Contracts

Question 1

What test for mixed contracts? (goods + services)

Answer 1

Predominant purpose.

When a transaction involves both the sale of goods and the rendering of services, the “predominant purpose” test applies to determine which law applies to the entire transaction.

⚠️ Divisible contracts, when goods can easily

Question 2

What body of law governs contracts (based on subject matter)?

Answer 2

UCC governs sale of goods, and common law governs everything else (services, real estate, etc.)

Question 3

What is a contract?

Answer 3

A legally enforceable agreement.

Question 4

Elements of contract?

Answer 4

1 + #2 aka Mutual Assent

1. Offer
2. Acceptance
3. Consideration
4. & (no valid defenses)

Question 5

What is the standard/theory for whether an offer or acceptance is valid?

Answer 5

Objective theory = manifestation of mutual assent, upon acceptance of valid offer.

Intent determined by outward objective facts, as interpreted by a reasonable person.

Question 6

What is an express vs. implied-in-fact contract?

Answer 6

Express = words express intent of parties

Implied in fact = conduct indicates assent or agreement

Question 7

What is an offer?

Answer 7

Objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.

A communication that gives power to the recipient to conclude a contract by acceptance.

Question 8

What must a statement express to be an offer?

Answer 8

The present intent of a person to be legally bound to a contract.

A statement is an offer only if the person to whom it is communicated could reasonably interpret it as an offer.

Question 9

Can an offeree accept an offer he doesn’t know about (or doesn’t yet)?

Answer 9

No.

To have power to accept an offer, the offeree must have knowledge of it.

Question 10

Requirements for a contract’s terms?

Answer 10

For a contract to exist, the terms of the contract must be certain and definite, or the contract fails for indefiniteness.

Question 11

Specific requirements for a contract’s terms? (CL? UCC?)

Answer 11

CL: essential terms (parties, subj matter, price, and quantity)

UCC: quantity (UCC will fill the gaps)

⚠️ Requirements or output contracts satisfy requirements even without specific quantities (UCC implies “good faith”).

Under the UCC, a contract is formed if both parties intend to contract and there is a reasonably certain basis for giving a remedy. The only essential term is quantity, and as long as the parties intend to create a contract, the UCC “fills the gap” if other terms are missing, such as the time or place for delivery, or even the price for the goods.

Question 12

What is the default duration term in an employment contract?

Answer 12

At-will.

⚠️ Default rule often overcome by express terms, employer’s rules (e.g. employee handbook), or by implication (usage/conduct).

This is true even if it says “permanent employment,” in the absence of a proven contrary intention. There’s a split on “lifetime employment” (some say at-will, others literal).

If an employment contract does not state duration, there is a rebuttable presumption that the employment is “at will.” In an employment-at-will relationship, either party can terminate the relationship at any time, without the termination being considered a breach of the contract (unless the termination is against public policy, such as when an employee is discharged for filing a discrimination claim).

Question 13

If employment contract is not at will, how to approach the Q?

Answer 13

Use traditional breach of contract analysis.

At-will employment contract being terminated by either party is not a breach.

Question 14

Is a contract still good if a term is missing?

Answer 14

Yes, courts will supply, based on presumption that parties intended to include reasonable term.

UCC “fills the gap” for missing terms like time (reas), place for delivery (seller’s POB), time of pmt (when buyer is to receive goods), assortment of goods (reas choice of buyer), price (reas @ time of delivery).

⚠️ but WILL NOT GAP FILL for subject matter and quantity.

⚠️NO presumption for vague terms in a contract (intent they manifested cannot be determined).

Question 15

“Unilateral” vs. “Bilateral” contract?

Answer 15

Unilateral = promise for promise

Bilateral = an act is requested

Question 16

Are advertisements offers?

Answer 16

Generally no, ads are just invitations to deal (unless they are associated with a stated reward).

An advertisement that is specific and limiting as to who may accept could also be an offer (e.g., “Used car for sale for $5,000. First come, first served”).

EXAM NOTE: Be careful not to mistake a true offer for language that sounds like an offer but is actually just an invitation to receive offers. The more definite the statement (e.g., “I will sell you X for…”), the more likely it is to be an offer.

Question 17

What ways can an offer be terminated?

Answer 17

1. Lapse of time in offer (reas if not specified)
2. Death* or mental incapacity of offeror
3. Destruction or illegality
4. Revocation (offeror manifests intent not to enter into proposed contract)
5. Rejection by offeree (rejected offers can be revived by offeror and then accepted)

* (⚠️ only terminates outstanding offers, accepted contracts will not auto-terminate)

Question 18

When is a revocation (by an offeror) effective?

