Contract Formation Flashcards
Offer definition
An objective manifestation of a present intent to contract. Demostrated by a promise, undertaking, or commitment; definite and certain terms; and communication to an offeree.
An offer creates the power of acceptance in the offeree.
Offer
Objective Manifestation of Intent
Offer must give offeree a reasonable expectation that offeror is willing to enter into a contract.
- Ask would a reasonable person believe the communication is an offer inviting acceptance.
Offer
Definite and Certain Terms
Enough essential terms must be included to allow a court to enforce the contract.
- vague terms or terms of negotiation not allowed.
- Real Estate: requires price, parties, and identification of land.
Offer
Communication to an Identified Offeree
Offeree must know of the offer and have the power to accept it.
Offer
Advertisements
Generally not offers, unless highly specific as to quantity and clearly indicate who may accept.
Offers
UCC
Quantity must be certain or capable of being made certain.
- Requirement/output – no unreasonably disproportionate increase in quantity allowed.
- Missing terms OK if it appears parties intended to make a contract and there is a reasonably certain basis for giving a remedy.
Termination
Acts of Parties
- Revocation by offeror
- Rejection by offeree
- Lapse of time
Termination
Operation of Law
- Death of insanity of either party
- Destruction of proposed contract’s subject matter
- Supervening illegality
Revocation Definition
An offeror may revoke her offer, which effectively terminates the offer and the offeree’s power of acceptance
Methods of Revocation
- Unambiguous statement by the offeror to the oferee
- Offeree becomes aware of the offeror’s unambiguous conduct or statement indicating an unwillingness or inability to contract
Limitations on Revocation
- Revocation is only effective upon receipt by offeree.
- Offer cannot be revoked once it has been accepted.
Irrevocable Offers
Offer is irrevocable if:
- Option Contract
- Promise to keep an offer open; requires consideration
- UCC Firm Offer
- If a merchant offers to sell goods in a signed writing and gives assurances that offer will be held open, it is irrevocable for designated period or up to three months
- No consideration required
- Detrimental Relaince by Offeree
- Reliance must be reaosnable
Revocation
Unilateral Contracts
Start of performance makes the offer irrevocable for a reasonable time to complete performance.
- Start of performance must go beyond mere preparation.
Rejection of Offeror Definition
Rejection by offeree terminates the offer and the offeree’s power of acceptance.
Methods of Rejection
Express Rejection
Express rejection by the offeree will terminate the offer.
Methods of Rejection
Counteroffer
Terminates the origional offer can becomes a new offer; bargaining is not a counteroffer.
- If response to an offer is a question: bargaining
- If response is a statement: counteroffer
Methods of Rejection
Conditional Acceptance
Terminates the origional offer and becomes a new offer.
Indicated by terms such as “if, only if, but, provided, so long as, on condition that, etc.”
Methods of Rejection
Acceptance with Additional Terms (common law/UCC)
- Common Law: acceptance must be the mirrow image of the offer
- UCC: if both parties are merchants, additional terms are a “seasonable expression of acceptance” if they do not materially change the offer and the offeror does not object.
Acceptance Definition
A clear expression of assent to the terms of the offer
Acceptance
Common Law Mirror Image
Acceptance must mirror the offer’s terms; it cannot omit or add new terms
UCC Acceptance Issues
Acceptance with Additional Terms
Acceptance that proposes additional terms or different terms is vlaid, unless the acceptance expressly requires assent to the different or additional terms.
- Merchants: additonal terms become part of the contract unless they materially change the offer or offeror objects within a reasonable time.
UCC Acceptance Issues
Acceptance by prompt shipment
A merchant may accept an offer to buy goods either by:
- providing a promise to ship goods (usually by written confirmation); or
- Promptly shipping conforming goods.
Shipment of nonconforming goods may give rise to breach.
Mailbox Definition
Offers and acceptance transmitted via mail or other similar methods become effective upon either dispatch or reciept.
Mailbox Definition
Offers
Effective upon reciept
Mailbox Definition
Acceptance
Effective upon dispatch
Mailbox Definition
Limitations
- If the offer stipulates acceptance is not effective until received, the offer controls.
- Options Contracts: acceptance is effective upon receipt.
- If oferee send both a rejection and acceptance, the first to arrive is controlling.
Mailbox Definition
Revocation
Mailbox rule does not apply.
Revocation is effective only upon receipt.
Acceptance by Performance Definition
An offeree may accept by partial performance (for bilaterial contracts) or complete performance (for unilateral contracts), unless acceptance is limited by terms of the offer.
Acceptance by Performance
Unilateral Contracts
Complete performance is required.
- Oferee not obligated to complete performance
- Oferee’s failure to perfrom does not constitute a breach (bc no contract formed)
- Offer may become irrevocable upon the start of performance until completion
Acceptance by Performance
Unilateral Contracts
Notice
Oferee not required to give notice upon start of performance, but must notify offeror within a reasonable time upon completion.
Acceptance by Performance
Bilateral Contracts
Partial performance gives rise to acceptance.
- Offeree must make offeror aware of acceptance
Offers requiring acceptance by promise
An offer requiring acceptance by promise may still be accepted by performance if:
- The offeree begins to perfrom, and
- The offeror learns that the offeree has started performance and acquiesces.
Consideration Definition
A bargained-for-legal detriment incurred by each party to a contract by promise, forebearance, or performance.
Bargained for legal detriment
The promise must induce the detriment and the detriment must induce the promise.
Bargained for legal detriment
Legal Detriment
Obligation to do or refrain from doing something one would not otherwise be obligated to do or refrain from doing.
Bargained for legal detriment
Pre-existing legal duty
A promise to perfrom a pre-existing legal duty is not valid consideration, unless there is a new written promise to fulfill a debt obligation.
Substitutes for Consideration
Promissory Estoppel
Courts may enforce a promise if:
- Promisor reasonably expects reliance by promisee
- Promisee acts or refrains from acting such that his relaince is detrimental, and
- Injustice will occur without enforcement of the promise
Substitutes for Consideration
UCC Modifications to K
Consideration not necessary for good-faith written modification to a contract governed by the UCC.
Substitutes for Consideration
Past Debts
If a debt is barred by the SOL, a new written promise to fulfil the debt is enforceable without consideration, but only according to the new terms.
