Contracts

Question 1

What is a contract? (requirements)

Answer 1

A contract is a mutually enforceable agreement that requires mutual assent and consideration.

Question 2

Quasi-contract

Answer 2

Protects a party against unjust enrichment, by ensuring that the party who performed gets restitution.

Question 3

Bilateral contract

Answer 3

A contract that can be accepted in any reasonable way (by promise, by act, etc.). This is most contracts.

Question 4

Unilateral contract

Answer 4

A contract that can only be accepted by completion of performance. Typically: rewards, contests, and prizes

Question 5

Implied Contract

Answer 5

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.

Question 6

Offer

Answer 6

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.

Question 7

Offer (what is required to be valid)

Answer 7

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.

Question 8

Requirements Contract

Answer 8

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.

Question 9

Types of Termination of Offers

Answer 9

1) Lapse
2) Revocation
3) Rejection
4) Death

Question 10

Lapse of Offer

Answer 10

If the offeree waits too long (past a reasonable time), the offer lapses and the offeree can no longer accept it.

Question 11

Revocation of an Offer

Answer 11

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).

Question 12

Four Types of Irrevocable Offers

Answer 12

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.

Question 13

Option Contract

Answer 13

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.

Question 14

Merchant’s Firm Offer

Answer 14

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.

Question 15

Foreseeable Reliance Before Acceptance

Answer 15

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”)

Question 16

Starting Performance in a Unilateral Contract

Answer 16

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.

Question 17

Effective Revocation (timing)

Answer 17

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.

Question 18

Rejection (definition and types)

Answer 18

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)

Question 19

Counteroffer

Answer 19

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.

Question 20

Conditional “acceptance”

Answer 20

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”

Question 21

Mirror Image Rule

Answer 21

At common law, an acceptance has to mirror the offer - any variation (adding or changing a term) constitutes a rejection and counteroffer.

Question 22

Battle of the Forms

Answer 22

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)