Contracts Flashcards
What is a Contract?
A legally enforceable agreement formed by mutual assent (offer + acceptance) and consideration, provided no valid defenses exist.
Sources of Contract Law
- Common Law – Governs contracts for services and real estate.
- UCC (Uniform Commercial Code) Article 2 – Governs contracts for the sale of goods (tangible, moveable items).
- Predominant Purpose Test – Used when a contract involves both goods and services to determine which law applies.
Example: If a company hires a contractor to install a custom-built air conditioning system, but the primary purpose of the contract is purchasing the system (a good), the UCC applies. If the main purpose is installation services, common law applies.
Give the order.
Contract Formation Process.
Contract Formation
Mutual Assent
Offer & Acceptance
Contract Formation
Offer
A manifestation of willingness to enter a contract that creates the power of acceptance in the offeree.
o Must show intent to be bound (objective standard).
o Essential terms under common law: parties, subject, price, quantity.
o UCC allows missing terms except for quantity.
Example: “I will sell you my car for $5,000” is a valid offer. However, “I might be willing to sell my car for around $5,000” is not a valid offer due to vagueness.
Contract Formation
Acceptance
A clear and definite agreement to the terms of the offer.
o Mirror Image Rule (Common Law) – Acceptance must match offer exactly.
o UCC 2-207 – Acceptance can include additional or different terms.
Example: If A offers to sell B a laptop for $800 and B replies, “I accept, but only if you include a carrying case,” under common law, this is a counteroffer, not an acceptance. Under UCC 2-207, it may still be acceptance, with the additional term possibly included.
Mirror Image Rule
The Mirror Image Rule – A Comprehensive Breakdown for the Bar Exam
The Mirror Image Rule is a fundamental principle in common law contract formation, requiring that an acceptance must match the offer exactly to create a valid contract. Any modification or deviation in the terms of the acceptance invalidates the acceptance and turns it into a counteroffer, which rejects the original offer.
This rule is an important doctrine under contract law and is often tested on the bar exam, particularly in comparison with the more flexible approach under the Uniform Commercial Code (UCC) § 2-207, which governs the sale of goods.
I. Why Does the Mirror Image Rule Exist?
The Mirror Image Rule ensures mutual assent (also called a “meeting of the minds”). The idea is that if the acceptance changes any terms, then the parties have not truly agreed to the same contract.
By requiring an exact match between the offer and acceptance, the Mirror Image Rule prevents confusion, disputes, and unintentional contract formation.
II. Step-by-Step Analysis of the Mirror Image Rule
Step 1: Identifying an Offer
An offer is a clear and definite proposal by an offeror to enter into a contract. It must:
Show a present intent to be bound.
Contain definite and certain terms (such as price, subject matter, quantity, time of performance, etc.).
Be communicated to the offeree.
Example of an Offer:
John says to Sarah, “I will sell you my car for $10,000. Let me know if you accept.”
Step 2: What is a Valid Acceptance?
For a valid acceptance, the offeree must:
Accept the exact terms of the offer (without modification).
Communicate the acceptance to the offeror.
Follow the manner of acceptance required (if the offer specifies a method).
Example of a Proper Acceptance (Valid Contract Formed)
Sarah replies, “I accept your offer to buy your car for $10,000.”
✅ Since her response mirrors the terms of the offer exactly, a binding contract is formed.
Step 3: What Happens if the Acceptance Changes the Terms?
If the offeree modifies any term, the response is not an acceptance—it is a counteroffer, which:
Rejects the original offer, making it void.
Creates a new offer, shifting the power of acceptance to the original offeror.
Example of a Counteroffer (No Contract Yet)
John: “I will sell you my car for $10,000.”
Sarah: “I accept, but can you include new tires?”
❌ Sarah modified the terms by asking for new tires, so her response is not an acceptance but a counteroffer.
❌ Since her counteroffer rejected John’s original offer, John is no longer bound by his $10,000 offer.
John now has three options:
Accept Sarah’s counteroffer (which would form a contract on her new terms).
Reject Sarah’s counteroffer (no contract forms).
Make a new offer (e.g., “I can include the tires, but the price will be $10,500.”)
III. The Effect of a Counteroffer on the Original Offer
A counteroffer automatically terminates the original offer.
The original offeror is no longer obligated to the original terms.
If the original offeror rejects the counteroffer, the original offer cannot be revived unless re-offered.
Bar Exam Tip: A counteroffer acts as both a rejection and a new offer.
