contracts/sales: is there a deal between the parties?

Question 1

A “deal” consists of three parts

Answer 1

(1) an offer
(2) which is “alive” at the time of the attempted acceptance, and
(3) a proper acceptance

Question 2

mutual assent

Answer 2

“Mutual assent” is judged by the objective theory of contracts

Whether an offer or revocation has been made is judged from the perspective of a reasonable offeree

Whether an acceptance, rejection, or counteroffer has been made is judged from the perspective of a reasonable offeror

Question 3

types of contracts: Express contracts

Answer 3

mutual assent established by the parties’ language (oral or written).

Option contracts: an express contract to hold an offer open for a fixed period of time. (these are super contracts)

Question 4

types of contracts: Contracts implied-in-fact

Answer 4

mutual assent established (at least in part) by the parties’ conduct

(e.g., silently accepting benefits where it is reasonable to assume the other party expects compensation).

paving wrong driveway exsample

Question 5

types of contracts: Contracts implied-in-law (i.e., quasi-contracts)

Answer 5

these are not contracts, so there is no mutual assent. A quasi-contract is simply a remedy designed to prevent unjust enrichment.

Question 6

An offer

Answer 6

Definition: An offer is an expression of present willingness to enter into a bargain, made in such a way that a reasonable offeree would believe that she can conclude a bargain merely by giving assent.

A valid offer has three components:

(1) INTENT on the part of the offeror to enter into an immediate deal
(2) The CONTENT of the offer must be sufficiently definite

for real estate contracts, there must be a price and an adequate description of the land

for UCC contracts, there must be a quantity term (e.g., numerical or buyer’s requirements or seller’s output)

for employment contracts, there must be a duration (no duration results in an at-will contract)

Advertisements, price quotes, and catalogs are generally not offers

(3) COMMUNICATION of the offer to the offeree
• only persons aware of the offer may accept
• only persons to whom the offer was directed may accept (i.e., offers are not assignable, but option contracts are assignable)

Timing: An offer is effective upon receipt by the offeree.

Question 7

There are several ways an offer may “die” prior to an attempted acceptance: By Its Own Terms.

Answer 7

The offeror is the “master” of the offer. As such, she may place a specific limit (e.g., one day or five minutes) on the time to accept. If no such limit is placed on the offer, the offer is open for a reasonable time.

Question 8

There are several ways an offer may “die” prior to an attempted acceptance: Revocations by Operation of Law.

Answer 8

An offer is automatically revoked (regardless of the other party’s knowledge) by the:

Death or the adjudicated incapacity of the offeror or offeree

(Death or adjudicated incapacity does not terminate an option contract)

Intervening illegality or destruction of the subject matter

(These events will also terminate an option contract)

Non-adjudicated insanity of the offeror or offeree (but knowledge of the other party is necessary for this type of revocation to be effective

Question 9

There are several ways an offer may “die” prior to an attempted acceptance: Revocations by the Offeror.

Answer 9

As a general rule, offers are freely revocable, even if the offeror promises not to revoke the offer. An offer is revoked when:

An unambiguous verbal revocation is communicated by the offeror to the offeree prior to acceptance

The offeree obtains reliable information showing that the offer is no longer open (e.g., notice that the item has been sold to another person) prior to acceptance

Question 10

Timing: When is a revocation effective?

Answer 10

A revocation is effective upon “receipt” by the offeree. Revocations by the offeror must pre-date the acceptance.

Question 11

Non-Revocable Offers: option contracts

Answer 11

an agreement, supported by consideration (even nominal consideration), to hold an offer open for a fixed period of time

under the Restatement, an option contract is enforceable if it merely recites nominal consideration

Question 12

Non-Revocable Offers: a merchant’s firm offer (UCC-only rule)

Answer 12

an offer to buy or sell goods made by a merchant in a signed writing in which the merchant promises to hold the offer open for a stated time (or a reasonable time if no precise time is stated);

such “firm offers” are irrevocable for the stated time (or reasonable time), but in no event more than 90 days

if the offer provides for a period longer than 90 days, the offer may still be accepted after 90 days if it has not been revoked; the 90-day period is simply the maximum period of irrevocability

Question 13

Non-Revocable Offers: detrimental reliance

Answer 13

the offeree has detrimentally relied on the offer and that reliance was reasonably foreseeable by the offeror

if a general contractor relies on the bids of subcontractors in preparing the general contractor’s bid, the subcontractors’ bids are irrevocable until a reasonable time after the owner/architect awards the contract to the general contractor.

