Contract Formation

Question 1

K Definition

Answer 1

(1) agreement, that is

(2) legally enforceable

Question 2

K requirements

Answer 2

(1) mutual assent

(2) consideration or some substitute, and (3) no defenses

Question 3

Offer

Answer 3

A person’s manifestation of willingness to contract.

Test: whether a reasonable person in the position of the offeree would believe that his or her asset creates a contract.

Requires a (1) promise, undertaking, or commitment, (2) CERTAINTY and DEFINITENESS in the essential terms (“apprpriate, reasonable, fair” not enough), and a (3) COMMUNICATION of the above to the offeree

Question 4

Advertisements

Answer 4

usually construed as mere invitations for offers

Exceptions: (1) can be a unilateral offer if it is in the nature of the award (e.g. $100 reward to anyone who catches teh flu after using its smoke ball); (2) offer if it SPECIFIES quantity and expressly indicates WHO can accept (fur coat $10, first come first served); (3) price quotations can be an offer if sent in RESPONSE to an inquiry

Question 5

Offer of land

Answer 5

Must identify the LAND and the PRICE terms. No deed required however. Courts will NOT supply a missing price term

Question 6

Sale of Goods offer

Answer 6

QUANTITY must be stated. But NO requirement for price.

UCC “Gap Filler” will fill the rest. Reasonableness.

Question 7

Requirement Contracts

Answer 7

Buyer promises to buy from seller all of the goods buyer requires, and seller agrees to sell that amount to buyer

Good faith assumed. Buyer can increase requirements so long as the increase is not UNREASONABLY DISPROPORTIONATE

NOT voided for vagueness or ambiguity if it says “all,” “only,” “exclusively,” or “solely”

Question 8

Termination by Time

Answer 8

lapse of time stated in the K or a reasonable time passed will terminate an offer

Question 9

Death of offeror

Answer 9

Death of offeror after an offer, but BEFORE acceptance, terminates offer

Exception: irrevocable offers

Question 10

Revocation

Answer 10

UNAMBIGUOUS words or conduct by the offeror that terminate an offer that offeree is AWARE of

Question 11

Option Contract

Answer 11

When offeree gives consideration for a promise by the offeror not to revoke for a certain amount of time.

Offer + 2: (1) offer, (2) promise to keep offer open (not revoke), and (3) promise is supported by consideration

May only be revocable if offeror detrimentally relies on an unequivocal rejection

Question 12

Firm Offer Rule

Answer 12

UCC specific

Offer CANNOT be revoked for up to THREE MONTHS if (1) MERCHANT; (2) offers to buy or sell GOODS; (3) in a SIGNED WRITING; that (4) PROMISES to keep the offer open

If offer is promised to be open for a period longer than three-months, merchant will be bound to be irrevocable only for three months in court.

NOTE: no consideration necessary. If there is consideration, it becomes an option contract that can be held open for as long as the parties specify!!

Question 13

Reliance irrevocability

Answer 13

offer CANNOT be revoked if offeror could reasonably foresee that offeree would rely on the offer to her detriment, and the offeree does so rely

Question 14

Four types of Irrevocable offers

Answer 14

Option K, Firm Offer Rule, Reliance, Unilateral K

Question 15

Unilateral K and revocability

Answer 15

Start of performance pursuant to a unilateral contract offer makes that offer IRREVOCABLE for a reasonable time to complete performance

NOTE: mere preparation is NOT enough to make an offer irrevocable, however. But can trigger detrimental reliance.

Question 16

Counteroffer

Answer 16

Generally terminates offer and creates a new offer.

BUT does NOT kill an option K while option is still open, unless offeror detrimentally relied on rejection.

NOTE: mere inquiry is not a counteroffer and thus does NOT terminate the offer (would you accept $X?) – Reasonable person test

Question 17

Conditional Acceptance

Answer 17

Look for: if, only if, provided, so long as, but, or on condition that (accept, but only if….)

Common law: reject and counteroffer that CAN be accepted

UCC: straight up rejects. Not counteroffer so can’t be accepted.

Question 18

Mirror Image Rule

Answer 18

Common law

response to an offer that adds any new term is a COUNTEROFFER and NOT acceptance

Question 19

Seasonable Expression of Acceptance

Answer 19

UCC mirror image equivalent (different from conditional b/c it is essentially a

response to offer that adds additional terms, but does not make those terms a condition, is generally treated as ACCEPTANCE (a seasonable expression of acceptance)

BUT, additional term is NOT part of the K unless: (1) both parties are merchants; and (2) the additional term is immaterial

UCC? –> Additional term? –> merchants –> immaterial?

Material: generally remedies, price, quantity, liability

Nonmaterial: shipping date, color of items

Question 20

Acceptance

Answer 20

Manifestation of asset to the terms of an offer. Generally only person to whom an offer is addressed can accept (or a member of a class that has power to accept). Must also know of offer in order to accept.

power to accept CANNOT be assigned, unless if it is an option contract

Question 21

Acceptance of unilateral contract

Answer 21

Offer provides it may be accepted only by performance. Performance must be completed to accept offer.

Beginning of performance creates option K and makes offer irrevocable, but offeree is not bound to complete performance, as only full performance is acceptance

Question 22

Acceptance of bilateral contract

Answer 22

If not specifically state accepted only through performance, it is a bilateral contract.

Accepted by a promise to perform or by BEGINNING of performance

Question 23

silence as acceptance

Answer 23

generally must be communicated. But silence may be acceptance if, because of PRIOR DEALINGS or TRADE PRACTICES, it is commercially reasonable for offeror to consider silence as acceptance

Question 24

Effectiveness of Acceptance (Mailbox rule)

Answer 24

acceptance creates a K at the MOMENT OF DISPATCH, provided that the mail is properly addressed and stamped, UNLESS

(1) offer states that acceptance is not effective until received; or (2) an option contract is involved (effective only upon receipt)

All other communications are effective only when RECEIVED

If rejection is mailed BEFORE an acceptance is mailed, the neither is effective until RECEIVED

Question 25

Shipment of Nonconforming Goods and Accomodation

Answer 25

UCC. Generally, it is treated as ACCEPTANCE and BREACH

NOTE: Accommodation: if nonconforming goods are accompanied by a notice that it is offered only as an accommodation, buyer is not required to accept and may reject the goods. If he does, shipper is NOT in breach and can reclaim the goods.

REMEMBER: this rule ONLY applies when shipment is acceptance. If seller accepts, then discovers he lacks the goods promised, he cannot use accommodation as an out.