC - Sale of Goods; Merchants or Non-Merchants
Offer
CL - 1) Present contractual intent, 2) Definite and certain terms (QTIPS), 3) communicated to the offerree.
ML: 1) Present contractual intent, 2) Definiteness of terms (Reasonable terms to determine existence of breach and give remedy), 3) communicated to the offerree.
Advertisement:
Majority - Invitation to receive offer from the public.
Minority - If terms definite/certain. Advertisement specifies who may accept and how acceptance is to be made, leaves nothing for further negotiation.
Termination or Revocation of Offer
GR - Freely terminable by the offeror prior to acceptance, except when
1) Option contract with consideration even nominal or recited
2) Detrimental reliance by offeree in bilateral contract. reasonable foreseeable reliance or forbearance.
3) Performance begins in unilateral contract, kept open for reasonable period of time, implied option contract, death or incapacity of offeror will not terminate.
Mail - revoked upon receipt.
Public Offer - Revoke through same method of offer
Indirect - Offeree acquires reliable information that
Offeror cannot perform and inconsistent with offer.
Agent - same as offeree
Termination by Law
1) Lapse of Time - If offer specifies date, offer terminates at midnight of that day. If specifies number of days, days start from day offer received.
2) Oral Offers - Terminate at end of conversation unless held open by offeror.
3) Death/Destruction of Subject Matter - Terminates at death or destruction.
4) Death or Insanity - Terminates on death or insanity of offeror, unless option contract.
5) Supervening Illegality - Terminates at time subject matter becomes illegal.
Rejection by Offeree
1) Conduct - Express or Implied
2) Mail - Rejected upon receipt.
3) Counter Offer - Implied rejection, does not terminate option contract.
Acceptance
Unequivocal assent to the terms of the offer. Mirror image rule.
Only person intended by the offeror may accept.
Bilateral - Accepted by return promise
Unilateral - Accepted by performance
CL - Same mode of offer.
ML - Same or Reasonable mode.
Mailbox Rule
Acceptance effective upon dispatch, when properly mailed.
Revocations and Rejections effective upon receipt.
Options effective upon receipt.
1) Acceptance sent then Rejection - Contract, unless Rejection received first and offer detrimentally relies upon rejection.
2) Rejection sent then Acceptance, Rejection received first - No Contract
3) Rejection sent then Acceptance, Acceptance first - Contract
4) Revocation sent then Acceptance then Revocation received - Contract
5) Revocation sent then Revocation Received then Acceptance sent - No Contract.
Exceptions: 1) Exercising Option, 2) Unilateral Contract, 3) Offer rules out
Silence as Acceptance
Not generally acceptance, except when offer states or implies silence will constitute acceptance, or offeree improperly exercises dominion over goods.
Rewards
Majority - Must have knowledge of offer prior to performance of act.
Minority - Do not need knowledge prior to performance of act.
Mistake
A material misrepresentation of past or present facts, which goes to the essence of the contract.
Mutual Mistake - Contract is voidable by adversely affected party.
Unilateral Mistake - If nonmistaken party knew or should of known, no contract.
If nonmistaken party neither knew nor had reason to know of other parties mistake, contract exists. If mistaken party refuses to perform, nonmistaken party is entitled to expectational damages.
Modernly if mistaken party notifies nonmistaken party before change of position, mistaken party can rescind, if position changed reliance damages.
Mistranscription
When oral contract is reduced to writing but due to clerical mistake the contract contains an error. The adversely affected party can use parole evidence and be entitled to reformation.
Ambiguity
Terms of offer open to multiple interpretations.
1) If both or neither parties had reason to know of the ambiguity, no contract unless they give same meaning.
2) If one party had reason to know of the ambiguity, favor interpretation by innocent party.
Consideration
Bargain made in exchange for a legal detriment. Both parties view their promise or performance as the price for the other’s promise or performance.