IV. Special Situations & Applications
1. Conditional Acceptances = Counteroffers
A conditional acceptance is when an offeree pretends to accept but adds a condition to the acceptance.
A conditional acceptance is actually a counteroffer, not a true acceptance.
Example of a Conditional Acceptance (No Contract Yet)
Offer: John: “I will sell you my car for $10,000.”
Response: Sarah: “I accept, but only if you include an oil change.”
❌ This modifies the offer, so it is not an acceptance—it is a counteroffer.
2. Requests for Information (NOT Counteroffers)
A mere request for information does not count as a counteroffer.
Example of a Request for Information (Original Offer Still Stands)
Offer: John: “I will sell you my car for $10,000.”
Response: Sarah: “Would you consider including an oil change?”
✅ This is just an inquiry, not a counteroffer, so John’s original offer remains open.
3. The UCC Exception: The “Battle of the Forms” Rule (UCC § 2-207)
The Mirror Image Rule applies only to common law contracts (real estate, services, employment, etc.).
For contracts for the sale of goods, the UCC § 2-207 relaxes the Mirror Image Rule:
A non-matching acceptance can still form a contract unless:
The acceptance is explicitly conditional on new terms.
The offeror objects to the new terms.
The new terms materially alter the contract.
Example of UCC § 2-207 in Action (Contract Formed Despite Different Terms)
Offer: A seller offers to sell 1,000 widgets for $5 each.
Acceptance: The buyer accepts but adds, “Delivery must be within 10 days.”
✅ Under the UCC, this still forms a contract unless the seller objects to the delivery term.
Key Difference:
Common law (Mirror Image Rule) → ANY change = counteroffer (no contract yet).
UCC § 2-207 (Battle of the Forms) → Small changes may still result in a contract.
V. Summary of Key Rules for the Bar Exam
Rule Effect
Mirror Image Rule Acceptance must match offer exactly.
Any change = counteroffer A counteroffer rejects the original offer.
Conditional acceptance This is actually a counteroffer.
Request for information ≠ counteroffer The original offer still stands.
Common law vs. UCC The UCC allows minor variations in acceptance.
VI. Bar Exam Strategy: Spot the Mirror Image Rule Issues
Look for a slight change in the acceptance – If the offeree modifies any term, NO CONTRACT is formed under common law.
Watch for counteroffers – If an offeree makes a counteroffer, the original offer is terminated.
Check if it’s a sale of goods (UCC) – If so, some changes in acceptance may still form a contract.
Recognize conditional acceptances – These are really counteroffers.
Differentiate requests for information – These do not reject the offer.
VII. Mnemonic Device: “Mirror Must Match!”
Mirror = Must Match exactly.
Mismatch = Makes a Mess (no contract).
Modification = Must be a new offer.
Contract Formation
Termination of an Offer
- Revocation – Offeror withdraws before acceptance (effective when received).
- Rejection – Offeree declines the offer.
- Counteroffer – Rejection + new offer.
- Lapse of Time – Offer expires after a reasonable time.
- Death or Incapacity – Terminates an outstanding offer.
- Destruction/Illegality – Subject matter is destroyed or becomes illegal.
Example: If a seller offers to sell a house, but before the buyer accepts, the house burns down, the offer is automatically terminated.
Consideration
- A bargained-for exchange between parties with a legal detriment.
- Preexisting Duty Rule – A promise to do what one is already obligated to do is not consideration.
- Exceptions:
o Modification under UCC – No consideration required, just good faith.
o Promissory Estoppel – Enforceable promise if reliance is foreseeable and detrimental.
o Past Consideration Rule – Not valid unless under Material Benefit Rule.
Example: A promises to pay B $1,000 for rescuing A’s dog last week. This is past consideration and not enforceable because the act occurred before the promise.
Contract Defenses
Lack of Capacity
- Minors – Can void contracts unless for necessities.
- Mental Incompetence – Voidable unless adjudicated incompetent (then void).
- Intoxication – Voidable if other party knew of incapacity.
Example: A 16-year-old buys a car and later wants to return it. The contract is voidable at the minor’s discretion.
Contract Defenses
Misrepresentation & Fraud
- Fraudulent Misrepresentation – Intentional false statement, reliance, damages.
- Nonfraudulent Misrepresentation – Negligent or innocent misrepresentation can make the contract voidable.
- Nondisclosure – Generally not a defense unless there is a duty to disclose.
Example: A sells a house to B but fails to disclose that the foundation is severely cracked. If B can prove A knew, the contract is voidable.
Contract Defenses
Duress & Undue Influence
