contract formation and statute of frauds

Question 1

T or F • Even if UCC, common law still applies unless UCC contradicts it

Answer 1

True

Question 2

What is an express contract

Explain an implied in fact contract? Give an example

What is an implied in law contract? Give some examples

Answer 2

o Express = oral and written expressions of the agreement
o Implied-in-fact = formed by conduct rather than words; consensual agreements that fail to express the agreement of the parties in its entirety.

EXAMPLE: Homeowner hires a plumber to fix a leak, but because of the urgency of the service, the parties do not discuss the price of the work performed. Upon completion of the work, Homeowner has an implied-in-fact obligation to pay the plumber the reasonable value of the services rendered.

o Implied-in-law(aka quasi contract obligation) = arises where one party bestows benefit on another and it would be unjust not to pay the reasonable value of the benefit
EXAMPLE: A surgeon who performs emergency surgery on an unconscious patient creates an implied-in-law obligation to the patient.
EXAMPLE: A merchant who mistakenly delivers goods to the wrong party may create an implied-in-law obligation on the wrong party.

Question 3

what is the American rule regarding commercial advertisements?

what is the exception to the American rule?

Answer 3

o American Rule: Ads, catalogs, price lists are invitations for offers, since responses may exceed available supply of goods or services
 Exception: Language that identifies who gets limited supply of goods even if there is an excess demand (i.e. first come, first served, or first 10 customers)

Question 4

What is required to effectively revoke an offer?

distinguish between direct and indirect revocation

Answer 4

 Must be revoked before acceptance + revocation must be communicated to the offeree.

• Direct revocation – offeror directly communicates to offeree an intent to withdraw the offer
• Indirect revocation – 2 requirements:
o Offeror takes action that is inconsistent with the intent to go through with the offer and
o Offeree learns of such action from reliable source
EXAMPLE: While deciding whether to accept an offer to sell you a car, you learn from a friend that the car was sold to someone else.

Question 5

HYPOTHETICAL: A offers to sell real property to B. While B is considering the offer, A sells the property to C. Oblivious to the third-party sale, B sees A on the street and yells, “I accept your offer!” Is A now contractually bound to sell the property to B?

Answer 5

yes because A never found out about the offer

Question 6

T or F under the American rule an offeror cannot revoke an offer if he gave a specific time to the offeree to accept.

Answer 6

False,  American Rule: the offeror can revoke even if he gave a specific time to accept

Question 7

 Without additional consideration normally required in an option contact, Reliance/Construction: Courts will hold offers open when the offeree has?

Answer 7

detrimentally relied on them, such as when general contractors rely on subcontractor’s bids in forming their own bids on a project.

Question 8

Do option contracts prevent revocation of an offer?

Answer 8

yes

Question 9

 Firm Offer under UCC – Irrevocable offer by merchant to buy or sell goods without consideration (3 requirements):

Answer 9

• Offer made by a merchant (in the business of buying or selling goods) +
• In a writing signed by the merchant +
• Expressly stating it will be held open
o Irrevocable for time stated or reasonable time, BUT no longer than 3 months even if stated otherwise

Question 10

What are three methods of termination by offeree’s rejection?

Answer 10

o Outright rejection
o Rejection via counteroffer: counteroffer = rejection + new offer (e.g., I am not willing to pay $10K for the car, but I would happily buy your car for $9K.)

o Rejection via non-conforming acceptance
 Mirror image rule (common law): Acceptance must mirror the terms, and any variation is counteroffer (and rejection of initial offer)
EXAMPLE: X offers to buy goods from Y, Y says OK, and says he expects payment in 30 days. This will be a violation of the mirror image rule, and thus a counteroffer.

Question 11

T or F, an offeree can test the waters by making a mere inquiry. A mere inquiry does not terminate original offer.

give an example

Answer 11

True

e.g., $10k isn’t out of the question but it’s a little high given the age, would you consider a lower offer?).

