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Contract Formation Flashcards

1
Q

What is a contract?

A

A contract is a promise or set of promises for breach of which the law gives a remedy.

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2
Q

What is the formula for a contract?

A

A contract equals mutual assent (offer and acceptance) plus consideration and a lack of defenses.

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3
Q

What is an express contract?

A

An express contract is formed orally or in writing.

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4
Q

What is an implied contract?

A

An implied contract is formed by conduct.

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5
Q

What is a quasi-contract?

A

A quasi-contract is when an unenforceable contract gives rise to unjust enrichment.

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6
Q

What is a bilateral contract?

A

A bilateral contract is the exchange of mutual promises.

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7
Q

How is a bilateral contract accepted?

A

A bilateral contract is accepted in any reasonable manner, unless otherwise specified.

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8
Q

What is a unilateral contract?

A

A unilateral contract is one in which the offeror requests performance rather than a promise. The contract is complete when performance is complete.

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9
Q

How is a unilateral contract accepted?

A

A unilateral contract can only be accepted by performance.

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10
Q

What are the two situations where unilateral contracts come up?

A

(1) when the offeror clearly and unambiguously indicates that completion of performance is the only manner of acceptance
(2) where there is an offer to the public such as a reward

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11
Q

What is a void contract?

A

A void contract is one without any legal effect that cannot be enforced by either party.

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12
Q

What is a voidable contract?

A

A voidable contract is a contract that one or both parties may avoid, such as by raising a defense that makes the contract voidable.

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13
Q

What is an unenforceable contract?

A

An unenforceable contract is one that is otherwise valid, but isn’t enforceable due to a defense such as the statute of limitations or the statute of fauds.

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14
Q

What is a good?

A

A good is anything moveable at the time the items are to be sold under the contract.

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15
Q

What is a merchant?

A

A merchant is one who regularly deals in goods of the kind sold or one who holds himself out as having special skill or knowledge as to the practices or goods.

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16
Q

When is a merchant not a merchant?

A

A party is not a merchant for the purposes of sales that are solely personal, such as hobbies.

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17
Q

What is the duty of good faith in the UCC?

A

Under the UCC, good faith is honesty in fact and observance of reasonable commercial standards.

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18
Q

What is a breach of the duty of good faith and fair dealing under common law?

A

Under common law, a breach of the duty of good faith and fair dealing usually involves exercising discretion in a way that deprives the other party of the fruits of the contract.

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19
Q

What is an offer?

A

An offer is a communication that creates a reasonable expectation in the offeree that the offeror is willing to enter a contract on the basis of the offered terms.

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20
Q

When is a price quotation an offer?

A

A price quotation is an offer when given in response to an inquiry that contains a quantity term.

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21
Q

Is an advertisement an offer?

A

Generally, an advertisement is not considered an offer but rather an invitation for offers.

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22
Q

What terms must an offer include?

A

An offer must identify the offeree and include definite and certain terms. Enough of the essential terms must have been provided so that the contract is capable of being enforced.

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23
Q

What terms are required in an offer for the sale of land?

A

An offer for the sale of land must identify the land and the price terms.

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24
Q

What terms are required in an offer for a sale of goods?

A

A sale of goods must identify the quantity being offered or the quantity must be capable of being made certain as with a requirements contract or an outputs contract.

