Contract Formation

Question 1

Merchant

Answer 1

(1) a person who regularly deals in the type of goods involved in the transaction, (2) a person who by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction, and (3) in some instances, any businessperson when the transaction is of a commercial nature

Question 2

Offer - CL

Answer 2

All essential terms must be provided (parties, subject matter, price, quantity)

Question 3

Offer - UCC

Answer 3

The essential terms are the parties, subject matter, and quantity; a court will “gap fill” any other missing terms

Question 4

Bilateral Contract

Answer 4

Contract in which the parties exchange promises; can be accepted by a promise OR by beginning performance

Question 5

Unilateral Contract

Answer 5

Contract in which the offeror makes a promise and the offer must perform; can only be accepted by complete performance

Question 6

Option Contracts (CL)

Answer 6

An offer where the offeror promises to hold the offer open for a certain period of time. The offeree must pay consideration to the offeror to hold the offer open.

Question 7

Firm Offers (UCC)

Answer 7

A firm offer exists if:
- the offeror is a merchant, and
- the offeror gives assurance that the offer will remain open in a signed writing

Irrevocability cannot exceed 90 days.

Question 8

When is revocation effective?

Answer 8

Revocation is effective upon receipt (i.e., mailed revocation is not effective until it is received)

Question 9

Constructive Revocation

Answer 9

If the offeree acquired reliable information that the offeror has taken definite action inconsistent with the offer, the offer is automatically revoked

Question 10

Counteroffers

Answer 10

A counteroffer acts as a rejection of the original offer and creates a new offer

Note: A mere suggestion of a different term or a mere inquiry about changing the term is not a counteroffer and will not terminate the original offer

Question 11

Acceptance

Answer 11

The objective manifestation by the offeree to be bound by the terms of the offer

Question 12

Mirror-Image Rule (CL)

Answer 12

The acceptance must mirror the terms of the offer. Any changes/additions to the terms constitute a rejection of the original offer and a counteroffer.

Question 13

UCC Acceptances When Both Parties Are Merchants

Answer 13

An acceptance from the offeree with changes or additions will be a valid acceptance. The contract WILL include the changes or additions UNLESS:
- they materially alter the terms of the original offer;
- the original offer limits acceptance to the terms of the offer, or
- the offeror objects to the changed or new terms.

Question 14

UCC Acceptances When Both Parties Are Not Merchants

Answer 14

An acceptance from the offeree with changes or additions will be a valid acceptance. However, the contract will NOT include the changes or additions UNLESS the offeror agrees to them.

Question 15

Mailbox Rule

Answer 15

Acceptance of an offer is valid when placed in the mail.

Exception: If there is an option contract or firm offer, the acceptance is only valid when received before the offer expires.

Special Issue: If a party mails a rejection of an offer and then mails an acceptance to the offer, the first communication to be received is effective.

Question 16

Consideration

Answer 16

Requires a bargained-for change in the legal position between parties. Both sides must have a legal detriment.

Legal Detriment = can take the form of a promise to do/not do something, or performance/refraining from performance

Question 17

Gifts

Answer 17

A gift from one party is not supported by consideration because that receiving party is not suffering a legal detriment.

Question 18

Preexisting Duty Rule

Answer 18

A promise to perform a preexisting legal duty will not qualify as consideration because the promisor is already required to perform (i.e., no additional legal detriment is being incurred)

Question 19

Moral Consideration

Answer 19

A promise not supported by consideration may be enforceable if it is made in recognition of a significant benefit previously received by the promiser from the promisee

Note: This rule does not apply if the promisee conferred the benefit as a gift to the promisor. Court might reduce the amount of money owed under the promise if it’s disproportionate to the benefit conferred by the promisee.

Question 20

Promissory Estoppel (Detrimental Reliance)

Answer 20

Substitute for consideration under a contract.

The promise will be binding in the absence of consideration if:
- the promisor should reasonably expect the promise to induce action or forbearance
- the promise actually induces action or forbearance, and
- injustice can be avoided only by enforcement of the promise

Damages: typically limited to reliance damages