Contract Flashcards
Applicable Law
- Common law
- UCC: movable goods
- Predominance test: determines the predominant purpose of the contract.
Merchant
One who deals in goods of the kind, or one holding oneself out as having special knowledge or skills regarding the practices or goods involved in the contract.
Contract Formation
A valid contract requires mutual assent, which consists of an offer and acceptance, and consideration.
Offer in Common Law
Definition: manifestation of willingness to enter into a bargain
Elements:
- intent to enter into a contract
- definite and certain terms: Quantity, Time of performance, Identity of the parties, Price, Subject matter (QTIPS)
- Communicated to the offeree: offeree must have knowledge of the offer.
Termination of offer
- rejection
- counteroffer
- revocation
- lapse of time: “reasonable time”
- death or incapacity (terminated automatically, unless option contract)
UCC “firm offers”
Requirements:
- made by a merchant
- in writing and signed
- gives assurance it will be held open for a specified time, during which it is irrevocable
- three-month max of irrevocability
Option contract
consideration is required for an option contract. The offer will be irrevocable for the stated option periods.
Detrimental reliance and partial performance
An offer is irrevocable if the offeree has made preparation to perform in reasonable detrimental reliance on the offer, or has performed in part.
Acceptance
Manifestation of assent to the terms of the offer.
Requirements:
- within a reasonable time
- only a person at whom the offer is directed may accept
- offeree must know of the offer before accepting
- accepted in a manner required by the offeror, if no manner required, can be accepted by any reasonable means
- acceptance is judged by an objective standard
- CL requires Mirror Image Rule
Mailbox rule
Acceptance is effective upon dispatch.
- proper dispatch requires that the offeree no longer has control or possession of the acceptance.
Exceptions:
- offer provided otherwise
- option contract is effective upon receipt
- if an rejection is dispatched first, acceptance will only become effective if it is received first.
- Acceptance dispatched first is effective on dispatch.
Acceptance varies (UCC)
Added terms:
- if one or more party is not a merchant, any additional term is a proposal and will not become part of the K unless the other party assents.
- If both parties are merchants, the additional term automatically becomes a part of the K unless: 1) offer expressly limits acceptance to its terms; 2) material alteration; 3) objection within a reasonable time.
Conflicting terms:
- Knock-out rule (majority): neither enters into the K, UCC gap fillers will supply the missing terms.
- Treat as additional terms (minority): as above
- Fall out rule (minority): offeror’s terms controls.
Acceptance by shipment (UCC)
The offer is accepted by shipping conforming or nonconforming goods:
shipping conforming goods: acceptance
shipping nonconforming goods: depends upon whether the seller acknowledges the nonconformity of the shipment-
- Shipment without acknowledging: accepted and breached simultaneously
- Shipment with acknowledging: serve as a counteroffer, not acceptance
Consideration
bargained-for exchange of legal detriment.
Illusory promise
A promise not supported by consideration and thus unenforceable.
Requirement and output K are not illusory because of the implied obligation of good faith (requirement K: seller - exclusive source of all buyer’s requirement; output K: buyer - buy all of the seller’s output)
Inadequate consideration examples
- gifts
- sham or nominal consideration
- past consideration except when: i) promise to pay a past debt of which statute of limitation has run; ii) promise to pay for benefits previously received at the promisor’s request.
- Preexisting duty rule