Contracts & Sales Flashcards
What are the “two universes” of Contract Law?
- Common Law - Governs real estate transactions and services.
- UCC (Article II) - Concerns transactions for goods.
Can a contract be under both Common Law and the UCC simultaneously?
Generally no, the All or Nothing Rule makes it clear that you can only operate in one universe. (Exception: Divisible Contracts)
If a contract governs both services and goods, which universe are you in?
Use the Predominant Purpose Rule; ask what the primary purpose of the contract is. That purpose determines which universe governs.
- e.g. You agree to purchase a hot-water heater from Boilermaker Inc. for $1,000. As part of the deal, Boilermaker promises to install the hot water heater in your home. Is this contract governed by the UCC? - YES*
- Divisible Contract Example: You agree to purchase a hot-water heater from Boilermaker Inc. for $950. As part of the deal, Boilermaker promises to install the hot-water heater in your home for an additional $50. Is this latter installation part of the deal governed by the UCC? NO.*
What are the four steps to determining the existence of an Enforceable Contract?
Use ACDS-
- Agreement (Offer and Acceptance)
- Consideration
- Defenses
- Statute of Frauds
Define an Offer.
An offer is an Objective manifestation of the offeror’s willingness to enter into an agreement that creates a power of acceptance in the offeree.
Notes: The offer must be based on the outward appearance of words and actions. Secret intentions are irrelevant.
Who can accept an offer?
Only the person(s) to whom it was directed.
Exception: Contest or Reward Offers that are open to anyone.
What are considered to be the four essential terms of an agreement?
- Parties
- Subject
- Price
- Quantity
How specific (What essential elements are required) at Common Law? Under the UCC?
- At common law, all four of the essential elements need to be present (again parties, subject, price, quantity).
- Under the UCC, gaps can generally be filled in; but Quantity is essential and must be clearly established.
Note: With respect to Quantity, “All You Produce” (Output Contract) or “All I need” (Requirements Contract) are valid quantity terms.
What are the default gap-filling substitutions for Time of Delivery, Place for Delivery, Price, Time of Payment, and Assortment of Goods?
- Time of Delivery - Within a reasonable time;
- Place of Delivery - The seller’s place of business.
- Price - Reasonable price.
- Time of Payment - When the buyer is to receive the goods.
- Assortment of Goods - Reasonable choice of the buyer.
What are some common ways for an offer to be revoked?
- Express communication with the offeree;
- Constructive Revocation - Offeror has taken an action that is absolutely inconsistent with a continuing ability to contract.
- Offeree Rejects the offer.
- Offeree makes a Counteroffer. Here, this operates as a rejection plus a new offer.
- The Offeror Dies. (Note: This applies to the offer, a party’s death will not necessarily terminate an established contract. Also, see death as it relates to option contract).
- A reasonable time passes.
What are the four means by which an offer can become irrevocable?
- An Option - Consideration is provided to keep the offer open for a specific period of time.
- A Firm Offer - Arises under the UCC; can be made by a Merchant.
What are the requirements for a valid Firm Offer?
- Contract arises under the UCC
- Offeror is a Merchant
- A business person, or a person holding themselves out as having knowledge or skills particular to the goods.
- If the transaction is commercial in nature, then a “merchant” is any business person.
- Offer must be made in writing and signed by the offeror (merchant).
- Offer must contain an explicit promise not to revoke.
Duration:
Either (1) as indicated in the signed writing, or (2) for a reasonable time period. Either way, the firm offer cannot exceed 90 days, unless consideration is paid.
What are some valid substitutes for a signature on a firm offer?
- Initialing a relevant clause in a contract;
- Handwriting on a company letterhead.
Define an Acceptance
Acceptance is an objective manifestation of the offeree’s willingness to enter into the agreement.
