CONTRACTS Flashcards
What is the overarching question of contracts?
Which promises has society deemed important enough to enforce through courts of law.
What is the objective theory of assent?
- Would a reasonable person in the position of the promisee understand from the promisor’s words and conduct an intent to be bound; AND
- Did the promisee in fact so believe?
What is the difference between objective and subjective in contracts?
Objective: A reasonable person’s belief.
Subjective: The belief of the actual person in the case.
In viewing an offer objectively, from which perspective do we look at?
The “listener’s shoes”.
What intentions are considered in an intent to be bound?
Only the intentions expressed to the other party; no secret intentions.
What are the factors relevant to Offer (Intent to Be Bound)?
Language used,
Conduct of parties,
Length of negotiations (depends on what you’re negotiating),
Subject matter of contract,
Setting of negotiations,
Course of dealing (or conduct before signing),
Method of communication,
Characteristics of parties (somewhat subjective),
Policy concerns.
What must an offer give the listener?
The power of acceptance. All the listener needs to do to make a contract is say “I accept”.
What are the two parts of an offer?
- Intent to be bound.
2. Specific terms (definiteness)
What is the general rule of advertisements?
Advertisements are generally not offers, and price quotes are generally not offers. The exception is if the language is very specific and limited (like first come first served, or rewards), or if it is a response to an inquiry.
What are the common essential terms?
Parties,
Time for Performance,
Price,
Subject Matter
What are the two approaches to missing terms?
Old common law approach: No specific terms, the offer fails, no contract.
Modern approach: Fill the gaps wherever there is a reasonable basis for doing so.
What are the ways to kill an offer?
- Rejection (from the offeree)
- Revocation (from the offeror) (direct/indirect)
- Lapse
- Death
What is the rule for indirect revocation?
2 things have to happen:
- The offeror needs to take steps indicating an intent not to be bound; AND
- The offeree must learn of those steps from a reliable source?
What are facts that matter in the killing of an offer?
Method of communication Price of item Rarity of item Time given for consideration (30 seconds vs 1 week,etc.) Fluctuation/stability of item price Demand of item
What happens if the offeror dies?
The offer dies, whether or not the offeree knew about it. The contract does not die with the death of an offeror, just the offer. If it was accepted before the death of the party, it is still enforceable.
What are some factors that are used to consider a “reasonable time”?
Subject matter
Method of communication
Course of dealing
Trade usage
What is the common law rule for option contract?
a promise to keep an offer open that is supported by consideration is irrevocable for the stated time.
What are the elements of a firm offer?
“An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if not time is stated for a reasonable time [not to exceed three months].”
What is a firm offer and when does it apply?
Firm offer is a promise to keep the offer on the table. It is UCC so applies to sale of goods only. And it does not require consideration.
What are the elements of promissory estoppel?
- A promise that the promisor should have reasonably expected to induce the plaintiff’s action or forbearance
- The promise did in fact induce the plaintiff’s action or forbearance, and
- Injustice can only be avoided by enforcing the promise.
The promise need not be definite enough to support a unilateral contract, but it must be definite enough to show that the plaintiff’s reliance on it was reasonable and foreseeable.
What are the 3 ways to make an offer irrevocable?
Option Contract
Firm Offer
Promissory Estoppel
Who is a merchant?
A merchant is a person who regularly deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.
What are the 3 categories of acceptance mediums?
Reasonable - effective upon dispatch
Unreasonable - effective upon receipt
Prohibited - ineffective
What is the mailbox rule?
Acceptance is effective upon dispatch.
When is everything except the acceptance effective?
Upon receipt.
Why is acceptance triggered upon dispatch?
The offeror is in the best position to bear a risk, and has the power to change it.
What are the exceptions to the mailbox rule?
If the medium of acceptance is unreasonable
If the parties contract around the mailbox rule
Option contracts, acceptance of option effective upon receipt
When there is “Two in the mail”
Revocation of reward offers
How can you measure if a medium of acceptance is reasonable?
what would a reasonable listener think the offeror would allow? what would the reasonable offeree think is reasonable?
What is the “two in the mail” exception?
If acceptance goes out first=mailbox rule
Unless rejection somehow arrives first and is relied on.
