Contract Fundamentals (72%) Flashcards
UCC governs what?
sales + goods
Sales = transfers of full title of goods to a buyer of value
What are examples of goods the UCC covers?
-Any movable item
(a) Growing crops (while crops are still growing & after harvest)
(b) Uncut Timber
(c) Unborn Animals
(c) Computer software and other electronic information
In hybrid cases, which involve both the sale of goods and a services contract, what law applies?
Law determined by the predominate purpose of the transaction: is it more about the good or more about the service
To determine the predominant purpose of a contract (goods or service) the following factors are used:
(3)
1) Factor #1: Language of the contract 2) Factor #2: Nature of the supplier’s business (Best Buy v. Landscaper) 3) Factor #3: Relative values of goods v. service
Even in a sale of goods, the common law will apply unless:
the UCC provides contrary provisions
Implied-in-fact contractual obligations are formed by
conduct rather than words
An implied-in-law contractual obligation arises where:
One party bestows a benefit on another and it is unjust to retain the benefits without paying
(e.g. emergency services)
What is Quantum Meruit?
The cause of action for an implied-in-fact contract to recover the reasonable value of the services provided
EXAMPLE:
The plumber who was hired to fix Homeowner’s leak without first discussing the price.
In order to constitute an offer, a party’s communication must meet two requirements.
- An outward manifestation (oral, written, or conduct)
+
- A signal that acceptance will conclude the deal
(nothing left to do but say “yes” to conclude the deal)
What is the American advertising offer rule?
Exception?
Ads, catalogues, & price lists are not offers
=Invitations for offers
EXCEPTION:
Language that identifies: (1) who gets the limited supply of goods in an excess of demand situation
EXAMPLE:
Advertisements that say, “first come, first served” or “first 10 customers only” are construed as offers.
What are two types of reward offers?
- Self-limiting rewards
2. Open-field rewards
Self-limiting awards are offers that
indicate the task to be rewarded can be performed only once
EXAMPLE:
“Will pay $100 for finding my lost dog.”
Are offers for rewards offers?
Generally, reward offers are treated as:
Are treated as offers
because they offer money in exchange for a specified task
Who is the offeror in an auction
The auctioneer are inviting offers and the responsive bidders are the offerors
What is the legal effect of an offer?
An offer creates the power of acceptance in the offeree
Four ways to terminate power of acceptance
Lapse,
Death or Incapacity,
Revocation by Offeror, or
Rejection by Offeree
A power of acceptance is terminated due to Lapse if?
3
- An offer lapses after the time stated in the offer
- After a reasonable time (subject matter, market conditions, degree of urgency)
- Face-toFace Conversation rule
What is the face-to-face conversation rule?
An offer made in a face-to-face conversation generally lapses at the end of the conversation; unless, the offer states otherwise
A power of acceptance is terminated due to death or incapacity if?
(a) Death:
Death of either party terminates the power of acceptance
(b) Incapacity:
If either party becomes mentally incompetent, the power of acceptance is terminated
A power of acceptance is terminated due to offeror’s revocation if?
(2)
- Revoked before the offer is accepted
2. Revocation communicated to the offeree
Direct revocation occurs when?
Offeror directly communicates to the offeree an intent to withdraw the offer
Indirect revocation occurs when?
2
- Offeror takes an action that is inconsistent with the intention to go through with the offer
- The offeree learns about such action + from a reliable source
What is the functional equivalents rule?
The Offeror revokes by communicating the revocation in a functionally equivalent manner to how the offer was made.
thus,
Terminates the power of acceptance even if the offeree is unaware of the revocation
Ways to prevent offeror revocation?
2
- option contract; or,
2. firm offer under the UCC
Preventing Revocation by Means of a Common Law Option Contract
(3)
- An offer
- 2nd promise to keep the offer open until X
- Consideration for the 2nd promise
The majority rule is where a general contractor uses a particular subcontractor’s bid to formulate his own:
Promissory estopple applies to protect the general contractor from revocations of the subcontractors
Preventing Revocation by Means of a “Firm” Offer under the UCC
(3)
- offer is made by a merchant
- offer is made in a signed writing by the merchant
- offer expressly states by its terms that it will be held open
A firm offer that meets all of these requirements becomes irrevocable for:
the period of time stated; or,
if not stated, a reasonable time
How long can a “firm offer” remain open?
