Contracts-Formation Flashcards
Contract Formation (comprised of)
(1) Offer
(2) Acceptance
(3) Consideration
Offer
(1) Outward manifestation of INTENT to enter into a K, AND
(2) Must contain specific TERMS
*Advertisements are NOT generally considered an offer, but an “invitation to offer/deal” (unless it has very specific terms)
Power of Acceptance (legal significance of an Offer)
A valid Offer creates a power of acceptance in the recipient/offeree
Termination of Offer/Power of Acceptance
(1) Death/Incapacity (of EITHER party)
(2) Lapse of Time: generally an offer remains available for a REASONABLE amount of time (unless actually stated)
(3) Rejection
(4) Counteroffer: changing the material term of an offer = rejection + new offer
(5) Revocation: an ordinary/revocable offer can generally be revoked at any time before acceptance; can be direct (express) or indirect (offeree aware of offeror’s words/conduct indicating revocation); revocations are effective upon receipt
Irrevocable Offer
4 types of offers that are NOT revocable:
(1) Option K: BOTH promise to keep Offer open + additional CONSIDERATION to hold open
(2) UCC “firm offer”: promise to keep Offer open + signed WRITING by merchant; if no time stated = 3 months max
(3) Part Performance of an Unilateral K (promise for an act): once performance has begun, an option K is created making the offer irrevocable
(4) Detrimental Reliance (Promissory Estoppel): REASONABLE detrimental reliance by offeree; must’ve been reasonably FORESEEABLE that such detrimental reliance would occur to imply the existence of an option K
Mirror Image Rule (common law, non-UCC K only)
Acceptance must be a precise mirror image of the offer (i.e., cannot conflict, change, or add new terms)
NOT a mirror image = rejection + counteroffer
Methods of Acceptance
(Unless specified in the offer), an offer can be accepted by:
(1) Silence: generally silence does not operate as acceptance, unless the offeree intends for their silence to manifest acceptance OR b/c of prior dealings/trade practices it is reasonable for offeror to believe so
(2) Conduct (implied-in-fact K): where both parties engage in conduct which recognizes the existence of a K
Acceptance of unilateral K requires COMPLETE PERFORMANCE
(3) Mail (see next card on the Mailbox Rule)
Mailbox Rule
Acceptance is effective when SENT
Exceptions:
(1) Where the offer itself provides otherwise
(2) Option K is effective upon receipt
(3) When offeree sent rejection first followed by acceptance, the first letter to be received by offeror controls
Common Law vs UCC on Acceptance
Common law: Mirror Image Rule
UCC (sale of goods): acceptance is construed liberally (i.e., you can still accept even if minor/non-material terms are modified)
Exceptions: (1) changes materially altered a term in the K; (2) offeror objects to change in reasonable amount of time; or (3) where the offer limits the acceptance
Consideration
Bargained-for exchange (i.e., a promise for a promise or a promise for an act)
Ct’s generally will not invalidate consideration b/c of the amount, unless it’s a sham or nominal consideration
1. Cannot be an illusory promise (i.e., when promissory appears to promise something but in fact does not commit to do anything at all)
Exceptions/non-illusory:
(1) Conditional promise: a promise conditioned upon the occurrence of an event outside the promisor’s control does not render the promise illusory
(2) Requirements/output K’s are not illusory
2. Promise to give a gift is NOT valid consideration (but a gift already given IS valid consideration)
3. Cannot be past or moral consideration/benefit received, except:
(1) New promise to pay a debt that is now barred/discharged by bankruptcy, made in writing or partially performed, is valid w/o new consideration
(2) New promise to pay for benefits previously received at the promisor’s request or in an emergency is valid w/o new consideration
4. Preexisting duty: a preexisting legal duty does not constitute consideration, except:
(1) Duty is owed to a third party
(2) Substituted performance
(3) Forbearance to sue
Promissory Estoppel
= Detrimental Reliance (a substitute for consideration)
Accord and Satisfaction
Does partial payment (marked “paid in full”) satisfy a debt?
(1) if there’s no dispute as to the amount of debt, partial payment DOES NOT satisfy the debt
(2) if there is a dispute/settlement/compromise as to the amount of debt, partial payment DOES satisfy the debt
(3) if there’s doubt as to whether there’s a debt in the first place, partial payment DOES satisfy the debt
