CONTRACT FORMATION

Question 1

Offer

Answer 1

Outward manifestation and signal that acceptance will conclude deal. Can be oral, written or through conduct but must be made apparent through conduct

Question 2

Multiple Offerees (Commercial Ads, Auctions, Reward Offers)

Answer 2

Advertisements addressed to multiple recipients are generally invitations for offers unless it clarifies the means in which the available quantities will be allocated

Question 3

What does an Offer create and the effects

Answer 3

An offer creates a continuing power of acceptance. If acceptance is made before that power is terminated the contract is binding.

Question 4

How can the power of acceptance be terminated

Answer 4

1. Lapse of time - Reasonable time
2. Death - Either party
3. Revocation (Direct or Indirection)
4. Rejection

Question 5

Option Contracts and Firm Offers

Answer 5

Offeror may revoke offer at any time, even if he has promised to hold it open.

In order to create an enforceable option contract in which the offeror must hold the K open we need:

1. An offer
2. Promise to keep it open
3. Consideration to offeror in return

Firm Offer (UCC)
Merchant can create irrevocable offer to buy or sell goods by:
1. Offer
2. Writing signed by merchant
3. expressly stating it will be held open

Can be held open for 3 month period

Question 6

What is a merchant

Answer 6

A merchant is an individual having special knowledge or skill with respect to the practices or goods in the transaction

Question 7

Unilateral K and Revocation

Answer 7

Offer seeking performance in return. Can be revoked anytime before acceptance through performance. In modern times an option K is created once offeree begins performance and offeror cannot revoke.

Question 8

Bilateral K

Answer 8

Offer seeking a promise in return

Question 9

Acceptance (ALSO FOR UCC)

Answer 9

Must mirror terms of offer and be communicated to offeror. Offer must be accepted through particuar means if requested by offeror.

UCC -

Question 10

Acceptance by Silence (When can it occur)

Answer 10

1. Where offeree takes the benefit of the offeror’s services with a reasonable opportunity to reject knowing the offeror’s intention
2. Where offeror has given the offeree reason to understand that acceptance may be communicated by silence, and will serve as acceptance if he intends such
3. Where due to previous dealings or other circumstances it is reasonable that the offeree should notify the offeror if he dies not intend to accept.

Question 11

Acceptance by Mail (Mailbox Rule)

Answer 11

Acceptance is effective upon dispatch (properly posted, correct address, postage). Parties are bound even if lost in mail.

All other communications are effective upon receipt

Question 12

Parol Evidence Rule

Answer 12

Governs the admissibility of evidence that is outside the written contract

Question 13

Modification

Answer 13

Promise to increase compensation under existing K is unenforceable if no consideration.

Mutual Modification is enforceable if:

1. Both parties agree to performance that is different than the original K
2. Difference in performance is not a mere pretense for a new bargain

Question 14

Defenses Against K Formation

Answer 14

1. Incompetence
2. Misrepresentation
3. Duress
4. Undue Influence
5. Unconscionably
6. Public Policy

Question 15

Excuses of Performance

Answer 15

1. Unilateral Mistake
2. Mutual Mistake
3. Impossibility
4. Impracticability
5. Duress
6. Accord/Satisfaction
7. Anticipatory repudiation

Question 16

Statute of Frauds

Answer 16

Requires that certain contracts be written.

Question 17

What K falls into SOF

Answer 17

Marriage
Year
Land
Executor
Goods over 500
Surety (guardianship)

Question 18

Specific Performance

Answer 18

When P request that P abide by the terms of the K

Question 19

Recovery/Counterclaims

Answer 19

1. Quasi-K
2. Contractual recovery
3. Counterclaims

Question 20

Governing Law

Answer 20

Decision as to whether common law or the UCC applies to a transaction.

UCC covers sales of goods. If it applies it trumps common law.

A good is a moveable item.

Question 21

Hybrid cases (K for Goods and Services)

Answer 21

What is the predominant purpose of the K?

Factors:

1. Contractual language
2. Nature of supplier’s business
3. Value of goods v. services

Question 22

General categories of Ks

Answer 22

1. Express - Oral or written

2. Implied-in-Fact - Conduct rather than words

Question 23

Conditional Acceptance

Answer 23

If offeree’s acceptance is specifically conditioned on offeror agreeing to additional terms first than this is not sufficient to form K obligations.

Question 24

Consideration requirement in Ks

Answer 24

Promise is unenforceable absent consideration; otherwise it is simply a gratutitous transfer that can be revoked at any time by the transferor.

Bargain theory of Consideration - Promise is supported by consideration if there is a bargained for exchange

Legal Detriment Test:
Whether promise is doing something he had a legal right not to do OR forgoing an activity that he had a legal right to do

Consideration does not have to be proportional, but cannot be an exchange for money

Question 25

Illusory Promise

Answer 25

Promise of performance that leaves performance up to the discretion of the promising party.

Question 26

Gratuitous Promises

Answer 26

Promise to make a gift that is unenforceable to grantee

Exception:

1. Written promise to pay debt barred by statute of limitations
2. Written promise to pay debt discharged in bankruptcy

Question 27

Promissory Estoppel

Answer 27

Promisee that reasonably relies to his detriment on gratiutious promise may be able to enforce without consideration

Elements:

1. Promise
2. Foreseeable reliance
3. Actual reliance
4. Injustice without enforcement

Factor for Injustice:

1. Strength of other requirements
2. Wilfulness of breach
3. Position of the parties
4. Extent to which reliance was detrimental