Answer 18

When it is communicated/received.

A revocation may be made in any reasonable manner and by any reasonable means, and it is not effective until communicated. A revocation sent by mail is not effective until received.

Example: On day 1, A mails an offer to B. On day 2, A mails a revocation to B. If B receives the offer and accepts before receiving the revocation, a contract is formed.

Question 19

How does revocation of a general offer work?

Answer 19

A “general offer” is an offer made to a large number of people, generally through an advertisement. A general offer can be revoked only by notice that is given at least the same level of publicity as the offer. So long as the appropriate level of publicity is met, the revocation will be effective even if a potential offeree does not learn of the revocation and acts in reliance on the offer. Note that if a person has actual knowledge of the intent to revoke but did not see the notice, then the revocation will be effective as to such person.

Question 20

Option vs. UCC firm offer?

Answer 20

CL: Option = promise not to revoke for some amt of time and requires consideration to be enforceable (for promise not to revoke offer to enter new contract)

UCC: An offer is irrevocable if:

1. Offeror is a merchant*,
2. there is an assurance that the offer is to remain open (cannot exceed three months without consideration), and
3. the assurance is in a signed writing from the offeror.**

⚠️ NO CONSIDERATION NEEDED for the offer to stay open under UCC firm offer rule.

* “merchant” = is in the business of selling goods of this kind, or holds himself out as having knowledge/skill

**⚠️ A firm offer on a form has to be separately signed by the offeror

Question 21

Can UCC provisions requiring signed writings be satisfied by electronic signatures?

Answer 21

Yes.

Question 22

When does promissory estoppel kick in?

Answer 22

When the offeree reasonably and detrimentally (and foreseeably) relies on the offeror’s promise prior to acceptance, the doctrine of promissory estoppel may make the offer irrevocable.

Requirements: It must have been reasonably foreseeable that such detrimental reliance would occur in order to imply the existence of an option contract. The offeror is liable to the extent necessary to avoid injustice, which may result in holding the offeror to the offer, reimbursement of the costs incurred by the offeree, or restitution of the benefits conferred.

Question 23

What does partial performance by offeree entail?

Answer 23

Unilateral contract -> Offeree begins performance, offeror cannot revoke, offeree gets reas time to complete (but cannot be required to complete).

Bilateral contract -> operates as promise to complete performance.

In both cases offeree must have had knowledge of offer when he began performing.

Question 24

How does a counteroffer work?

Answer 24

A counteroffer acts as a rejection of the original offer and creates a new offer.

⚠️ An exception exists for an option holder, who has the right to make counteroffers during the option period without terminating the original offer.

EXAM NOTE: Remember that a counteroffer is both a rejection and a new offer. Examine the offeree’s statement closely. It may be a rejection, but it may also be only an inquiry (e.g., “Is that a 2005 model car?”) or merely indecision (e.g., “I’ll keep your offer under advisement.”); in either case the offer remains open.

Question 25

What is an acceptance?

Answer 25

Objective manifestation by the offeree to be bound by the offer’s terms.

It must be communicated to the offeror. Offeree must know of offer.

Question 26

How do you accept a unilateral offer?

Answer 26

Only by complete performance.

Once performance is begun, offer is irrevocable for a reas period of time to allow for complete performance (unless there’s a manifestation of contrary intent).

Question 27

How do you accept a bilateral offer?

Answer 27

By either a return promise or by starting performance.

Starting performance on bilateral contract operates as a promise to render complete performance.

Question 28

Is silence an acceptance?

Answer 28

Generally no.

⚠️ unless: oferree has reas to believe offer is acceptable by silence (and he was silent with such intent), or bc previous dealings/patterns of behavior it is reas to believe offeree must notify offeror if offeree intends not to accept.

Question 29

UCC: How to accept a buyer’s request that goods be shipped?

What if the goods shipped by seller are nonconforming?

Answer 29

Either by promise to ship or by prompt shipment.

Acceptance valid even if goods nonconforming.

Nonconforming goods shipped? Shipment counts as acceptance + breach. Seller liable for damages resulting from breach.

Question 30

What is the mailbox rule?

Answer 30

A timely mailed acceptance is effective when sent (not upon receipt) unless offer provides otherwise.

NB: This is true only for an acceptance.

Question 31

What if a rejection and an acceptance are sent together?

Answer 31

Whichever the offeror receives first.