Contract Formation Flashcards
Merchant
(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
Offer - CL
All essential terms must be provided (parties, subject matter, price, quantity)
Offer - UCC
The essential terms are the parties, subject matter, and quantity; a court will “gap fill” any other missing terms
Bilateral Contract
Contract in which the parties exchange promises; can be accepted by a promise OR by beginning performance
Unilateral Contract
Contract in which the offeror makes a promise and the offer must perform; can only be accepted by complete performance
Option Contracts (CL)
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.
Firm Offers (UCC)
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.
When is revocation effective?
Revocation is effective upon receipt (i.e., mailed revocation is not effective until it is received)
Constructive Revocation
If the offeree acquired reliable information that the offeror has taken definite action inconsistent with the offer, the offer is automatically revoked
Counteroffers
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
Acceptance
The objective manifestation by the offeree to be bound by the terms of the offer
Mirror-Image Rule (CL)
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.
UCC Acceptances When Both Parties Are Merchants
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.
UCC Acceptances When Both Parties Are Not Merchants
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.
Mailbox Rule
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.
Consideration
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
Gifts
A gift from one party is not supported by consideration because that receiving party is not suffering a legal detriment.
Preexisting Duty Rule
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)
Moral Consideration
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.
Promissory Estoppel (Detrimental Reliance)
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