Question 14

Non-Revocable Offers: unilateral contracts

DELET THIS CARD

Answer 14

if the contract is unilateral in nature and the offeree has commenced performance (something more than mere preparation to perform), the offeree must be given a reasonable time to complete performance

(but note: the offeree is not bound to complete performance unless it was a bilateral contract)

unilasteral= acceptance by performing the act
v. Bilateral= acceptance by promise made

Question 15

Terminations by the Offeree

Answer 15

The offeree may also terminate an offer. When an offeree terminates an offer, it is called a “rejection.” Methods of rejection:

(1) Counteroffer. a counteroffer by the offeree permanently revokes the offer and, in fact, constitutes a new offer

mere inquiries alone (“Will you take $9,000?”) are not rejections

in some cases, the original offer may be revived after a counteroffer

(2) Express Rejection. “No thanks” or “Not interested.” A rejection permanently revokes the offer, even if the offeror had originally indicated that it would be held open for a longer period.

Effective Date of Rejection. rejections (express or otherwise) are effective upon receipt by the offeror.

Option Contracts. A rejection or counteroffer made by the “offeree” during the option period does not terminate the option contract, unless the “offeror” detrimentally relies on the offeree’s rejection.

(3) Conditional Acceptances. a conditional acceptance (“I accept if [or but or provided that or on the condition that or so long as”] . . . is a rejection/counteroffer and permanently revokes the offer

Question 16

timing: when is a revocation effective: mailbox rule

Answer 16

As a general rule, acceptances are effective upon dispatch (e.g., mailing),

but revocations are always effective upon receipt by the offeree;

thus, it is possible that a revocation will be communicated to the offeree prior to the receipt of the acceptance by the offeror (because it’s still in the mail) but subsequent to the mailing of the acceptance; in such cases, the revocation is ineffective.

Question 17

timing: when is a revocation effective: receipt

Answer 17

A written offer, revocation, counteroffer, or rejection is “received” when the writing comes into the possession of the person addressed, regardless of when such document is opened or read.

Question 18

Non-Revocable Offers: general rule

Answer 18

Offers are inherently revocable, except:

1) option contracts
(2) a merchant’s firm offer (UCC only rule
(3) detrimental reliance
(4) unilateral contracts

Question 19

Terminations by the Offeree: UCC

Answer 19

Under the UCC, if the “acceptance” adds a term (“I accept and ….”) to the offer, ask two questions:

1) Is there a contract? Answer:

Yes (as long as “acceptance” of the additional term was not an express “condition” of acceptance).

2) Does the deal include the additional term?

Answer: It depends.

if both parties are MERCHANTS, the additional term is part of the contract, unless:

(1) the original offer limited acceptance to the exact terms of the offer;
(2) the offeror objects to the additional term within a reasonable time after receiving the acceptance; or
(3) the additional term materially alters the offer (e.g., changes the remedies available to the offeror, significantly limits the offeree’s liability, or disclaims warranties). An additional term that materially alters the offer does not equal a rejection; in such cases, there will be a contract, but without the new term.

if either party is a non-merchant, the additional term is not part of the contract, unless the additional term is expressly accepted by the offeror (after receiving the acceptance)

Question 20

Proper acceptance: definition

Answer 20

An acceptance is a manifestation of assent to the terms of the offer

Question 21

Proper acceptance: who may accept:

Answer 21

(1) only those who are aware of the offer

to be entitled to the reward you must know of the reward before finishing the acts necessary to collect it.