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25
What is are requirements and output contracts?
In a requirements contract, the buyer promises to buy from the seller all of the goods the buyer requires. In an output contract, the seller promises to sell to the buyer all of the goods the seller outputs.
26
What terms are required in an offer for an employment contract?
The offer for an employment contract must include the duration of the employment. If none is stated, employment is construed as terminable at will.
27
What terms are required in an offer for a service contract?
An offer for a service contract must include the nature of the work to be performed.
28
Is a contract precluded if the offer does not state a price?
A failure to state a price, except in real estate contracts, does not prevent formation if the parties intended to form a contract without price being settled. Under UCC, if a price is not listed, the default price will be a reasonable price at the time of delivery.
29
What if an offer does not include a time for performance?
If no time for performance is stated, performance must be completed within a reasonable time.
30
Can an offer be enforced if the terms are vague?
No, unless part performance clarifies the vague term.
31
Must an offer be communicated to an offeree?
Yes, the offeree must have knowledge of the offer to have the power to accept .
32
May an offer be accepted after it has been terminated?
No.
33
When does an offer terminate?
An offer terminates after a rejection, a revocation, or after a lapse of time, either within the time specified in the offer or, if none, a reasonable time.
34
What is an express rejection?
An express rejection is a statement by the offeree that he does not intend to accept the offer.
35
Is a counteroffer an acceptance?
No, a counteroffer is a rejection and a new offer.
36
What is a counteroffer?
A counteroffer is an offer made by the offeree to the offeror that contains the same subject matter as the offer but in different terms.
37
Is a mere inquiry a counteroffer?
No, a mere inquiry is not a counteroffer if a reasonable person would not believe the offer has been rejected.
38
Is conditional acceptance an acceptance?
No. When an acceptance is expressly made condition on the assent to new terms, it is a rejection and a new offer.
39
May a conditional acceptance be accepted by performance?
No. If the parties begin performance (e.g. ship goods) after a conditional acceptance, the contract is formed by conduct and the new terms are not included.
40
When is a rejection effective?
A rejection is effective when it is received by the offeror.
41
Does a rejection of an option terminate the offer?
No, because the option is a contract to keep the offer open for a specified period of time. The offeree is still free to accept unless the offeror has detrimentally relied.
42
What is a revocation?
A revocation is a retraction of an offer by the offeror.
43
How may an offeror revoke an offer?
(1) by directly communicating it to the offeree (2) by publication through comparable means, if offer published (3) indirectly, if the offeree receives correct information from a reliable source, of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer.
44
When is a revocation effective?
A revocation is effective when received by the offeree.
45
When is an offer irrevocable?
An offer is irrevocable when the offer is an option, a merchant's firm offer, when the offeree has detrimentally relied, or when performance has begun in a unilateral contract.
46
What is an option?
An option is a contract in which the offeree gives consideration for a promise by the offeror not to revoke the offer.
47
What is a merchant's firm offer?
Under UCC, an offer is not revocable for lack of consideration if a merchant offers to buy or sell goods in a signed writing and the writing gives assurances it will be held open.
48
How long is a merchant's firm offer open?
If no time is stated, the merchant's firm offer will be open for a reasonable time, not to exceed 3 months.
49
When is an offer irrevocable due to detrimental reliace?
An offer is irrevocable when the offeror could reasonably expect the offeree would rely to their detriment on the offer and the offeree actually does rely.
50
When is a unilateral contract irrevocable?
A unilateral contract is irrevocable once performance has begun. The offeror must give the offeree reasonable time to complete performance.
51
Is an offeree bound to complete performance in a unilateral contract?
No because there is no acceptance until performance is complete.
52
Are preparations to perform enough to make an offer irrevocable?
No, but they may constitute detrimental reliance.
53
When does an offer terminate by operation of law?
An offer terminates by operation of law on the death or insanity of either party, by destruction of the subject matter of the contract, or by supervening illegality.
54
What is acceptance?
Acceptance is manifestation of assent to the terms of the offer.
55
Who may accept an offer?
Generally, only the person or a member of the class to whom the offer is addressed may accept.
56
Is acceptance assignable?
No, unless the offeree paid consideration to keep the offer open.
57
How is a bilateral contract accepted?
A bilateral contract is accepted by a promise to perform or the beginning of performance.
58
Can silence be an acceptance?
Generally, acceptance must be communicated to the offeror. Silence can be acceptance when, because of prior dealings, it would be commercially reasonable to consider silence as acceptance. Silence can also be acceptance if the recipient of services knows compensation would be expected and fails to speak.
59
How may an offer be accepted under UCC?
Under UCC, an offer may be accepted by a promise to ship or by current or prompt shipment of goods.
60
What is the mirror image rule?
At common law, acceptance had to be absolute and unequivocal for each and every term in the offer.
61
How is a unilateral contract accepted?
A unilateral contract is accepted by completing performance.
62
Is an offeree required to give notice that performance has begun in a unilateral contract?
An offeree is not required to give notice that performance has begun, but is required to notify offeree after performance is complete, unless (1) the offeror waived notice or (2) the offeree's performance would normally come to the offeror's attention within a reasonable time.
63
Is a shipment of nonconforming goods an acceptance of a contract?