Question 12

HYPOTHETICAL: Professor A makes the following offer to her students: “For anyone who completes this series of exercises by Friday, I’ll provide you with a free beverage from Starbucks.” Student B completes the exercises by Friday but does not notify the Professor until Monday. Does B’s completion of the exercises by Friday constitute acceptance of A’s offer?

What change in the facts would make the offer acceptance not proper?

Answer 12

yes no notification asked for so completion of the exercises was proper acceptance of A’s offer.

If the professor asked for notification from the student that they completed the exercise by Friday

Question 13

• Common law Mailbox Rule: acceptance by mail is effective upon dispatch if properly posted.
o Applies only to?

Answer 13

o Applies only to acceptances and not to any other communication (i.e., not to revocations or rejections)

Question 14

What is the mailbox default rule? give an example

Answer 14

– it applies unless the offer provides otherwise

A’s offer to B stipulates that A “must hear from B by the close of business Thursday” in order for B’s acceptance to be effective. B dispatches acceptance of the offer on Wednesday, but it doesn’t reach A until Friday. Is B’s acceptance effective? NO because the offer provided otherwise

Question 15

What happens when an offeree dispatches two responses to an offer, the first purporting to reject the offer and the second purporting to accept it?

Answer 15

o Mailbox rule does not govern if rejection is mailed before acceptance, and whichever arrives first will be effective.

Question 16

T or F o An offeree’s nonconforming acceptance or confirmation (with additional terms) will operate as an effective acceptance of the offer, thus forming a contract (not a counteroffer).

Answer 16

True

Question 17

o Between merchants, the “additional” terms in offeree’s acceptance or confirmation become part of the K EXCEPT in three circumstances:

Answer 17

1. The offer expressly limits acceptance to its own terms
   EXAMPLE: “This order expressly limits acceptance to the terms stated herein.”

2.If offeror objects to the additional terms within a reasonable time
EXAMPLE: This could be accomplished through language “We do not accept the binding arbitration provision set forth in your Acknowledgment of Order.”

3. If the additional terms would materially alter the K.
   • “Material alteration” = terms that would result in “surprise or hardship if incorporated w/o the express awareness of the other party”.

EXAMPLE: Buyer sends Seller a purchase order for 1,000 widgets at the advertised price of $10 each. Seller sends Buyer an Acknowledgment of Order that promises delivery of the widgets at the stated price and includes boilerplate language that negates all warranties and requires payment for the order to be complete within 30 days of delivery, which is standard in the widget trade.

Question 18

What are some examples that would materially alter a contract under the UCC

Answer 18

• Examples of clauses that would materially alter the contract include:
o warranty disclaimers
o clauses that materially shorten the deadline for raising complaints
o clauses that change usages of trade or past courses of dealing
o arbitration clauses

EXAMPLE: Buyer sends Seller a purchase order for 1,000 widgets at the advertised price of $10 each. Seller sends Buyer an Acknowledgment of Order that promises delivery of the widgets at the stated price and includes boilerplate language that negates all warranties and requires payment for the order to be complete within 30 days of delivery, which is standard in the widget trade.

Question 19

o If the offeree’s “acceptance” is specifically conditioned on offeror first agreeing to the additional terms in the acceptance before offeree will proceed, this nonconforming, conditional acceptance Will/ Wont be effective to form a K

Answer 19

Wont be effective its a counteroffer

 No K is formed by the writings until the offeror expressly assents to the additional terms.

Question 20

T or F o The UCC provides that the parties’ conduct in recognizing the existence of a contract is sufficient to establish a contract even though their writings do not otherwise establish a contract.

Example of K formation by conduct under the UCC.

but what terms will be enforceable?

Answer 20

True

EXAMPLE: Buyer sends order to Seller, Seller responds with a conditional acceptance containing a negation of warranties, and the parties have no further communications. Seller nevertheless ships the ordered goods, and Buyer accepts and pays for them. Although the parties’ writings do not form a contract—because Seller sent a conditional acceptance—a binding contract is formed by their conduct.

o The terms of the contract will be:
 Terms on which the writings of the parties agree; and
 Default terms provided by the UCC
Note: express terms in the parties’ communications which do not match or agree are omitted.

