Contracts Flashcards
Silence as Acceptance
Generally, an offeree cannot be forced to speak or have her silence treated as acceptance. However, if because of prior dealings or trade practices, it would be commercially reasonable for the offeror to consider silence an acceptance, the court may so find. Also, if the recipient of services knows or should have known that the services were being rendered with the expectation of compensation and, by a word, could have prevented the mistake, she may be held to have accepted the offer if she fails to speak.
Unilateral v. Bilateral Contract
Unilateral Contract: exists only when an offeror makes acceptance possible only by performing a stipulated act.
Bilateral Contract: contemplates an exchange of promises.
Types of Irrevocable Offers
(1) Option Contracts & Merchant’s Firm Offers; (2) Beginning Performance under a Unilateral Contract; (3) Detrimental Reliance
Options & Merchant’s Firm Offers
Revocation: offers can be revoked at will by the offeror, even if he has promised not to revoke for a certain period, except with options contracts and a merchant’s firm offer
Options: an option is a distinct contract in which the offeree gives consideration for a promise
Merchant’s Firm Offer: under Art. 2, the following must be met for a merchant’s firm offer:
(i) if a merchant; (ii) offers to buy or sell goods in a signed writing; and (iii) the writing gives assurances that it will be held open
Note - when the court finds a merchant has made a firm offer, the offer is not revocable for lack of consideration during the time stated, or if no time stated, for a reasonable time (but in no event may such period exceed three months)
Unilateral Contract
Beginning Performance: an offer for a true unilateral contract becomes irrevocable once performance has begun (IN THE MANNER REQUESTED)
Note - the offeror must give the offeree a reasonable time to complete performance; & the offeree is not bound to complete performance - she may withdraw at any time prior to completion of performance, and there is no acceptance until performance is complete.
Distinguish - Preparations to Perform: substantial preparations to perform (as opposed to the beginning of performance) do not make the offer irrevocable but may constitute detrimental reliance sufficient to make the offeror’s promise binding to the extent of the detrimental reliance.
Detrimental Reliance
When the offeror could reasonable expect that the offeree would rely to her detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time.
Mailbox Rule
Acceptance by mail or similar means creates a contract at the moment of dispatch, provided that the mail is properly addressed and stamped, unless:
(i) the offer stipulates that acceptance is not effective until received; or (ii) an option contract is involved (an acceptance under an option contract is effect only upon receipt); (iii) if the offeree sends a rejection and then sends an acceptance, whichever arrives first is effective; (iv) if the offeree sends an acceptance and then a rejection, the acceptance is effective (i.e., the mailbox rule applies) unless the rejection arrives first and the offeror detrimentally relies on it.
Remember - The mailbox rule (“effective upon dispatch”) applies only to acceptance. It does not apply to other events in the contract setting, such as rejection or revocation.
Statute of Frauds
MY LEGS
M - Marriage - A contract in anticipation of marriage
Y - Year - a contract not performable within 1 year (Note that a lifetime contract need not be in writing)
L - Land - Transfer of an interest in land (identity of parties, subject matter, consideration, and signature of the seller are required elements)
E - Executor - Executor contracts
G - Goods - Sale of Goods of $500 or more
S - Surety - A surety contract (a secondary promise to answer for the debt of another)
In most instances, an oral contract is valid. However, certain agreements, by statute, must be evidence by a writing signed by the party sought to be bound (breaching party). The Statute of Frauds requires a writing only for the sale contract and not for a revocation of the contract.
Exceptions to Statute of Frauds
There are three situations in which contracts are enforceable without the writing requirements:
(i) Specially Manufactured Goods; (ii) Admissions in Pleadings or Court; or (iii) Payment or Delivery of Goods
SOF Exceptions #1 - Specially Manufactured Goods
If goods are to be specially manufactured for the buyer and are not suitable for sale to others by the seller in the ordinary course of his business, the contract is enforceable. To be enforceable, ONE of the following must be met:
(i) The seller has, under circumstances that reasonably indicate that the goods are for the buyer, made a substantial beginning in their manufacture
(ii) The seller made commitments for the buyer’s purchase before notice of repudiation is received
SOF Exception #2 - Admissions in Pleadings or Court
If the party against whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract for sale was made, the contract is enforceable without a writing (but in such a case the contract is not enforced beyond the quantity of goods admitted)
SOF Exception #3 - Payment or Delivery of Goods
If goods are either received and accepted or paid for, the contract is enforceable. However, the contract is not enforceable beyond the quantity of goos accepted or paid for.
Thus, if only some of the goods called for in the oral contract are accepted or paid for, the contract is only partially enforceable.
If an indivisible item is partially paid for, most courts hold that the SOF is satisfied for the whole item.
Specific Performance
Specific performance is allowed when the legal remedy (damages) would be inadequate, such as with contracts to purchase land, which is unique.
Capacity & Voidability
Legal Incapacity to Contract: Individuals in certain protected classes are legally incapable of incurring binding contractual obligations. Timely assertion of this defense by a promisor makes the contract voidable at his election.
Who is an Infant?: The age of majority in most jurisdictions is 18. However, in many states, married persons under age 18 are considered adults.
Effect of Infant’s Contract: Infants generally lack capacity to enter into a contract binding on themselves. However, contractual promises of an adult made to an infant are binding on the adult. In other words, a contract entered into between an infant and an adult is voidable by the infant but binding on the adult.
Affirmance/Disaffirmance
On reaching majority, a minor may choose either to be bound by a contract by affirming it or to avoid the contract by disaffirming it. Generally, such a contract must be affirmed or disaffirmed as a whole; it cannot be affirmed in part and disaffirmed in part. If a contract is not disaffirmed shortly after the party reaches majority, it is considered affirmed.
