Contracts (Kaplan) Flashcards
Are reward offers considered real offers?
Yes, b/c they are communications that promise $ in exchange for performance of specific tasks.
Are commercial ads considered offers?
Under the American rule, ads, catalogs, price lists are INVITATIONS FOR OFFERS, since responses may exceed available supply of good/services.
Elements of an Offer
(1) Outward Manifestation (oral, written or via conduct); and
(2) Signal that ACCEPTANCE WILL CONCLUDE THE DEAL (power of acceptance).
Four Ways to Terminate the Power of Acceptance
1) Lapse of Time
2) Death / incapacity of either party
3) Revocation by offeror
4) Rejection by the offeree
Terminating the Power of Acceptance: Lapse of Time
This occurs
1) after time stated in offer expires; OR
2) after a REASONABLE TIME.
–Reasonable time is determined by (A) subject matter/market conditions; and (B) the degree of urgency and means of transmission.
Revocation of Offer by Offeror
Offeror may revoke at any time, for any reason
HOWEVER, the offer must be revoked BEFORE acceptance and THE revocation must be COMMUNICATED.
(can be done directly or indirectly)
What are the requirements for Indirect Revocation of an Offer?
1) Offeror takes action that is INCONSISTENT w/ the intent to go through w/ offer; and
2) Offeree LEARNS of such action from a RELIABLE SOURCE.
If an offeror gives an offeree a specific amount of time to accept, can the offeror revoke this offer?
Yes, the offeror can revoke even if he gave a specific time to accept (absent consideration to keep offer open).
–HOWEVER, note that courts will consider offers open when the offeree has DETRIMENTALLY RELIED on them, such as when general contractors rely on subcontractor’s bids in forming their own bids on a project.
What are the elements of an Option Contract?
1) Offer;
2) Separate promise to keep the offer open; and
3) A valid mechanism for enforcing the subsidiary promise (consideration is most common way).
Firm Offer under UCC
Irrevocable offer by merchant to buy/sell goods WITHOUT consideration.
Requirements:
1) Offer made BY A MERCHANT;
2) In a writing signed BY THE MERCHANT OFFEROR;
3) Expressly stating that it will be held open.
–Irrevocable for time stated or reasonable time, BUT NO LONGER THAN 3 MONTHS EVEN IF STATED OTHERWISE.
Termination. by Offeree’s Rejection
1) Outright rejection;
2) Rejection via counteroffer (counteroffer = rejection + new offer)
–EXCEPTION: Offeree can test the waters by making a MERE INQUIRY.
3) Rejection via non-conforming acceptance.
–MIRROR IMAGE RULE: Acceptance must mirror the terms, and any variation is a counteroffer (and rejection of the initial offer).
Counteroffer
A counteroffer = rejection + new offer.
Mirror Image Rule
Under common law, acceptance must mirror the terms, and any variation is a counteroffer (and rejection of the initial offer).
What is a bilateral contract?
Offer seeking acceptance by a promise.
A promise for a promise is being exchanged. Once promises are exchanged, both parties are bound.
What is a unilateral contract?
Offer seeking performance in return (I.e., reward offers).
Offeror not bound until offeree completes performance, and offeree is NEVER bound.
Revocation of Offer - Unilateral Contract
Once offeree BEGINS PERFORMANCE, an option K is created and offeror may NOT REVOKE.
MERE PREPARATIONS DO NOT CREATE AN OPTION K, ONLY BEGINNING PERFORMANCE.
What are the terms of acceptance under common law?
Acceptance must MIRROR the terms of the offer and be COMMUNICATED TO THE OFFEROR.
Two exceptions:
1) Unilateral Ks
2) Acceptance by Mail
Acceptance: Unilateral Ks
Acceptance is only effective by completing performance, no communication is required unless offer provides otherwise.
Acceptance by Mail
Acceptance by mail is effective UPON DISPATCH if properly posted.
–Applies only to acceptances and not to any other communication (I.e., not revocations or rejections)
–Default Rule: It applies UNLESS the offer provides otherwise.
The Mailbox Rule and Option Ks
Restatement/Maj. Rule: FOR OPTION CONTRACTS, the mailbox rule is NOT applicable and acceptance is only effective UPON RECEIPT.
What happens when an offeree dispatches 2 responses to an offer, the 1st purporting to reject the offer and the 2nd purporting to accept it?
Mailbox rule does NOT govern if rejection is mailed before acceptance, and whichever arrives first will be effective.
UCC - Acceptance by Seller’s Shipment of Nonconforming Goods
Seller can accept Buyer’s offer to purchase goods for prompt or current shipment in 3 ways:
1) Promise to ship the goods;
2) Shipping conforming goods; or
3) Shipping non-conforming goods, UNLESS the seller sends the shipment as an ACCOMMODATION. (I.e., counteroffer)
–Accommodation = counteroffer
UCC Rejection of the Mirror Image Rule
An offeree’s nonconforming acceptance or confirmation (w/ additional terms) will operate as an effective acceptance, thus forming a contract (NOT a counteroffer).
UCC Battle of Forms: Effect of Additional or Different Terms
BETWEEN MERCHANTS, the “ADDITIONAL” terms in offeree’s acceptance or confirmation become PART OF THE K, EXCEPT in 3 circumstances:
1) The offer expressly limits acceptance to its own terms;
2) If offeror objects to the additional terms within a reasonable time;
3) If the additional terms would materially alter the K.
–“Material alteration” = terms that would result in “surprise or hardship if incorporated w/o the express awareness of the other party. (e.g., warranty disclaimers, clauses that materially shorten the deadline for raising complaints, clauses that change usages of trade or past courses of dealing.
–Note: “Different” terms in the two writings dealing w/ the same topic will KNOCK EACH OTHER OUT.