Question 21

T or F, the courts police the equivalence or fairness of the exchange between the parties and may determine that consideration is inadequate.

Answer 21

False, they do NOT police the equivalence or fairness of the exchange between the parties in determining whether consideration is adequate.

Question 22

5) Gratuitous Promises: Promise to make a gift, generally unenforceable due to insufficient consideration. What is the exception? examples

Answer 22

• Exception: Gratuitous transfers are legally binding
EXAMPLE: If I promise you a new car for your birthday, that would constitute a gratuitous promise and would be unenforceable if I decline to follow through. However, if I give you a new car for your birthday, then the transfer is legally binding, and I cannot later change my mind and take back the car.

Question 23

What is the definition and example of an illusory promise?

Answer 23

4) Illusory Promises: Promise of performance that leaves performance to the unlimited discretion of the promising party  does NOT constitute consideration

EXAMPLE: You agree to paint my portrait, and I agree to pay you $1,000 if I decide I want it.

Question 24

Past or Moral Consideration
• Majority General Rule: A promise in exchange for something already given or performed is NOT supported by consideration.
EXAMPLE: In Mills v. Wyman [20 Mass (3 Pick.) 207 (1825)], the court refused to enforce the father’s after-the-fact promise to compensate a Good Samaritan for nursing his dying son, and the case would likely come out the same way today.

1. What are the exceptions that are enforceable?
2. What is the minority rule or material benefit test? example

Answer 24

1. Exceptions (these are enforceable):
   o A written promise to pay a debt barred by limitations;
   o A written promise to pay a debt discharged by bankruptcy;
2. • Material Benefit Test (minority rule): promise made in recognition of a past benefit conferred is enforceable if:
   o Promisee conferred the benefit on the promisor (not a third party); and
   o The benefit is material
   EXAMPLE: A sees that B is in grave danger and heroically intervenes to save the latter, injuring himself in the process. B gratefully promises to compensate A for his efforts. These are the facts of Webb v. McGowin [27 Ala. App. 82 (1935)], where the court enforced the promise because A’s efforts bestowed a material benefit (the saving of a life) on B.
   EXAMPLE: Because the Good Samaritan in Mills v. Wyman bestowed the benefit of nursing services on the promisor’s son rather than on the promisor, the promise would not be enforceable.

Question 25

What is promissory estoppel?

What are the 4 requirements?

Answer 25

Promissory Estoppel is a (substitute for consideration). it allows enforcement of a gratuitous promise where is otherwise unenforceable given certain requirements are met.

4 requirements
1. A promise
EXAMPLE: Statements like “I’d like to give you some money to help you with college” would be considered too vague to be an actual promise. Alternately, “I’ll give $25,000 toward your tuition this fall” would be specific enough to qualify as a promise.

2. Foreseeable reliance
   EXAMPLE: The widow’s move to her brother-in-law’s farm on the faith of his promise would have been reasonably foreseeable to the brother-in-law at the time he made her the promise. However, if the widow had purchased a high-end SUV to facilitate the move, this would likely not have been foreseeable.
3. Actual reliance (must be induced by the promise)
   EXAMPLE: If the widow had already decided to make the 60-mile move before her brother made her the promise, then this would not be actual reliance.
4. Injustice without enforcement
   o Factors to analyze “injustice” requirement:
    Strength of proof of the other three requirements;
    Blameworthiness or willfulness of the breach; (spiteful breach)
    Relative position or equities of the parties;
    Extent to which the reliance was detrimental; and
    Availability of alternatives short of enforcing the promise

Question 26

What are factors that the court analyzes to consider the injustice without enforcement requirement in promissory estoppel?

Answer 26

 Strength of proof of the other three requirements;
 willfulness of the breach; (spiteful breach)
 Relative position or equities of the parties;
 Extent to which the reliance was detrimental; and
 Availability of alternatives short of enforcing the promise

Question 27

1) General Rule = Oral and written Ks are equally enforceable
• SOF Exception?

