Formation

Question 1

UCC S.O.F. Exception - Partial Payment

Answer 1

A contract is excepted from the UCC statute of frauds when some amount of payment was made and accepted. A partial payment for separable goods renders the contract enforceable only up to the quantity paid for in full, while a partial payment for an indivisible good renders the entire contract enforceable.

Question 2

UCC S.O.F. Exception - Merchant Memo

Answer 2

Under the merchant exception, a written confirmation need only be signed by one merchant and sent to the other merchant. If the recipient has reason to know the confirmation’s contents and does not object within 10 days, then it is enforceable against both merchants.

Question 3

Implied-in-law (quasi) Contract

Answer 3

In the absence of any contractual relationship between the parties, courts have the power to construct an implied-in-law (“quasi”) contract to prevent unjust enrichment when:

• the plaintiff has conferred a measurable benefit (eg, medical services) on the defendant
• the plaintiff acted without gratuitous intent AND
• it would be unfair to let the defendant retain the benefit without compensating the plaintiff.

Question 4

Implied-in-law (quasi) Contract: Unfair retention of a benefit arises when:

Answer 4

(1) the defendant had an opportunity to decline the benefit but knowingly accepted it

OR

(2) the plaintiff had a reasonable excuse for not giving the defendant such opportunity—often because of an emergency. This allows the plaintiff in a quasi-contract action to recover restitutionary damages equal to the reasonable value of the benefit conferred.

Question 5

Offer to form a bilateral contract - Notice

Answer 5

Notice is not required to effectively accept an offer by starting performance unless the offer so requires. But if the offeree should know that the offeror has no convenient way of learning within a reasonable time that performance has begun, the offeree must notify the offeror. Otherwise, the offeror’s contractual duty will be discharged.

An offer to form a bilateral contract—ie, an offer that invites acceptance by return promise—can be expressly accepted with a return promise or impliedly accepted by starting performance.* Notice is not required to accept an offer by starting performance unless the offer so requires (Choice A). However, if the offeree should know that the offeror has no convenient way of learning within a reasonable time that performance has begun, the offeree must notify the offeror. Failure to do so will discharge the offeror’s contractual duty (Choice D).

Question 6

What does an offer to form a unilateral K invite?

Answer 6

An offer to form a unilateral contract invites acceptance only by performance of a specified act, while an offer to form a bilateral contract invites acceptance by a promise to perform the act. But regardless of whether the offer is for a unilateral or bilateral contract, the offer must be reasonably communicated to the offeree and the offeree must be aware of the offer to accept it. Otherwise, there is no mutual assent to form a contract.

Question 7

When does a unilateral mistake avoid a contract?

Answer 7

Unilateral mistake is not grounds to avoid a contract unless (1) the mistake would make enforcement of the contract unconscionable or (2) the nonmistaken party caused, or knew or had reason to know of, the mistake.

Question 8

Acceptance by Performance

Answer 8

Unless acceptance is limited by terms of the offer, offeree may accept by partial performance (for Bi-Lateral Ks) or complete performance (for Uni Ks)

Question 9

Acceptance - Unilateral Ks

Answer 9

• Complete performance is not required
• Ree is not obligated to start or complete performance
• failure to perform does not give rise to breach b/c no K is formed absent complete performance
• Revocability: Offer may become irrevocable upon the start of performance until completion
• Notice: Offeree is no required to give notice upon start of performance, but must notify offeror within a reasonable time upon completion.

Question 10

Acceptance by Performance - Bi-lateral Ks

Answer 10

Partial performance gives rise to acceptance

Offeree must make offeror aware of acceptance

Question 11

Offers requiring acceptance by promise

Answer 11

An offer requiring acceptance by promise may still by accepted by performance if:

1. Offeree begins to perform; and
2. Offeror knows offeree has begun performance and acquiesces.

Question 12

When an UCC agreement reflects an intent to be bound only if the price is subsequently set, when is the K formed?

Answer 12

Under the UCC, a contract is formed if both parties intend to contract and there is a reasonably certain basis for giving a remedy for a breach. So when an agreement reflects an intent to be bound only if the price is subsequently set, no contract is formed until the price is set.

Question 13

Under the UCC, ff the contract omits a price term or if the parties agree to set the price in the future but fail to do so, when does the UCC supply a reasonable price?

Answer 13

The UCC “fills the gaps” for many missing terms in a contract for the sale of goods. If the contract omits a price term or if the parties agree to set the price in the future but fail to do so, then the UCC supplies a reasonable price at the time of delivery.

Question 14

Mailbox Rule - UCC Firm Offers

Answer 14

Under the mailbox rule, an acceptance that is mailed within the allotted response time is effective when sent unless the offer provides otherwise.

However, this rule does not apply to firm offers, options, or other irrevocable offers. Under the UCC, a merchant’s offer to sell goods is firm (i.e., irrevocable) if it is made in a signed writing that assures that the offer will remain open.

Acceptance of a firm or otherwise irrevocable offer is effective only if it is received by the offeror before the offer expires.

Question 15

When is an offer binding as an irrevocable option K?

Answer 15

An offer is binding as an irrevocable option contract if:
(1) the offeror should have reasonably expected to induce reliance on the offer,

(2) the offeree reasonably relied on the offer,
(3) reliance caused the offeree to suffer substantial detriment, AND
(4) injustice can be avoided only by enforcing the offer.

