Contracts - THE OFFER (and lapse, revocation, rejection and termination) Flashcards
Contract
a legally enforceable agreement
Express Contract
A contract created by the parties’ words (oral or written)
Implied-in-fact Contract
contract created by the parties’ conduct
Restitution (Quasi-Contract)
protects against unjust enrichment whenever the contract law yields an unfair result. Restitution is a remedy of last resort
allows P to recover the “reasonable value of the benefit conferred” NOT the contract price
(generally speaking, restitution gets you less than contract price)
e.g. Ben Affleck orally agreed to work for Sony Pictures for 5 years for $20 million per film. “Gigli” bombed and Sony refused to pay Ben for the film. The Statute of Frauds bars Ben from recovering. – Ben can recover in RESTITUTION to avoid an unfair result (Sony getting ben’s labor for free) he can recover the “reasonable value of the benefit he conferred, NOT the contract price
BRKU - “Bobby Ripped Kim’s Uggs”
(1) P conferred a BENEFIT
(2) P REASONABLY EXPECTED to be compensated for its value
(3) D KNEW or had reason to know of P’s expectation
(4) D would be UNJUSTLY ENRICHED if he were allowed to retain the benefit without compensating the P
Bilateral Contract
Where an offer can be accepted in ANY REASONABLE WAY (very flexible)
Unilateral Contract
Where an offer can be accepted only by performing (very inflexible)
2 fact patterns on MBE
(1) where offer expressly states it can be accepted only by completing performance (offeror is the master of the offer and can create the offer in this fashion)
(2) offer to the public , such as reward, contest or price - e.g. only way to win is by “catching the bad guy” - clearly contemplates acceptance by performance rather than a promise
When a contract suit is brought - first question that must be resolved is WAS THER A CONTRACT?
what three things need to be present for a contract to have been formed?
(1) mutual assent (i.e. offer [that hasn’t lapsed] and acceptance)
(2) consideration
(3) defenses to creation of the contract?
Definition of an “Offer”
Manifestation of an intention to be bound
in other words - for a communication to be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms
may ask 3 questions:
(I) was there an expression of a “promise, undertaking, or commitment” to enter into a contract?
(ii) was there CERTAINTY AND DEFINITENESS in the essential terms?
(iii) was there communication of the above to the offeree?
note: objectively measured - each party is bound to the “apparent intention” that he manifested to the other
Rule for advertisements
generally, an advertisement is NOT an offer
-e.g. catalogs containing price quotations are just invitations for offers, they are announcements of prices at which seller is willing to receive offers
why? they lack definiteness
EXCEPTION: where the ad specifies a QUANTITY, or specifically identifies offeree(s) - e.g. store advertised a coat for $140 on “first come, first served” basis - held valid offer
INDEFINITENESS:
How do courts treat open price terms?
court will read in a “reasonable” price except in a contract for the sale of REAL PROPERTY
article 2 gap fillers
if contract is silent on price or says they will agree later - price is “reasonable price at time of delivery”
INDEFINITENESS:
Quantity Terms
Requirement Contracts
In a contract for the sale of goods, the QUANTITY being offered must be certain or capable of being made certain
Under article 2, REQUIREMENTS CONTRACTS are OK despite uncertain quantity (because it is “capable” of being made certain by reference to objective facts)
HOWEVER, any increase on one’s requirements cannot be UNREASONABLY DISPROPORTIONATE to any stated estimate or any normal or otherwise comparable prior output requirement
for new businesses, article 2 reads in a “good faith” agreement into the contract, must be a reasonably foreseeable figure
Was the OFFER TERMINATED?
What are the ways in which an offer can be terminated?
(1) Lapse
(2) Revocation
(3) Rejection
(4) Death - of either party before acceptance terminates a revocable offer, but not an irrevocable one, like an option
LAPSE
An offer lapses after a STATED TERM or a REASONABLE TIME has passed
REVOCATION
An offer terminates when the offeror revokes the offer
GENERAL RULE: an offer can be revoked any time before acceptance
DIRECT REVOCATION: the offeror indicates directly to the offeree that he has changed his mind about the deal
INDIRECT REVOCATION: the offeror engages in conduct that indicates he changed his mind AND the offeree is aware of the conduct
Four Exceptions where OFFER CANNOT BE REVOKED (ie Irrevocable Offers)
(and a 5th exception in NY***)
(1) Option
(2) Firm Offer
(3) Foreseeable Reliance Before Acceptance (very rare!)