Yes, and it is also a breach of contract unless the seller notifies the buyer that the nonconforming goods are being offered as an accommodation.
64
Is accommodation possible when the contract is formed by a promise to ship goods?
No. Accommodation only works when the acceptance is done by prompt shipment.
65
Does UCC follow the mirror image rule?
No. UCC has the battle of the forms. The inclusion of the additional terms are treated as an acceptance, unless acceptance is made conditional on the assent to the terms (in which case, it is a counteroffer).
66
Are additional terms included in the contract under battle of the forms?
The additional terms are included if both parties are merchants and (1) the terms do not materially alter the original terms of the contract, (2) the offer is not expressly limited to the terms of the offer (3) the offeror has not already objected to the particular terms or did not object within a reasonable time. The additional terms are not added to the contract if either party is a nonmerchant, unless the offeror agrees.
67
Are different terms included in the contract under battle of the forms?
There is a split on authority. Some courts follow the rules for additional terms. Others follow the knockout rule where conflicting terms are knocked out of the contract and replaced with UCC gap fillers.
68
Does battle of the forms apply to a merchant's confirmatory memo?
Yes.
69
What is the mailbox rule?
Acceptance by mail or similar means is effective at the moment of dispatch, provided the mail is properly addressed and stamped.
70
What are the exceptions to the mailbox rule?
(1) the offer says acceptance is not effective until received (2) an option contract is involved (3) the offeree sends a rejection and then sends an acceptance (4) the offeree sends an acceptance and then a rejection
71
What happens if the offeree sends an acceptance and then a rejection?
Acceptance is effective unless the offeror received the rejection first and detrimentally relied on it.
72
What happens if the offeree sends a rejection and then sends an acceptance?
The mailbox rule is suspended, and whichever the offeror receives first controls.
73
What happens to the mailbox rule if an option is involved?
The mailbox rule does not apply. Acceptance of an option is effective when the offeror receives it.
74
When is a sale at auction complete?
A sale at auction is complete when the hammer falls.
75
What is an auction with reserve?
A good sold at auction with reserve may be withdrawn at any time prior to the completion of the sale.
76
What is consideration?
Consideration is (1) a bargained-for-exchange with (2) legal value (a benefit to the promisor or a detriment to the promisee).
77
What is "bargained for"?
Bargained for means that the promise induced the detriment and the detriment induced the promise.
78
Is a gift consideration?
No, because there is no bargain.
79
Is an act or forbearance consideration?
An act or forbearance is consideration if it benefits the promisor.
80
Is something done in the past consideration?
No. Past or moral consideration does not satisfy the bargain requirement.
81
What are the exceptions to past consideration?
(1) if a past obligation is unenforceable because of a technical defense like the statute of limitations, the obligation will be enforced if a new promise is made in writing or is partially performed (2) If the past act benefitted the promisor and was performed by the promisee at the promisor's request or in response to an emergency, a subsequent promise to pay is enforceable.
82
When is consideration inadequate?
Consideration is inadequate if it is devoid of value or sham consideration that is not paid.
83
Do courts consider the adequacy of consideration?
In general, courts do not consider the adequacy of consideration. Even a kernel is enough.
84
What is a legal detriment?
A legal detriment results if the promisee does something they are not legally obligated to do or refrains from something they have a legal right to do.
85
What is a legal benefit?
A legal benefit results when the promisor receives an act or forbearance she was not legally entitled to demand or expect.
86
Is a preexisting legal duty consideration?
No, but there are exceptions.
87
What is the exception to the preexisting legal duty rule?
A preexisting legal duty is consideration if - a new or different consideration is promised - the promise is to ratify voidable obligations - the preexisting duty is owed to a third party rather than the promisor - there is an honest dispute as to the duty - there are unforeseen circumstances sufficient to discharge a party or the modification is fair and equitable in view of the circumstances anticipated when the contract was made (modern rule)
88
What is the preexisting duty rule in UCC?
A good faith modification to a UCC contract needs no consideration to be binding.
89
Can a contract be modified?
Under common law, a contract cannot be modified unless there is new consideration. The modern view permits if (1) the modification is due to circumstances that were unanticipated by the parties when the contract was made and (2) it is fair and reasonable. Under UCC, all parties need to do is make good faith promises of new and different terms.
90
Is a promise to refrain from suing consideration?
A promise to refrain from suing is consideration if the claim is valid or the claimant in good faith believed the claim was valid.
91
When is a promise illusory?
A promise is illusory when only one party is bound to perform.
92
Is a promise to choose from alternative performance types illusory?
A promise to chose from alternative performance types is illusory unless (1) every alternative involves a legal detriment to the promisor, (2) at least one alternative involves a detriment and the choice lays with a third party or the promisee, or (3) a valuable alternative is actually selected.
93
What is promissory estoppel?
Promissory estoppel is an alternative to consideration.
94
What are the elements of promissory estoppel?
A promise is enforceable if necessary to prevent injustice if (1) the promisor should reasonably expect to induce action or forbearance, and (2) such action or forbearance is in fact induced.
95
What damages are awarded for promissory estoppel?
Some courts award the full contract price. Others, and the Restatement, say remedy is limited as justice requires (reliance damages).

Contracts (5 decks)

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