Note: Knowledge of the offer is not necessary to collect a standing offer of reward made by a governmental body

Equal Publicity Rule: A must give equal publicity (e.g., same newspaper, same number of days, etc.) to the retraction as he did to the offer.

Under the common law, two offers that cross in the mail that have identical terms do not create a contract because neither party was aware of the other’s offer. The UCC has a more flexible rule.

(2) Only those persons to whom the offer was made (thus, offers may not be assigned or accepted by bystanders to whom the offer was not directed).

Option contracts may be assigned.

Question 22

Proper acceptance: how may an offer be accepted

Answer 22

The offeror is the master of the offer and may limit the form of acceptance (e.g., by fax only), but must do so unambiguously.

Question 23

Proper acceptance: how may an offer be accepted: commencing performance

Answer 23

Bilateral Contracts may be accepted by either

(1) a promise to perform (communicated to offeror); or
(2) commencement of performance.

Contracts are presumed to be bilateral.

If an offeree accepts by commencing performance and the offeror has no adequate means of learning of such commencement, the offeree must notify the offeror within a reasonable time that performance has commenced; failure to give timely notice will render the contract unenforceable.

Question 24

Proper acceptance: how may an offer be accepted: NOT by commencing performance

Answer 24

Unilateral Contracts may NOT be accepted by commencing performance.

An offeree is not bound by starting performance in a unilateral contract, but commencement of performance prevents the offeror from revoking the offer for a reasonable time.

Unilateral offers may be accepted only by full performance

Unilateral contracts are limited to

(1) those that unambiguously require completion of performance as acceptance; and
(2) offers to the public, such as rewards or prizes.

In a unilateral contract, the offeree is not required to give the offeror notice that the offeree has accepted (or is in the process of accepting) the offer until a reasonable time for full performance has expired.

Question 25

Proper acceptance: how may an offer be accepted: mailbox rule

Answer 25

As a general rule, an acceptance is effective upon dispatch (e.g., mailing), even if it never gets to the offeror.

A contract is created at the moment of dispatch, provided the dispatch is properly addressed and, where necessary, stamped.

After proper dispatch, the offeror may not be revoke the offer.

Question 26

Proper acceptance: how may an offer be accepted: mailbox rule exceptions

Answer 26

The Mailbox Rule does not apply where:

(1) the offeror stipulates that acceptance is not effective until received;
(2) the offeror unambiguously mandates a method of acceptance (e.g., by fax only) different than that used by the offeree; or
(3) the offeree’s method of acceptance is not reasonable under the circumstances (e.g., offeree uses U.S. mail to accept an email offer to purchase ripe bananas).

Question 27

Proper acceptance: how may an offer be accepted: Dual dispatches

Answer 27

Rejection then acceptance sent:

If an offeree rejects an offer by mail and then sends an acceptance, the first document received by the offeror is effective.

Acceptance then rejection sent:

if the offeree accepts by mail but then sends a rejection, there is a contract, unless the rejection arrives first and the offeror relies on the rejection to his detriment (in which case the offeree is estopped from enforcing the contract).

Question 28

Proper acceptance: how may an offer be accepted: option contracts

Answer 28

the offeror must receive the acceptance (i.e., exercise) to have a contract. In other words, the Mailbox Rule does not apply to option contracts.

Question 29

Proper acceptance: how may an offer be accepted: A UCC offer for “prompt shipment” may be accepted by a prompt:

Answer 29

1. Promise to ship
2. Shipment of conforming goods
3. Shipment of non-conforming goods

Shipment of non-conforming goods constitutes an acceptance and a breach of contract

Accommodation: If the seller sends non-conforming goods as an “accommodation,” there is no acceptance and thus no breach of contract. An accommodation occurs when the seller notifies the buyer (before or with the shipment) that the goods are non-conforming but are being sent anyway.

If a seller promises to ship conforming goods and then sends non-conforming goods as an accommodation, the seller has accepted the offer and breached the contract.