Contract Formation

Question 1

Mutual Assent

Answer 1

1) Offeror making an offer to the offeree 2) Offeree accepts.

Offer + Acceptance + Present Commitment

Question 2

Consideration

Answer 2

Bargained for exchange.

Question 3

Offer

Answer 3

Manifestation of willingness to enter into a bargain so made as to justify another person in understanding that his assent to a bargain is invited and will conclude it (present commitment & certain terms)

Question 4

Acceptance

Answer 4

Manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.

Question 5

Present Commitment

Answer 5

Manifestation of consent; Must be present to form a contract.

Question 6

Special Rules About Offers

Answer 6

Advertisements, Quotes, Requests for Bids, and Letters of Intent

Question 7

Manner of Acceptance

Answer 7

1) Acceptance by promise 2) Acceptance by performance. Made in the manner required by the offeror.

Question 8

Unilateral Contract

Answer 8

Only offeror is making a promise. Acceptance is in the form of performing an act (rewards poster).

Question 9

Bilateral Contract

Answer 9

Both parties are making a promise. Acceptance occurs through promise

Question 10

Acceptance by Silence

Answer 10

As a general rule, an offer cannot be accepted through the silence of the offeree.

Narrow exceptions to the general rule are found in § 69 of the R 2d Contracts.

Question 11

Termination of the Power to Accept

Answer 11

1) Offer lapses
2) Death of offeror
3) Incapacity
4) Rejection
5) Counter Offer
6) Revocation

Question 12

Mutual Assent UCC Art. II

Answer 12

Applies to goods. If the UCC doesn’t provide insight, use the common law. If method of acceptance is not specified, any reasonable manner & medium will work. Additional terms are seen as proposals. However, between merchants additional terms become part of the contract unless the contract expressly limits acceptance to the terms in the offer, the additional terms materially alter the contract, or notification of objection has been given within a reasonable time.

UCC § 2-204 - 2-207 governs this

Question 13

Past & Moral Consideration

Answer 13

Generally are not sufficient consideration unless it is based on a limited category of exceptions.

Question 14

Exceptions to Past & Moral Consideration

Answer 14

1. Past benefit received by promisor himself
2. Legal obligation of promisor
3. Bankruptcy decree
4. New promise to pay debt previously cut off by statute of limitations
5. Adult’s new promise to pay a debt that they incurred as a child

Question 15

Settlement of Invalid Claims

Answer 15

Claim that turns out to be unsuccessful. (ie car accident where the person who caused it agrees to pay 10K for A to not sue. Then finds out he wasn’t at fault. Wouldn’t have settled had he known).

Question 16

Pre-Existing Duty Rule

Answer 16

A promise to do what you are legally obligated to do. This doesn’t count as good consideration.

How to spot: Parties make a first K, then parties make a second K purporting to modify first K.

Question 17

Illusory Promises

Answer 17

A promise that fails to restrict the maker’s discretion is illusory; illusory promises fail the “bargained for” requirement

1) Language of promise

2) But leaves the promisor free to perform or not at their own discretion

3) Promise cannot be made to restrict discretion of courts by implying good faith and reasonableness.

Question 18

Promissory Estoppel

Answer 18

Reliance Theory
1) promise
2) the promisor should reasonably expect to induce action
3) does induce such action
4) if injustice can be avoided only by enforcement

Question 19

Certainty of Terms

Answer 19

QTPPPS: Quantity, Time for performance, Parties to the contract, Price, Place for performance, Subject Matter; Must be enough detail so a court can determine breach of agreement & remedies.

Question 20

Certainty of Terms Common Law

Answer 20

Parties, Price, Subject Matter, Quantity

Question 21

Certainty of Terms UCC Art. II

Answer 21

Parties, Subject Matter, Quantity

Question 22

Advertisements

Answer 22

An advertisement is not an offer.

2 Exceptions:

1) Ads offering rewards

2) Ads that are definite and leave no room for negotiation.

Question 23

Requirements of Acceptance

Answer 23

1) Manifestation (writing, oral, etc.) 2) To the terms of the offer 3) By the offeree 4) In the manner invited or required by the offer (if none, a reasonable manner).

Question 24

Irrevocable Offers in Bilateral Contracts

Answer 24

1) Making a firm offer
2) Option Contract

Question 25

Firm Offer

Answer 25

UCC §2-205: An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

Question 26

Option Contract

Answer 26

Allows buyers to buy time to decide. It is a separate contract stating that the offer is open for a specified time. Must be paid for by recipient of offer. Requires mutual assent and consideration. Consideration for option contracts must typically be $1 or more.

Question 27

Irrevocable Offers in Unilateral Contract

Answer 27

Partial performance is not acceptance, but it does make the offer irrevocable. The offeree has flexibility. Full performance is acceptance;

Question 28

Brooklyn Bridge Hypo (Irrevocable Offers in Unilateral Contract)

Answer 28

Brooklyn Bridge hypo: “I will pay you $100 to walk across Brooklyn Bridge. Halfway across, offeree revokes offer.

Old rule: Offeror of unilateral contract can withdraw anytime

New rule: If the offeree begins performance in unilateral contracts, it remains open for a reasonable amount of time.

Question 29

Revocation of Offer by Offeror

Answer 29

1) Direct Revocation
2) Indirect Revocation

Question 30

Direct Revocation

Answer 30

The offeror revokes the offer directly, by speaking to the offeree. R 2d Contracts § 42

Question 31

Indirect Revocation

Answer 31

1) The offeror revokes the offer indirectly by taking action inconsistent with the offer remaining open but ONLY IF
2) The offeree receives reliable information about the offeror’s action. Restatement (Second) of Contracts § 43.

Question 32

Lapse Rule

Answer 32

An offer lapses within the time specified by the offeror. If no time specified, a reasonable time.

Question 33

Rejection Rule

Answer 33

Once the recipient of an offer (the offeree) has rejected the offer, the offer is gone; the rejection terminates the offer. Rejection can be through behavior not just by words. §38

Question 34

Face-to-Face Lapse Rule

Answer 34

An offer is only valid for the duration of the conversation;
An offer made during a meeting lapses at the end of the meeting, unless the offeree says that she is taking the offer under advisement. § 41 (d)

Telephone and email are governed by this rule.

Question 35

Counter Offers

Answer 35

A counter-offer by the recipient of an offer (the offeree) terminates the offer.

Question 36

Mailbox Rule

Answer 36

When an acceptance, revocation, rejection, or counter-offer is effective, that is, when those actions have an effect on an outstanding offer.

An acceptance is effective when it is mailed. Hence, a contract is formed when the acceptance is mailed.

The other actions – a revocation, rejection, or counter-offer – are effective when they are received by the other person.

The mailbox rules for the common law are given in §§ 40, 42, 63, 66, and 67 of the Second Restatement.

Question 37

Predominant Purpose Test - Mutual Assent UCC Art II

Answer 37

If you have a mix of goods and services (hybrid) determine if it’s mainly for goods or mainly for services. If mainly goods, use UCC. If mainly services, use common law.

Question 38

Past & Moral Consideration Hero Exception

Answer 38

When promise receives benefit in the past. Mills v. Wyman Log falling disabling man case

Question 39

Promissory Estoppel Uses

Answer 39

1) Substitute for consideration

2) Substitute for a writing required by a statute of frauds

3) As a way of making bids (offers) irrevocable

4) Policing unfair negotiation behavior