Contracts: Formation

Question 1

A contract is

Answer 1

a legally enforceable agreement, typically created through process of mutual assent & consideration

Question 2

When does mutual assent occur?

Answer 2

upon acceptance of a valid offer to contract

Question 3

Objective Theory of Contracts

Answer 3

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.

Question 4

Intent of a party is

Answer 4

what a reasonable person in the position of the other party would believe as a result of that party’s objective manifestation of intent.

Question 5

A contract may be formed in what manner?

Answer 5

Any manner to show agreement, including conduct by both parties which recognizes the existence of such a contract. UCC.

Question 6

Express contract

Answer 6

when words express the intent of the parties

Question 7

Implied in fact contract

Answer 7

When conduct indicates assent or agreement.

Question 8

How does one determine whether an offer or acceptance is valid?

Answer 8

By the objective theory of contracts.

Question 9

Offer

Answer 9

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.

Question 10

Intent of an offer

Answer 10

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.

Question 11

How does an offeree have power to accept an offer?

Answer 11

the offeree must have knowledge of it

Question 12

Common law - terms of a contract

Answer 12

all essential terms - the parties, subject matter, price, and quantity - must be covered in the agreement. otherwise, the contract will fail for indefiniteness.

Question 13

UCC - terms of a contract

Answer 13

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.

Question 14

If a duration term is not specified in the agreement, what do the courts do?

Answer 14

the courts will imply that the contract will last for a reasonable period of time.

Question 15

if an employment contract does not state duration…

Answer 15

there is a rebuttable presumption that the employment is “at will””

Question 16

“at will” employment relationship

Answer 16

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.

Question 17

“permanent employment” contract

Answer 17

in the absence of a proven contrary intention, the employment is “at will.”

Question 18

How do you handle a question involving an employment agreement that is not at will?

Answer 18

use a traditional breach-of-contract analysis

Question 19

may a contract still be formed when a term is missing?

Answer 19

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.

Question 20

How does the UCC fill the gap for missing terms?

Answer 20

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.

Question 21

may a contract still be formed when terms are vague?

Answer 21

no, because the parties have manifested an intent that cannot be determined because of the vagueness of the terms.