Contracts and Sales Flashcards
What are the sources of contract law?
Common law - Default law UCC - Uniform Commercial Code
What does the common law govern?
It is the default law that governs contractual relations.
What are the requirements for a valid contract?
- offer and acceptance
- consideration
- legal capacity of the parties
- a legal objective
What does the UCC govern?
Governs contracts for the sale of all goods
What are sales?
Transactions in which a seller transfers title of goods to a buyer for value (Not leases or bailments)
What are goods
Any movable item (personal goods)
Examples of goods
Growing crops Uncut timber Unborn animals
What is not a good?
Intangibles Money Assignment of a legal claim Services (i.e. - construction or employment) Real Property
What is a Hybrid Cases?
There is both a sale of goods and a service
What rule do you apply in hybrid cases?
Majority - Determine the predominant purpose of the transaction Minority - Apply the UCC to the goods part & common law to the service part
What are the predominant purpose test factors?
- The Language of the K 2. Nature of the supplier’s/seller’s business 3. Relative value of the goods vs. the cost of the service
What is the rule for computer software?
Majority - treated as goods under the UCC
Common Law vs. UCC
Common law applies unless the UCC provides contrary provisions
Common law fills in the gaps
- i.e. - Defenses like fraud, duress & incapacity
UCC sometimes displaces the common law
- i.e. - firm offers & the battle of the form rules
What are the general categories of contractual obligations?
a
What is an express contract?
The parties make an oral or written expressions of their commitment
What is an implied-in-fact contract?
- The parties’ conduct rather than their words form the agreement
- Or when they fail to express the agreement in its entirity
- i.e. - leaving out price and putting in “reasonable value”
What is an implied-in-law Contract?
One pty bestows a benefit on another & it is unjust for them to retain the benefit w/o paying
(arises where there would be an equitable imposition of a would be K.)
a.k.a. – quasi-contract or a restitutionary obligation
other pty entitled to the fair value of the services rendered
Example - emergency services
What is Quantum Meruit?
It is the cause of action brougt for an implied-in-fact K in order to recover the reasonable value of the benefit involved
means of enforcing an implied-in-fact & an implied-in-law contract
“what the thing is worth:
What rules require a signed writing?
spme contracts under both the UCC and the common law
merchant’s firm offer SOF
What is the electronic signed writing requirement?
Electronic sig’s usually considered a signing in the vast part of the US. An email, etc. satisfies a writing
What constitutes an offer?
A party’s communication must meet two requirements:
- An outward manifestation AND
- A signal that acceptance will conclude the deal
What is an outward mainfestation?
Oral, written or made by conduct
Note: Inward thoughts/subjective intentions are irrelevant unless reasonably apparent to the other pty
What are communications that do not constitute an offer?
Preliminary negotiations
Invitations for an offer
What are situations of multiple offers?
CAR
Commercial Advertisements
Auctions
Rewards
What is the offer rule for commercial advertisements?
Are commercial advertisements considered to be offers?
No, ads, catalog s and price lists are invitations for offers b/c the responses may exceed the available supply
Exception to commercial advertisement?
When the language identifies who gets the limited supply even if there is an excess demand
What is the offer rule for rewards?
Generally: Yes they are offers b/c they promise a bounty in exchange for a specialized task
What are two types of reward offers?
Self-limiting rewards
Open-field rewards
What is a self-limiting reward?
Offers that indicate that the task can only be performed once
i.e. - “Will pay $100 for finding my lost dog.”
What is an open-field reward?
Offers that indicate that the tasks to be performed can be performed by multiple people
Exception: Language that specifies a limitation on how many can accept the offer
What is the rule for auctions in regards to offers?
General: The auctioneer is inviting offers & the responsive bid is the offer
Exception: If the auction is w/o reserve, the auctioneer is making the offer to the highest bidder
What is the legal effect of an offer?
It creates the power of acceptance
How can an offer be revoked?
Lapse of time
Death of incapacity of either pty
Revocation by the offeror
Rejection by the offeree
When does an offer terminate by lapse of time?
The time specified in the offer
If no time stated, then w/in a reasonable time
What factors determine a reasonable lapse of time for an offer?
Subject matter & market conditions
Degree of urgency & means of transmission
What is the face-to-face conversation rule?
An offer made in a face-to-face conversation generally lapses @ the end of the conversation unless specified.
Offer: Death of Incapacity by Either Pty
Dead men cannot accept offers thus terminated
Either incapacitated terminates the offer
Termination of an Offer by Offeror’s Revocation
An offeror can terminate his offer @ anytime and for any reason even if promise to hold open so long as:
Done before the offer is accepted AND
Is effectively communicated to the offeree
How is a revoked offer communicated to the offeree?
Direct revocation
Indirect revocation
What is direct revocation of an offer?
There is a direct communication of the intent to w/draw the offer
What is an indirect revocation of an offer?
The offeror takes some action that is inconsistent w/his intention to go through w/the offer AND
The offeree learns of it through a reliable source
How to revoke an offer made to multiple offerees?
By revoking through the functional equivalent (the same manner in which the offer was made)
EXCEPTION: Unless there is a better means of communicating the revocation
Note: This terminates the power of acceptance even if the offeree is unaware of the revocation
How can you prevent revocation of an offer?
American rule of free revocability allowed the offeror to revoke at anythime even if he expressly said he would hold it open
Contemporary rule allows two ways:
- Common law Option contract or
- UCC firm offer
What elements are required for an enforceable option contract?
- An offer
- A subsidiary promise to keep the offer open (“sell by” date may not constitute as such a promise) AND
- Some valid mechanism for securing enforcement of the promise (i.e. – consideration[most common]) [performance or promise of performance]
What problems arise with option contracts?
- False Recital in signed writing
- Where there is a signed writing w/a false recital of consideration (i.e. - paragraph 4 syays “$100 was paid in consideration..”
- Majority Rule - it is rebuttal
- Minority Rule - option K will be enforced even if the recital for the option is false
- Where there is a signed writing w/a false recital of consideration (i.e. - paragraph 4 syays “$100 was paid in consideration..”
- Promissory Estoppel
- Courts will sometimes enforce a subsidary promise to keep an offer open if there has been detrimental reliance
What is the rule for construction contracts?
Majority: When a general contractor uses a subcontractor’s bid to secure his own, an implied K is created which prevents the subcontractor from revoking the bid.
What is a firm offer (UCC)?
It is an irrevocable offer that does not to be supported by consideration
must meet three requirements
How do you revoke an offer by means of the UCC firm offer
a merchant can make a firm offer to buy/sell goods w/o consideration if:
- offer made by a merchant to buy/sell
- offer made in writing & signed by the merchant
- offer states by its terms that it will expressly be held open
this makes it irrevocable for a set period
How long is a firm offer held open for?
It is open for the time stated in the offer or for a reasonable time if not stated,
Reasonable time - no more than 3 months
- Three Month Rule - only irrevocable for the first 3 months if it is more than that time
- if longer than 3 months than will need consideration to become an option contract
In what ways can an offeree reject an offer?
- an outright reject
- a counteroffer
- rejects the current offer an creates a new offer
- NOTE - mere inquires are not rejections
- rejection by non-conforming acceptance
- Common law - mirror image rule
- acceptance must mirror the terms or else it asks as a counteroffer
- Common law - mirror image rule
How to revive an offer after reject or lapse?
The offeror can revive a terminated offer by their language or conduct restating the offer or give more thime to decide