If rejection goes out first, it is effective upon receipt
What is the revocation of reward offers exception?
Effective when posted, not when received, as long as the revocation is posted the same way as the reward was posted.
What is a bilateral contract?
Exchange of promises enforces a contract.
What is a unilateral contract?
Actual performance of promise is a contract
What are the three approaches to bilateral/unilateral contracts?
Old common law approach: binary -> either a contract is unilateral or bilateral, the offer determines which
Strict common law approach: the contract forms for unilateral only at completion of performance.
Modern Approach:
Words create bilateral contract,
Starting performance either forms bilateral contract or option to offeree to finish, OR
Unilateral contract formed at end of performance (only when contract specifically lays this out).
What notice of acceptance is required?
Common law only requires reasonable effort by the offeree to inform that offer has been accepted. UCC notice is required, or any information of notice.
What is the UCC Notice of Acceptance by Performance Rule?
Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
What is the mirror image rule?
If the acceptance is identical in terms to the offer, a contract forms. It is common law only. If there is acceptance and a suggestion, that’s okay. If there is acceptance and new mandated terms there is no contract, as that constitutes a counter offer.
What is the last shot rule?
Whatever is the last shot (last offer/counteroffer) then the last terms communicated (if undisputed) are the terms of the contract. Common law only, cannot apply when mirror image rule applies.
What is the battle of the forms?
- A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptances is expressly made conditional on assent to the additional or different terms.
- The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless
(a) The offer expressly limits acceptance to the terms of the offer;
(b) They materially alter it; or
(c) Notification of objection to them has already been given or is given with a reasonable time after notice of them is received. - Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree.
How is section 2 of the UCC Battle of the Forms summarized into elements?
Additional terms become part of the contract if all of the following are satisfied:
Merchants;
Original offer not restricted to its terms;
Additional terms do not materially alter contract; AND
Original offeror has not objected
What are the 3 different split of authority on what to do with different terms?
Treat different terms exactly like additional terms.
Ignore the different terms, follow the offer exactly.
Follow knock-out rule; different terms knock each other out and what is reasonable is ok.
Simply describe the battle of the forms.
- Do we have an agreement on the most important things?
- Yes, are there additional things?
- No, but did they act like it anyway?
What is the rule for electronic signatures?
Electronic signatures follow the general rule that you are bound to a contract whether or not you read it, however, you need to be on notice that you’re even making a contract and the standard for that notice is higher. The offeree has to know that in accepting, they are binding themselves to a contract.
How must terms be presented for an electronic signature contract?
It is not enough to give a link to the terms. If there is something special, it must be drawn to attention. Example of something special: arbitration. The more the terms deviate from what you would expect, the clearer and bolder they have to be.
What are preliminary negotiations, and what examples may come out of them?
Before a final complete deal is reached, parties can make many agreements, and subagreements. Examples:
Final Complete Contract
Partial contract (Closed terms/open terms, requires consideration)
No contract but a commitment to bargain further in good faith (unusual)
No contract and no obligation to bargain any further in good faith (common)
Promise that triggers reasonable reliance (promissory estoppel)
What is the rule for an option contract?
A promise to keep an offer open that is supported by consideration is irrevocable for the stated time.
What is the rule for “sham consideration” in an option contract?
An offer is binding as an option contract if it is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange of fair terms within a reasonable time.
Explain the concept and requirements of consideration.
Each side getting something is the bargain, each promise has to be worth the price of the other promise to be binding.There does not need to be equivalence of value, and there does not need to be equivalence of number of promises. There just must be something received in a bargain for exchange. Bargain as far as the second element of consideration, it does not mean negotiating. It means each side needs to be seeking the promise they are getting.
The two requirements of consideration are:
Benefit or detriment (or promise of)
AND bargained-for exchange.
What is the concept of nominal consideration?
Nominal Consideration says at some point the equivalence of value is such an obvious joke that the parties are clearly not bound. We don’t look at the equivalence of value except for nominal consideration. Something that is obviously not what the promisor is seeking is nominal consideration.
What is the concept of past consideration?
Past consideration is something received prior to bargaining for the contract. It fails the second element of consideration.