(4) Starting Performance in a unilateral contract (BUT NOT IN NY*** in NY an offer can be revoked all the way up until performance has been completed)
(5) NY*** only, a signed written promise not to revoke IS ENFORCEABLE, even without payment (sort of like a firm offer but doesn’t need to be between merchants)
Option
Irrevocable offers
an OPTION is a promise to keep an offer open that is PAID FOR
NY DISTINCTION***: a signed written promise not to revoke IS enforceable, even without payment
Firm Offer (Article 2)
In a sale of goods, if a MERCHANT promises in a SIGNED WRITING to keep an OFFER OPEN, the offer is irrevocable
** 3 MONTH TIME LIMIT ON FIRM OFFERS
Note: the term “merchant” and “signed” are broadly defined under article 2
e. g. CarMax makes written offer on CarMax letterhead to sell BMW, that says offer will not be revoked for 2 weeks - letterhead counts as “signed writing” so this is a firm offer, cant revoke for 2 weeks
- e.g 2 - if says will leave offer open but doesn’t state time, reasonable time not to exceed 3 months, if states offer but doesn’t state that it will be left open - REVOCABLE, NOT A FIRM OFFER
Foreseeable Reliance Before Accepting
IRREVOCABLE OFFERS
must be FORESEEABLE RELIANCE - e.g. if I offer to sell you a painting and you go buy an expensive frame, I can still revoke bc that wasn’t foreseeable
EXCEPTION**: SUBCONTRACTORS should always know their bid offer is IRREVOCABLE because contractor is going to rely on it before accepting
Starting Performance in a Unilateral Contract
IRREVOCABLE OFFERS
Once you begin to perform, on MBE, the offer is irrevocable, and given a reasonable time to complete performance (note: offeree not bound to complete performance, can walk away before completing)
-however MERE PREPARATIONS do not count as beginning performance and therefore don’t make the offer irrevocable (however, could be foreseeable reliance)
***NY DISTINCTION: in NY an offer can be revoked all the way up until performance has been completed
TIMING: When is Revocation effective?
A revocation is effective only when it is RECEIVED!!
e.g. Monday I offer to sell Jess my Honda, Tuesday I mail her a letter revoking, Wednesday she accepts, Thursday she receives my letter
MY REVOCATION IS NOT EFFECTIVE because she didn’t RECEIVE it until Thursday, and she had already accepted by then
REJECTION
An offer terminates when the offeree rejects it (inappropriate response)
COUNTEROFFER
Operates as a rejection, but MERE BARGAINING DOES NOT
e. g. Chelsea offers to sell her house to Whitney for $500k, Whitney responds, “I will only pay $460k.”
- – THIS IS A COUNTEROFFER and operates as a REJECTION, terminating the offer
e.g.2 - if instead Whitney says “will you take $460k?” - this is mere bargaining and offer is still open, she can still accept
CONDITIONAL ACCEPTANCE
NOT AN ACCEPTANCE AT ALL!!!
It is a REJECTION and operates as a Counteroffer
e.g. Disney asks Bill to be in a new film - he agrees PROVIDED HE GETS TOP BILLING - this is a conditional acceptance, aka no acceptance at all - rejection and counter offer
Acceptance that varies terms of the offer
Common Law: MIRROR IMAGE RULE - acceptance must mirror the offer - if it doesn’t if operates as a REJECTION and COUNTEROFFER
Article 2 (sale of goods) - Acceptance does not have to mirror offer (ie NO MIRROR IMAGE RULE) Offeree's adding or changing terms does not prevent acceptance
If, in a contract for a sale of goods, the offeree changes an adds terms what happens?
BATTLE OF THE FORMS!!! STILL AN ACCEPTANCE (not a rejection) and the OFFEREE's TERM IS INCLUDED IF: (1) both parties are MERCHANTS (2) There is no MATERIAL CHANGE (3) No OBJECTION with a reasonable time
Note: if the term is customary in the industry it is NOT material
BAR TIP: watch to see if offerees terms will make it into the contract
NOTE(not in lecture outline): if one of the parties is NOT a MERCHANT, terms of the offer govern, the additional or different terms are considered to be mere proposals to modify the contract and do NOT become part of the contract unless the offeror expressly agrees
TERMINATION OF OFFER:
DEATH
(remember: Lapse, Revoction, Rejection and Death are all ways in which an offer can terminate)
Death of EITHER PARTY before acceptance terminates a REVOCABLE offer, but not an irrevocable one, like an option
