Contracts Flashcards
What is a contract? (requirements)
A contract is a mutually enforceable agreement that requires mutual assent and consideration.
Quasi-contract
Protects a party against unjust enrichment, by ensuring that the party who performed gets restitution.
Bilateral contract
A contract that can be accepted in any reasonable way (by promise, by act, etc.). This is most contracts.
Unilateral contract
A contract that can only be accepted by completion of performance. Typically: rewards, contests, and prizes
Implied Contract
A contract that is created through conduct, not words. If the parties’ actions indicate mutual agreement and consideration passes from both parties, the contract is enforceable.
Offer
An offer is a manifestation of the intent to be bound to an agreement.
An advertisement is usually not an offer, unless there’s a quantity term.
Offer (what is required to be valid)
For a sale of goods, an offer must have a quantity term to be valid. Other stuff (e.g. price) can be filled in by the court, as whatever is reasonable at the time.
For a land sale contract, an offer must have a price term and a “land” term (i.e. must sufficiently describe the land).
For personal services, the nature of the work to be performed must be included in the offer.
Requirements Contract
A contract “for all the widgets you require” is valid. No need for a definite quantity.
BUT, a sudden increase in requirements is not OK - that’s unfair surprise.
Types of Termination of Offers
1) Lapse
2) Revocation
3) Rejection
4) Death
Lapse of Offer
If the offeree waits too long (past a reasonable time), the offer lapses and the offeree can no longer accept it.
Revocation of an Offer
If the offeror revokes his offer, it is terminated and the offeree can no longer accept it.
The offeror can revoke by directly telling the offeree he is doing so, or by implied revocation: when the offeror engages in conduct indicating that he changed his mind, and the offeree knows of this conduct (e.g. offeror sells to someone else and offeree knows).
Four Types of Irrevocable Offers
1) Option Contract
2) Merchant’s Firm Offer
3) Foreseeable Reliance Before Acceptance
4) Starting to Perform in a Unilateral Contract
Note: the mailbox rule does not apply to irrevocable offers.
Option Contract
When the offeror promises to hold an offer open for a given time in exchange for consideration given by the offeree, the offeror CANNOT revoke the offer until the time period has ended.
Merchant’s Firm Offer
In a sale of goods, an offeror who is a merchant can promise to hold open an offer for up to three months. During the time promised, the merchant offeror CANNOT revoke the offer.
Foreseeable Reliance Before Acceptance
This is very rare, and usually only comes up in subcontractor situations.
If the offeree foreseeably relied on the offer before acceptance, the offer becomes irrevocable.
(Usually though, we say reliance before acceptance is “unforeseeable”)
Starting Performance in a Unilateral Contract
On the MBE, once the offeree has begun performance, the offeror CANNOT revoke the offer.
In NY, the offeror CAN revoke the offer even after the offeree has begun performance.
NOTE: the offeree still has not accepted the offer and made a contract until performance is complete.
Effective Revocation (timing)
A revocation is effective only when it is received. And once the offeree accepts, a revocation cannot be effective.
NOTE, this means that a mailed revocation does not follow the mailbox rule.
Rejection (definition and types)
A rejection is an inappropriate response from the offeree, HOWEVER, sometimes a contract is still formed, just that offeree has simultaneously breached the contract.
Types of rejection:
1) Counteroffer
2) Conditional “acceptance”
3) Acceptance Varying the Offer (including Battle of the Forms)
Counteroffer
If the offeree makes a counteroffer to the offeror, this is a rejection of the offer. However, mere bargaining does not constitute a counteroffer.
Words like “I can only pay X” indicate a counteroffer. “Will you take Y?” is mere bargaining.
Conditional “acceptance”
An “acceptance” by the offeree that is conditioned on something not in the offer, it is not an acceptance at all but a rejection and counteroffer.
Look for language like “provided that,” “so long as”
Mirror Image Rule
At common law, an acceptance has to mirror the offer - any variation (adding or changing a term) constitutes a rejection and counteroffer.
Battle of the Forms
Under Article 2, when there is a sale of goods an acceptance does not have to perfectly mirror the offer to be valid.
If at least one party is not a merchant, the contract will form but no additional terms will be added.
If both parties are merchants, the added terms CAN make it into the contract IF there is no material change to the K and no objection within a reasonable time after acceptance.
A material change is one that causes hardship or surprise (e.g. change in price or disclaimer)
