Contracts - Formation

Question 1

Elements of an offer

Answer 1

Four elements: (1) must be communicated to the offeree; (2) must indicate a desire to contract; (3) must invite acceptance – if no mode of acceptance is prescribed, court must decide if acceptance was reasonable and timely; (4) acceptance must conclude the offer to form a K

Question 2

UCC 2-204: Contract formation for a sale of goods/indefiniteness

Answer 2

(1) provides a flexible test for deciding whether a K was formed: it may be made in any manner sufficient to show agreement, including conduct. (2) If the parties intended to contract, missing terms do not cause it to fail for indefiniteness if the court can find a reasonably certain basis for giving an appropriate remedy

Question 3

Price

Answer 3

Preliminary Negotiations Under common law, all material terms including price and quantity must be specified. Article 2 says there can be an offer even if price is omitted. However, vague terms of price will not create a valid offer. The price of goods need not be in money, price could be defined by other means such as conduct

Question 4

Advertisements

Answer 4

An advertisement can qualify as an offer if it is clear, definite, explicit, leaves nothing open for negotiation, and makes it apparent to a reasonable person that a commitment is intended w/o further action by the advertiser. The more people an ad tries to target, the more likely it is that the courts will view the communication as merely the solicitation of an offer.

Question 5

Quoting price

Answer 5

Quoting a price is an invitation to make an offer rather than an offer in and of itself

Question 6

Preliminary negotiations

Answer 6

An intent to enter into a contract is not an offer is the person to whom the offer is made has reason to believe the person making the offer is not intent to conclude the bargain without a further manifestation of assent.

Question 7

Restatement 33 - Indefiniteness

Answer 7

(1) Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted to form an enforceable contract unless the terms of the contract are reasonably certain
(2) The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy

Question 8

Walker - Rent based on “comparative business conditions”

Answer 8

The material terms of a contract must be specified with certainty, including the terms of future agreements. If the parties fail to agree on the material terms of the future agreement or how the parties will negotiate the terms in the future, then the agreement fails for lack of certainty. Agreements to agree in the future are not enforceable contracts. Rent is a material term to a contract.

Question 9

Rego - plaintiffs want to exercise an option to purchase provision in their lease that has missing language regarding a security to guarantee payment

Answer 9

(1) Courts must ensure that the reasonable expectations the parties had when entering into the contract are met. This can be accomplished by filling in the gaps where uncertainties exist in the contract.
(2) Courts will not fill in gaps where the contract manifests a failure to reach an agreement, only where they can be sure of the parties’ intent in making the contract

Question 10

Kolodziej - hyperbolic statement on dateline

Answer 10

Mutual assent requires both parties to agree to enter into an agreement with a full understanding of what obligations are required to be performed. Whether or not mutual assent exists is determined by an objective reasonableness test considering the reasonable interpretation of a party’s words or actions given the surrounding circumstances.

Question 11

Four ways to terminate power of acceptance

Answer 11

(1) Death of a party
(2) Lapse of time
(3) Rejection by offeree
(4) Revocation of acceptance by offeror

Question 12

Dickinson - Indirect Revocation

Answer 12

An offer may be revoked when a reliable third party communicates to the offeree that the offeror is no longer willing or able to contract with the offeree. An offer may be revoked by the offeror without an express or actual statement of revocation communicated to the offeree provided there has been no meeting of the minds and the offeree is aware of conduct by the offeror demonstrating intent to revoke the offer.

Question 13

“meeting of the minds”

Answer 13

A “meeting of the minds” occurs when both parties to the contract have the same understanding of and mutually assent to the terms of an agreement at the same time.

Question 14

Loring - reward for information on arsonists

Answer 14

A reward is considered an offer that can only be accepted by performance of the terms contained in the reward. Once a person has performed the exact terms of the offer, a valid contract is formed. Where no time limit is given to collect the reward, the offer is considered a continuing offer. However, offers are generally not intended to be perpetual and a reasonable time limit is imposed upon them. What is reasonable is a question of law determined by the context in which the reward was offered.

Question 15

The offeror has the power to revoke the offer at any time prior to acceptance UNLESS

Answer 15

(1) It is an option K – an offer that includes extra consideration to keep the offer open for a certain amount of time. The offer cannot be revoked before the time specified in the option K
(2) A firm offer under UCC 2-205
(3) Performance has begun under a unilateral contract

Question 16

firm offer under UCC 2-205

Answer 16

Three elements: (i) offer to buy or sell goods; (ii) a signed written promise to keep the offer open; (iii) the party making the promise must be a merchant.
If an offer has all three requirements, it will be irrevocable for the time specified (there is a three-month time limit to the merchant firm offer rule)

Question 17

Commerce Industry - Under UCC 2-207(3),

Answer 17

Under UCC 2-207(3), where two merchants exchange conflicting forms and one merchant expressly conditions acceptance on the other’s assent to his terms, a contract can still be formed based on the parties’ subsequent conduct, but the parties will only be bound to the terms they agreed upon.

Question 18

Mailbox Rule

Answer 18

A contract becomes binding when a notice of acceptance is put in the mail, provided that the mailing is expressly or impliedly authorized by the offer.

Question 19

If an offeree sends a rejection and an acceptance, the mailbox rule no longer applies, and there are two possibilities:

Answer 19

(1) If the rejection arrives first, there is no K b/c rejection is effective upon receipt
(2) If the acceptance arrives first, then there is a valid K b/c the moment of formation is upon receipt, and not upon dispatch

Question 20

Exceptions to the mailbox rule:

Answer 20

Acceptance of an Option K must be received by the offeror
(2) Unauthorized means of acceptance – If there is an improper mailing, the mailbox rule does not apply and acceptance takes effect upon receipt. The offeree does not have to read the acceptance for it to be effective, so long as they receive it.

Question 21

Peterson - power to revoke acceptance in a unilateral contract

Answer 21

An offer to enter into a unilateral contract may be revoked before the act requested to be done has been performed, even if the offeror knows of the offeree’s intention to accept and revokes at the very last second before acceptance.

Question 22

Fujimoto - mode of acceptance

Answer 22

Where no mode of acceptance is provided by the offer, an offer is considered accepted when the offeree clearly communicates his intention to accept to the offeror. When an offer fails to provide a preferred mode of acceptance, all that is required is that the offeree effectively makes it known to the offeror that his offer has been accepted. Actual knowledge on the part of the offeror that the offer has been accepted is sufficient to form a contract.

Question 23

Phillips - sale of goods completed

Answer 23

If a sale of specific goods or chattel is completed except for the transfer of property from the seller to the buyer, the buyer bears the risk of any loss to the property that occurs before the transfer.
A sale of goods is not generally considered complete until the goods have been delivered, because the specific goods sold are not known until that time. However, this is not the rule if the seller has agreed to provide the buyer with specific goods, and the buyer has agreed to accept those specific goods for an agreed-upon price. In that situation, the seller’s appropriation of specific goods for the buyer is equivalent to delivery of the goods, and the buyer’s agreement to accept the specific goods and pay the purchase price is equivalent to the buyer’s acceptance of possession

Question 24

Livingstone - response to a counter offer

Answer 24

A counter-offer is a rejection of the original offer. However, a response to the counter-offer may be a renewal of the original offer if the offeror intimates that he is still willing to stand by it. Here, Evan’s response to the counteroffer was not merely a rejection. By stating only that he could not reduce the price, Evans was in essence stating that he was standing by his original offer and it was still valid and open for acceptance.