Contracts & Sales Flashcards
Under the common law rule for offers, what essential terms must be covered in the agreement?
All essential terms must be covered in the agreement. Parties, subject, price, and quantity.
Under the UCC, what terms must be covered in the agreement? What gaps are willing to be filled?
The only essential term is the quantity of what’s being sold. UCC will fill in the gaps, such as price, material terms, delivery, etc.
What are the six ways in which an offer may be terminated before its accepted?
- The offeror revokes the offer by express communication to the offeree
- The offeree learns that the offeror has taken an action that is absolutely inconsistent with the ability to contract (constructive revocation)
- The offeree rejects the offer
- the offeree makes a counter offer (a rejection plus a New offer)
- The offeror dies
- A reasonable amount of time passes
Under the common law, what are 3 ways an offer may be irrevocable for a specific amount of time?
- option contract
- a unilateral contract where performance has begun
- Detrimental reliance (promissory estoppel)
What constitutes a “firm offer” under the UCC?
Must be made by a merchant in the OCOB. A firm offer must be written, signed by the merchant offeror, and contain an explicit promise not to revoke. Can be valid for no more than 90 days.
Under the modern approach, if an offer is ambiguous as to whether it’s unilateral or bi-lateral, how may acceptance be made?
By either performance OR a return promise.
What are the exceptions to the requirement that an acceptance must be communicated to the offeror (i.e., when is acceptance by silence ok)?
Unilateral reward offers or contests
Unilateral offer where the parties are geographically close (such that the offeror can see performance has begun)
A past history of silence serving as acceptance (such that the offeree should notify the offeror if they do NOT accept)
The offer says acceptance MUST come by silence and the offeree intends to accept by silence
What is an implied-in-fact contract?
Where acceptance is communicated without writing or speaking. For example, if you walk into a supercuts, give the receptionist your name, get your haircut you’ve impliedly accepted to pay $15 for a cut even though you never accepted anything.
UCC Section 2-207 gets rid of the mirror image rule, what is the general rule for acceptance under the UCC, and when will it not apply?
A definite and seasonable expression of acceptance [or a written confirmation] which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon.
UNLESS acceptance is expressly made conditional upon assent to the additional or different terms.
When may new terms control the agreement under 2-207(2)?
Both parties are merchants
The new term does not materially alter the deal
The initial offer did not expressly limit acceptance to its terms; and
the offeror does not reject/object within a reasonable time to the new term
What is the mirror image rule with regards to acceptance in the common law universe?
The terms in teh acceptance must match the terms of the offer EXACTLY or it is not an acceptance, it’s a counter-offer.
A conditional acceptance is a counter offer (“but if” “on the condition of” etc.)
What is the knock-out rule for acceptance under the UCC? State the difference between the minority and majority rules.
When the acceptance has a different term from the initial offer.
Minority - when the different term does not govern under 2-207, the initial offer controls
Majority - “knock out” both of the different terms; neither term will govern and the general gap-filling provisions of the UCC will apply
What happens under the UCC when there is an acceptance based on conduct? I.e., no contract was actually formed but the parties proceed as if there has been one?
When the parties act as though there was a contract (e.g., exchange goods for money), only the terms that both writings agree on become part of the contract with all other terms supplied by the UCC’s default rule.
Under UCC 2-207 what happens when the parties have a contract (usually by verbal agreement) and then one party sends a confirming memo with additional terms?
A written confirmation which is sent within a reasonable amount of time operates as an acceptance, UNLESS acceptance is expressly made condition on assent to the additional or different terms.
Recognize in all situations it’s very rare for new terms to come in because it’s difficult.
Is settling a legal claim sufficient consideration? If so, when?
Yes if the plaintiff has a good faith belief in the validity of the claim; or
There is reason to doubt the validity of the claim due to uncertain law.
What is the common law pre-existing duty rule as it applies to contract modification?
A promise to do something that you are already legally obligated to do is NOT consideration.
In general, under the common law, contract modification requires new consideration.
What are the 3 exceptions to the common law pre-existing duty rule with regards to contract modification?
- a change in performance
- a 3rd party promising to pay
- Unforeseen difficulties that would excuse performance
Is promising partial payment for release from a debt a binding modification? (Common law)
If the debt is currently due and undisputed, NO.
What is the requirement for contract modification under the UCC?
So long as it’s made in good faith, it is binding even without new consideration.
What are the three elements of promissory estoppel (detrimental reliance)?
- a promise is made that would be reasonably expected to induce reliance
- The promisee does indeed take detrimental action in reliance on the promise; and
- Injustice can only be avoided by enforcement of the promise
What is a quasi-contract and what are its elements?
Arises when you would have made a contract if you could have, but you could not, or when one party conferred a benefit on another party and it would be fair to pay for that benefit.
Elements
1. Plaintiff confers a measurable benefit on the defendant
2. The plaintiff reasonably expected to be paid; and
3. It would be unfair to let the defendant keep the benefit without paying
What are the common damages for a quasi-contract?
Usually limited as justice requires, to the fair value of the benefit conferred.
What is the minority moral obligation theory used as an exception to the general rule that past consideration is not sufficient consideration?
A few jurisidctions have some case law suggesting that a moral obligation plus a subsequent PROMISE to pay can be binding. Usually this would be considered past consideration and not binding.
What are the elements of the defense of misunderstanding?
The parties use a material term that is open to two or more REASONABLE interpretations (no objective test).
Each side attaches a different meaning
Neither parties knows or should have known of the misunderstanding
What happens if you make a contract with an incapacitated person? What is the necessities exception for minors?
A contract made with an incapacitated person is VOIDABLE; the incapacitated person can disaffirm.
With a contract for necessities, the party without capacity must still pay fair value (not necessarily the contract price).
What is ratification with regards to an incompetent person’s contract?
If they keep the benefits of the contract after gaining/regaining capacity, they can ratify the deal.
What is the effect of the defense of mutual mistake?
Allows the adversely affected party to rescind, if:
- there is a mistake of fact existing at the time the deal is made;
- the mistake relates to a basic assumption of the contract and has a MATERIAL impact on the deal; and
- The impacted party did not assume the risk of mistake
What is the effect of unilateral mistake? (one party)
Allows the adversely affected party to rescind if they can prove all the elements of mutual mistake AND
- the mistake would make the contract unconscionable OR
- The other party knew, or had reason to know of the mistake or they cause the mistake.
