CONTRACT FORMATION | MUTUAL ASSENT | OFFER & ACCEPTANCE

Question 1

Mutual Assent

Answer 1

OFFER and ACCEPTANCE

Question 2

A TRADITIONAL, enforceable contract is FORMED when there is:

Answer 2

"My Cats Do Sneak"
M.C.D.S
(1) MUTUAL ASSENT between the parties
(2) CONSIDERATION; and
(3) NO DEFENSES to formation that would invalidate the otherwise valid contract; and the contract does not fall within the STATUTE OF FRAUDS.

Question 3

Consideration

Answer 3

Transfer of LEGAL VALUE in a bargained-for exchange between parties.

Question 4

Offer Formation

Answer 4

(1) Manifest objective willingness to enter into the contract
(2) Create a POWER OF ACCEPTANCE in the offeree; and
(3) Specify all NECESSARY terms of the agreement.

Question 5

Requirements Contract

Answer 5

The seller agrees to sell as much as the buyer would require.

Question 6

Output Contract

Answer 6

The seller agrees to sell his entire production to the buyer.

Question 7

NECESSARY terms of the agreement

Answer 7

Under common law, all essential terms must be specified in the offer, which includes: 
parties, 
subject, 
quantity, and 
price.

Under UCC, the price term is not required in the offer. The only required terms under the UCC are:
parties,
subject and
quantity.

REQUIRMENT and OUTPUT
contracts are valid under the UCC even though they do no specify and exact quantity.

Question 8

ACCEPTANCE

Answer 8

To ACCEPT the OFFER, the offeree must”

(1) Manifest an objective willingness to enter into the agreement;
(2) ACCEPT the offer according to the rules established by the offeror who is master of the offer; and
(a) Bilateral Offer
(i) acceptance = start of performance or objective willingness
(b) Unilateral Offer
(i) completion of performance (send notice, if not obvious to offeror that performance has been completed.
(3) Have a power of ACCEPTANCE

Offer Formed I——————————-Performance Begins—————————-Performance Complete
Bilateral Contract Accepted Unilateral Contract Accepted

Question 9

OFFER

Answer 9

To FORM a valid OFFER, the offeror MUST:

(1) manifest OBJECTIVE willingness to enter into the agreement
(2) Create a POWER OF ACCEPTANCE in the offeree; and
(3) Specify all the necessary terms of the deal
(3a) Common Law: Parties, Subject, Quantity, and Price
(3b) Article 2-UCC: Parties, Subject, and Quantity

Termination of the Offer?

(1) Express revocation (offeror allowed to revoke prior to acceptance)
(1a) Offeror not free to revoke
(a) Option contract
(b) UCC Firm Offer: a merchant (1) in writing, (2) contains an explicit promise to not revoke the offer; (3) is signed by the merchant (no need for consideration, reasonable amount of time is not to exceed 90 days)
(c) Offeree starts performance (unilateral contract)
(d) Detrimental reliance
(1) reasonably and (2) foreseeable
(2) Constructive Revocation
(3) Rejection
(4) Counteroffer
(5) Death/Incapacitated
(6) Time (reasonable amount of time)
(7) Law (operation of law; supervening illegality before acceptance)

Think about the timeline; did anything happen to invalidate the offer before acceptance?

OFFER I———————————————————| I ACCEPT

Question 10

Mailbox Rule

Answer 10

An ACCEPTANCE sent by mail, email, or fax becomes effective at DISPATCH unless:

(1) The offeree has the wrong address (or improper postage);
(2) The offeror stipulates otherwise (Master of offer);
(3) An option contract is involved
(4) The offeree sends a termination letter BEFORE acceptance
(5) The offeror detrimentally relies on a termination BEFORE he receives the letter.

Question 11

Counteroffer - Common Law

Answer 11

Common Law

Mirror Image Rule:
(1) Terms of the offer must MIRROR the terms of the acceptance

any additional term or change in term is a counteroffer.

Question 12

Counteroffer - U.C.C.

Answer 12

Article 2 - U.C.C. 2-207

2-207 (1): Acceptance or a Counteroffer?

 (1) a definite and seasonable expression of acceptance or written confirmation;
 (2) which is sent within a reasonable amount of time
 (3) operates as an ACCEPTANCE even thought it states terms additional to or agreed upon;
 (4) UNLESS acceptance is EXPRESSLY MADE CONDITIONAL upon assent to the ADDITIONAL or DIFFERENT TERMS --> then it is a counteroffer.

2-207 (2): What terms control? (U.C.C. gap fillers) have an offer and an acceptance; ADDITIONAL TERMS become part of the contract if both parties are MERCHANTS unless:

 (1) The initial offer expressly limited acceptance to its terms;
 (2) The additional terms materially alter the deal; OR
 (3) The OFFEROR OBJECTS to the additional terms within a reasonable amount of time.

Knockout RULE (Majority Rule) (Minority 207-2 applies to ADDITIONAL TERMS as well)
2-207 2 applies to ADDITIONAL TERMS; DIFFIERNT TEMRS applies the knockout rule
conflicting rules are knocked out and filled with U.C.C. gap fillers

2-207 (3): Counteroffer but no acceptance, but parties performed as if they had one; overlapping terms are placed in new document, U.C.C gap fillers fill the holes as gap fillers