Contracts: Formation Flashcards
A contract is
a legally enforceable agreement, typically created through process of mutual assent & consideration
When does mutual assent occur?
upon acceptance of a valid offer to contract
Objective Theory of Contracts
Whether a party intends to enter into a contract is judged by outward objective facts, as interpreted by a reasonable person.
The mere subjective lack of intent is not sufficient to prevent the formation of a contract.
Intent of a party is
what a reasonable person in the position of the other party would believe as a result of that party’s objective manifestation of intent.
A contract may be formed in what manner?
Any manner to show agreement, including conduct by both parties which recognizes the existence of such a contract. UCC.
Express contract
when words express the intent of the parties
Implied in fact contract
When conduct indicates assent or agreement.
How does one determine whether an offer or acceptance is valid?
By the objective theory of contracts.
Offer
an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.
a communication giving power to the recipient to conclude contract by acceptance.
Intent of an offer
must express the present intent of a person to be legally bound to a contract, based on the objective theory of contracts.
A statement is an offer only if the person to whom it is communicated could reasonably interpret it as an offer.
How does an offeree have power to accept an offer?
the offeree must have knowledge of it
Common law - terms of a contract
all essential terms - the parties, subject matter, price, and quantity - must be covered in the agreement. otherwise, the contract will fail for indefiniteness.
UCC - terms of a contract
contract is formed if:
1) both parties intend to contract
2) reasonably certain basis for giving a remedy.
3) quantity usually must be specified
UCC will fill the gap of other terms.
If a duration term is not specified in the agreement, what do the courts do?
the courts will imply that the contract will last for a reasonable period of time.
if an employment contract does not state duration…
there is a rebuttable presumption that the employment is “at will””
“at will” employment relationship
either party can terminate the relationship at any time, w/o the termination being considered a breach of the contract, unless the termination is against public policy.
“permanent employment” contract
in the absence of a proven contrary intention, the employment is “at will.”
How do you handle a question involving an employment agreement that is not at will?
use a traditional breach-of-contract analysis
may a contract still be formed when a term is missing?
yes, if it appears that the parties intended to create a contract. courts may supply the missing term because there is a presumption that the parties intended to include a reasonable term.
How does the UCC fill the gap for missing terms?
the contract must have an objective standard for the court to reference - UCC supplies a reasonable price at the time of delivery. A court may infer a term or the reasonableness of a party’s conduct based on the parties’ course of performance or course of dealing or on trade usage.
may a contract still be formed when terms are vague?
no, because the parties have manifested an intent that cannot be determined because of the vagueness of the terms.