Answer 27

• SOF Exception = If the K falls under the SOF  It must be in writing + signed by party against whom enforcement is sought

Question 28

• Does the agreement fall within the SOF? Ks for sale of goods for price of $500 or more are under the UCC SOF.
• 5 ways to satisfy UCC SOF?

Answer 28

1. signed writing= Writing , Quantity, Signed by the party against whom enforcement is sought
2. merchants confirmation= Two merchants enter oral agreement, 1 sends the other written confirmation of agreement. SOF satisfied against the recipient merchant if:
    Both sender and recipient are merchants
    Writing is in confirmation of the K and contains a quantity; and
    Recipient does not send written objection within 10 days
3. judicial admission= Party admits K formation in pleading, testimony, or otherwise in court.
4. partial performance= Despite absence of writing, an otherwise valid K is enforceable for:
    Goods for which payment made/accepted
    Goods which have been received/accepted
5. specially manufactured goods= SOF satisfied against buyer who orders custom goods from a manufacturer if:
   • Manufacturer detrimentally relied by beginning performance before buyer’s withdrawal; and
   • Manufacturer can’t resell the goods in the ordinary course of business

Question 29

merchants confirmation= Two merchants enter oral agreement, 1 sends the other written confirmation of agreement. SOF satisfied against the recipient merchant if:

Answer 29

 Both sender and recipient are merchants
 Writing is in confirmation of the K and contains a quantity; and
 Recipient does not send written objection within 10 days

Question 30

partial performance under UCC satisfies SOF= Despite absence of writing, an otherwise valid K is enforceable for:

Answer 30

Goods for which payment made/accepted

 Goods which have been received/accepted

Question 31

UCC specially manufactured goods= SOF satisfied against buyer who orders custom goods from a manufacturer if:

Answer 31

• Manufacturer detrimentally relied by beginning performance before buyer’s withdrawal; and
• Manufacturer can’t resell the goods in the ordinary course of business

Question 32

To determine the predominant purpose of the contract where both common law and the UCC may apply what factors are used to assess the predominant purpose to determine which set of rules apply? (majority rule)

Answer 32

language of the contract
nature of the supplier’s business
the relative values of the good versus the service

Question 33

A valid merchant’s confirmation requires

Answer 33

A valid merchant’s confirmation requires a writing that is sufficient against the sender, is in confirmation of the contract, sent within a reasonable time of the making of the oral agreement and the contents of which the receiving merchant has “reason to know.” The confirmation must be signed by the sender and it must contain a quan- tity term. A confirmation that meets the foregoing requirements will satisfy the UCC Statute of Frauds against the recipient unless the recipient provides written notice of objection to the confirmation’s contents within 10 days of receipt.

Question 34

what are the SOF requirements for a signed writing

What is the distinctive requirement for goods under the UCC?

Answer 34

For the Statute of Frauds to be satisfied there needs to be a writing, that is signed by the party against whom enforcement is sought, and which is sufficient to indicate that a contract for sale has been made between the parties. A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the contract is not enforceable beyond the quantity of goods shown in such writing.

UCC: The UCC broadly defines “signed” as “any symbol executed or adopted by a party with present inten- tion to authenticate a writing,” which covers the same variety of “signings” effective under the common law Statute of Frauds.

Question 35

Contracts are subject to the UCC Statute of Frauds if they are for the sale of goods for $500 or more. The Statute of Frauds requires a

Answer 35

a writing that is signed by the party against whom enforcement is sought, and which is sufficient to indicate that a con- tract for sale has been made between the parties. When an agreement falls within the UCC Statute of Frauds and the Statute is not satisfied, the entirety of the contract is unenforceable, not just the portion of the contract which exceeds $499.99.

Question 36

Is an oral contract enforceable under the UCC? If so explain

hint showing agreement

Answer 36

Article 2 of the UCC, which governs the sale of goods, states in § 204 that a contract for sale of goods may be made in any manner sufficient to show agreement, includ- ing conduct by both parties, which recognizes the existence of such a contract.

oral agreement sufficient to show agreement