Contract Formation

Question 1

What is required for an offer?

Answer 1

(1) outward manifestation (oral, written, or via conduct)

(2) signal that acceptance will conclude the deal

Question 2

Are commercial advertisements offers?

Answer 2

American rule: ads, catalogs, and price lists are INVITATIONS FOR OFFERS, since responses may exceed the available supply of goods or services.
Exception: language that identifies who gets the limited supply of goods even if there is an excess demand (i.e. first come, first serve)

Question 3

What is a reward offer?

Answer 3

Considered an offer b/c they are communications that promise $ in exchange for performance of specific tasks.
(ex: $500 for finding and returning my lost dog)

Question 4

What are the four ways to terminate the power of acceptance in the offeree?

Answer 4

(1) lapse
(2) death or incapacity of either party
(3) revocation of offer BY OFFEROR
(4) offeree rejects offer

Question 5

What determines whether an offer has lapsed?

Answer 5

(1) after time stated in the offer or
(2) after a reasonable time. reasonable time determined by subject matter/market conditions and degree of urgency and means of transmission

Question 6

What is the face-to-face conversation rule?

Answer 6

an offer made in a face-to-face conversation generally lapses at the end of the conversation

Question 7

How can an offeror revoke an offer?

Answer 7

Offer can revoked at any time. Must be revoked before acceptance + revocation and must be communicated to the offeree.

Question 8

What is direct revocation?

Answer 8

offeror directly communicates to offeree an intent to withdraw the offer

Question 9

What is indirect revocation and what are the two requirements?

Answer 9

(1) offeror takes action that is inconsistent with the intent to go through with the offer and
(2) offeree learns of such action from reliable source

Question 10

How can the offeree prevent revocation?

Answer 10

(1) Option contract

(2) reliance/construction

Question 11

What is an option contract?

Answer 11

Offer and separate promise to keep it open and valid way to enforce the subsidiary promise

Question 12

What is the reliance/construction rule for preventing revocation?

Answer 12

Courts will hold offers open when the offeree has detrimentally relied on them

Question 13

What is a firm offer under the UCC?

Answer 13

irrevocable offer by the merchant to buy or sell goods WITHOUT consideration

Question 14

What are the three elements of a UCC firm offer?

Answer 14

(1) offer made by a merchant (in the business of buying or selling goods)
(2) in a writing signed by the merchant
(3) expressly stating it will be held open (but only up to 3 months even if stated otherwise)

Question 15

What are the three ways for an offeree to reject an offer?

Answer 15

(1) outright rejection
(2) rejection via counteroffer
(3) rejection via non-conforming acceptance

Question 16

What is the mirror image rule?

Answer 16

Acceptance of an offer must mirror the terms and any variation is a counteroffer and is considered a rejection of the initial offer

Question 17

What is a bilateral contract?

Answer 17

offer seeking acceptance by a promise. a promise is being exchanged for a promise. Once promises are exchanged, both parties are bound

Question 18

What is a unilateral contract?

Answer 18

Offer seeking performance in return. Offeror is not bound until offeree completes performance, and offeree is never bound.

Question 19

What are the rules for revoking an offer under a unilateral contract?

Answer 19

Once offeree begins performance, an option K is created and the offeror may not revoke the offer.
BUT mere preparations do not create an option K.

Question 20

How do you accept an offer?

Answer 20

(1) acceptance must mirror the terms of the offer and

(2) be communicated to the offeror

Question 21

Regarding acceptance, what are the two exceptions to the communication requirement?

Answer 21

(1) For a unilateral contract, acceptance is effective only by completing performance, no communication is required unless the offer provides otherwise
(2) Acceptance by mail - mailbox rule

Question 22

When is acceptance effective under the mailbox rule?

Answer 22

Acceptance by mail is effective upon DISPATCH if properly posted (unless the offer provides otherwise)

Question 23

Does the mailbox rule apply to an option contract?

Answer 23

No

Question 24

What happens when an offeree dispatched two responses to an offer, the first rejecting the offer and the second accepting it?

Answer 24

Mailbox doesn’t govern if the rejection is mailed before acceptance, and whichever arrives first will be effective

Question 25

Under the UCC, what are the three ways a seller can accept a buyer’s offer to purchase goods for prompt or current shipment?

Answer 25

(1) promise to ship goods
(2) shipping conforming goods
(3) shipping nonconforming goods, unless the seller sends the shipment as an accommodation (i.e. counteroffer)

Question 26

Under the UCC, what is a rejection of the mirror image rule? (Battle of the forms rule)

Answer 26

An offeree’s nonconforming acceptance or confirmation (with additional terms) will operate as an effective acceptance of the offer, thus forming a contract (not a counteroffer)

Question 27

Between merchants, what are the three circumstances where the additional terms in an offeree’s acceptance of confirmation will not become part of the K?

Answer 27

(1) the offer expressly limits acceptance to its own terms
(2) if offeror objects to the additional terms within a reasonable time
(3) if the additional terms would materially alter the K

Question 28

What is a material alteration to a K?

Answer 28

Terms that would result in surprise or hardship if incorporated w/o the express awareness of the other party
(ex. arbitration clause, warranty disclaimer)

Question 29

What is the knockout rule?

Answer 29

When different terms in the two writings dealing with the same topic knock each other out
(ex. Buyer’s purchase order contains a choice of law provision stating that California law will govern disputes arising from the transaction, and Seller’s order acknowledgment states that New York law will govern. Under the majority rule, neither provision is part of the parties’ contract, and if the parties desire a choice of law provision, they will have to negotiate one from scratch)

Question 30

What is a conditional acceptance?

Answer 30

When the offeree’s acceptance is specifically conditioned on the offeror first agreeing to the additional terms in the acceptance before the offeree will proceed.

Question 31

Is a conditional acceptance effective to form a K?

Answer 31

No K if formed until the offeror expressly assents to the additional terms

Question 32

What is a contract formed by conduct?

Answer 32

The UCC says that the parties’ conduct in recognizing the existence of a contract is sufficient to establish a contract even though their writings don’t otherwise establish a contract

Question 33

When a contract is formed by conduct, what are the terms of the contract?

Answer 33

(1) terms on which the writings of the parties agree; and

(2) default terms provided by the UCC