Non-Consideration
1) Donative Promise - A promise to make a gift. Does the act or forbearance benefit the gift-giver in any way. A offers B to pay $1,000 if B quits smoking, valid consideration.
2) Past Consideration - The bargained element requires a conscious exchange at the time of the promise.
3) Moral Consideration - Not consideration unless: promise to pay past debt, promise to perform avoidable obligation, promise to pay debt discharged by BK, minority will allow under quasi contract.
4) Nominal Consideration - Recital of a bargain, but no real bargain.
Legal Detriment
Each party must change their legal rights or liabilities by promise, act or forbearance.
Forbearance - Valid if validity of claim is reasonable or held in good faith.
Payment of a Lesser Amount - Liquidated debt, not valid unless different performance or different method of payment. Unliquidated debt, valid consideration
Pre-existing Duty
Majority - Not consideration.
Minority - Consideration if benefit received.
Exceptions - Different performance, pre-existing duty owed to third party, valid defense to perform under original defense.
Modification
Mutual assent and new consideration required.
New consideration not required if unanticipated circumstances and modification is fair and equitable given circumstances
No Oral Modification Clause
If written contract says all modifications must be in writing and parties orally modify, this waives the clause. Oral modification is enforceable if supported by consideration and not in statute of frauds.
Illusory Promise
If a bilateral contract has no actual obligations. Requirement/output contracts are not illusory when in good faith.
Promissory Estoppel
When there is no valid consideration.
CL - foreseeable reasonable reliance resulting in substantial economic loss, donative promise enforced to full extent.
ML - damages limited to extent of reliance.
Statute of Frauds
Applies to oral contracts or incomplete writings.
MR. DOG Should Poop More Frequently Religiously.
Marriage, Real Property, Debt of Another, One Year, Goods more than $500.
Sufficient Memo - Containing QTIPS and signed by party to be charged.
Part Performance - Contract for real property where payments made, taxes paid or improvements made.
Main Purpose - Main purpose in taking debt of another must be to benefit themselves.
Full Performance - If completed in less than 1 year valid even if contract was more than 1 year.
Receipt of goods or Payment - Either removes from Statute of Frauds.
Statute of Frauds Estoppel
If oral contract falls into statute of frauds but promisor induces reliance by promisee and injustice cannot be avoided except by enforcement of promise.
Unconscionability
Disparity in bargaining process. Court will strike oppressive provisions.
Procedural - Minor and Expert
Substantive - Terms of contract
Incapacity
Legal - Contracts entered into by minor are voidable by the minor before or within a reasonable period of time after reaching majority. Still liable under quasi-conract for reasonable value of necessities. Ratification after reaching majority will result in liability.
Mental - Inability to comprehend the nature and consequences of the transaction. Intoxication or mental defect.
Misrepresentation
A material misrepresentation by one party makes contract voidable. Would misrepresentation induce reasonable person to assent.
Nondisclosure is generally not sufficient, unless fiduciary relationship or trust/confidence or could not be easily determined by adversely affected party party
Tort Crossover
Duress
Deprivation of free will.
Threat to Person - threat of physical harm to the person or close relative which forces him to enter contract.
Economic Threat - Wrongful threat to withhold goods, services or payment.
Fraud
One party defrauds other into entering contract. Voidable by innocent party.
Public Policy
Illegal subject matter will not be enforced and no recovery under quasi contract if both parties guilty. If on party guilty quasi contract allowed.
Parole Evidence Rule
Any written/oral statement made prior or oral statement made contemporaneous with the contract cannot vary, alter or contradict term or original contract.
Fully Integrated - If contract is intended to be final expression of the bargain, parole evidence is barred.
Four Corners Test - Fully integrated with merger clause parole evidence barred.
Partially Integrated - Parole evidence allowed for terms not fully integrated.
Parole Evidence Exceptions
1) Defenses to Formation
2) Collateral agreements
3) Modifications to agreement
4) New agreement with new consideration
5) Naturally omitted terms
6) Condition Precedent to Contract
7) Course of Performance, dealing and usage