3 months, if > 3 months, you need consideration
How can an Offeree reject an offer?
3
- outright rejection
- counteroffer
- Non-conforming acceptance
What is the mirror image rule?
When does it apply?
Common law contracts
Acceptance must mirror the offer and any variation results in a counter offer
Bilateral contracts seek? Who is bound?
I make a promise and seek from you: a promise in exchange
Once promises are exchanged: we are both bound
Unilateral contracts seek? Who is bound?
I make a promise and seek from you: only your performance in exchange
The offeror is bound only when: offeree’s performance is completed—offeree is never bound
When can an offeror revoke a unilateral contract?
Once the offeree begins performance, an option contract is created and the Offeror may not revoke.
-Acceptance of the offer is still effective only upon the completion of performance
Acceptance under the common law occurs when?
2
- The acceptance mirrors the terms of the offer
2. the acceptance is communicated to the offeror
If the offer stipulates a particular means of communicating acceptance then,
that is the required means
If the offer is silent as to the means of communication for acceptance, the offeree can accept by:
(3)
1) Means used by the Offeror
2) Means customarily used in similar transactions
3) A means of communication that equivalent in speed in reliability to the means used by the Offeror
When does acceptance by silence occur in common law contracts?
(3)
- Where the offeree takes the benefit of the offeror’s services with:
+
Reasonable opportunity to reject them; and,
+
Reason to know that compensation was expected. - Where the Offeror gives to the offeree reason to understand that acceptance may be communicated by silence; the offeree’s silence will be effective if intended as such.
+
Offeree intends to accept - Where because of pervious dealings it is reasonable that the offeree should notify the Offeror when he does not intend to accept.
In a unilateral contract setting acceptance is effected by
only completing performance
What does the mailbox rule not apply to?
i. Offers
ii. Rejections
iii. Revocations
iv. Option contracts
What does the mailbox rule apply to?
acceptance by mail is effective upon dispatch; so long as properly posted
Does not matter if lost in the mail
When a rejection, offer, or revocation is put in the mail, when is it communicated?
Upon receipt
≠ have to be read
What carrier services does the mailbox rule apply to?
Mailbox applies to any means of transmission that involves a foreseeable delay between dispatch and receipt.
In a situation where the parties simultaneously dispatch identical offers, what is the effect?
offers are only effective upon receipt; therefore, dispatch of simultaneous offers is not legally relevant
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?
i) If the acceptance reaches the offeror first:
then, there is a contract by virtue of the communicated acceptance
ii) If the rejection reaches the offeror first:
then, there is no contract. The power of acceptance ahs been terminated
How can seller accept buyers offer under the UCC?
3
(a) First way:
A promise to ship goods in conformance with the offer
(b) Second way:
Prompt or current shipment of the goods in conformance with the offer
(c) Third way:
Shipping non-conforming goods (unless sent as an accommodation)
A UCC seller’s shipment of nonconforming goods does two things at once:
a) Accepts the offer forming the binding contract
b) Puts the seller in breach of the contract
UCC will allow for a binding contract to be formed with a non-mirror acceptance when?
- both parties are merchants
+
Additional Terms - Terms address a new topic not addressed by the offer + not expressly limited to nor objected to + does not materially alter the contract
or
Different Terms
3. Terms that change an existing term in the offer + If different, then cancel each other out.
Under the UCC what is a term that materially alters a contract
(3)
Terms that would result in surprise or hardship if incorporated without the express consent of the other party
i) Warranty Disclaimers
ii) Clauses that materially shorten the deadline for raising complaints
iii) Clauses that change industry standard or past courses of dealing
Under the UCC, what must the parties be for non-mirror acceptance to be binding?
Both merchants
If one is a consumer, then mere proposals
UCC acceptance when the acceptance is made expressly conditional on assent to the additional or different terms
≠ contract
To make expressly conditional, must have: “acceptance is expressly made conditional on assent to the additional or different terms”
What are the terms of a UCC contract formed by Conduct?
2
1) the terms upon which the writings of the parties agree
2) together with:
Default terms provided by the UCC
a) Note: The express terms in the parties’ communications which do not match or agree are omitted.
What is the legal effect of agreements that consumers find once they open the boxes or packaging containing the goods
in consumer transactions, they are mere proposals that the consumer can accept or reject