Question 16

Termination of offer before acceptance

Answer 16

OFFEROR’S REVOCATION:

• Offeror communicates revocation directly to offeree
• Offeree learns information from reliable source that reasonably indicates offer was revoked (eg, house sold to another buyer)

OFFEREE’S REJECTION:

• Offeree communicates rejection directly to offeror
• Offeree’s counteroffer serves as rejection & new offer

LAPSE:

• Time period specified in offer expires
• After reasonable time if no time period specified in offer

BY LAW:

• Either party dies or is adjudicated insane
• Subject matter of offer is destroyed or becomes illegal

Question 17

Battle of the Forms - Both Merchants

Answer 17

Under the UCC, when both parties are merchants, a new or additional term in the acceptance become part of the contract unless:

(1) the offer limits acceptance to the offer’s terms,
(2) the new term materially alters the contract, OR
(3) the offeror objects to the new term within a reasonable time.

Question 18

“Quasi in rem” vs. “in personam” remedy

Answer 18

A “quasi in rem” remedy is effective against a defendant in reference to property, while an “in personam” remedy is effective against a defendant directly. In personam remedies are available for most causes of action, including quasi-contract. A plaintiff can recover in quasi-contract—despite having no contractual relationship with the defendant—if the plaintiff conferred a non-gratuitous and measurable benefit on the defendant that resulted in unjust enrichment because:

the defendant had the opportunity to decline the benefit but knowingly accepted it or
the plaintiff had a reasonable excuse for not giving the defendant an opportunity to decline.

Question 19

Formation of Construction Ks

Answer 19

Question 20

Formation of Construction Ks - Subcontractor’s Bid

Answer 20

A subcontractor’s bid is considered an outstanding offer, so a general contractor is not bound to accept the sub-bid—even if the general contractor is awarded the general contract.

Question 21

Two ways in which an offer can be revoked:

Answer 21

An offer can be revoked by the offeror:

(1) expressly, when the offeror communicates the revocation directly to the offeree OR
(2) constructively, when the offeree acquires reliable information that the offeror has taken definite action inconsistent with the offer.

Question 22

Does the death of one party terminate the offer in an option K?

Answer 22

NO. An offer terminates when the offeror dies or becomes mentally incapacitated—unless the parties formed an option contract. Then the offer will not terminate because consideration was paid to keep the offer open for a specified period of time.

Question 23

What terms will the UCC not “gap-fill”?

Answer 23

• identity of the contracting parties
• subject matter of the contract
• quantity of goods to be sold

Question 24

When a contract for the sale of assorted goods does not specify who will choose the assortment, the UCC imposes a duty on the__________ to make that selection.

Answer 24

Buyer. If the buyer fails to specify the assortment of goods, then the seller can treat that failure as a breach—but only if the buyer’s failure to specify the assortment materially impacts the seller’s performance.

Question 25

What is required for an offer to be a “firm offer” under the UCC?

Answer 25

Under the UCC, an offer to buy or sell goods is irrevocable if:

(1) the offeror is a merchant,
(2) there is an assurance that the offer is to remain open, and
(3) the assurance is contained in a signed writing from the offeror.

However, the irrevocability of a firm offer cannot exceed three months unless the offeree gives consideration to validate it beyond the three-month period.

Question 26

What is an example of an offer being terminated by operation of law?

Answer 26

e.g., when the subject matter of the offer is destroyed.

Question 27

Can a K that specifies the date on which it will terminate end early?

Answer 27

Yes. An offer that specifies a date on which it will terminate will automatically terminate on the specified date. But unless consideration was paid to keep this option open, the offer can be terminated at an earlier date—e.g., if the offeree makes a counteroffer.

Question 28

After a counter-offer, how can the offer be revived?

Answer 28

An offer cannot be accepted after it terminates (e.g., is rejected by the offeree). But the offer can be revived if the offeror conveys that it is still open, which creates a renewed opportunity for the offeree to accept.

Question 29

Elements of valuable consideration

Answer 29

Bargained-for exchange

• Each party’s willingness to enter agreement must be induced by other party’s act/promise

Legal detriment

Each party must relinquish legal right by either:

• performing (or promising to perform) act that is not legally required OR
• refraining (or promising to refrain) from performing legally permissible act

Question 30

Consideration can take the form of:

Answer 30

Consideration can take the form of:

1. A return promise to do (or not do) something OR
2. The actual performance (or nonperformance) of some act

Question 31

Performance under a contract may be conditioned upon a _________________or a ____________________.

Answer 31

Performance under a contract may be conditioned upon:

• a condition precedent (which delays performance) or
• a condition subsequent (which excuses performance).

Question 32

Common Law vs. UCC

Answer 32

Question 33

UCC Relaxed Standard re Formation of K

Answer 33

Under the UCC, a contract is formed if the parties intended to contract and there is a reasonably certain basis for giving a remedy—even if the moment of formation is uncertain.

Question 34

Under the doctrine of promissory estoppel, a gift promise is enforceable if three requirements are met:

Answer 34

1. the promisor should reasonably expect the promisee to rely on the promise
2. the promisee detrimentally relies on the promise and
3. injustice can be avoided only by enforcement of the promise.

Question 35

UCC § 2-202 provides that, although a final written expression of an agreement may not be contradicted by any prior agreement, it may be explained or supplemented by _________, ____________, ____________.

Answer 35

Course of dealing, trade usage, or course of performance.

A course of dealing, when inconsistent with a trade usage, controls.

Question 36

Auction Ks

Answer 36

Auction contracts

Goods in lots: Each lot of goods is sold in separate sale

Type of auction

• Reserve (default type) – auctioneer may withdraw goods prior to completion of sale
• No-reserve (special announcement required) – goods cannot be withdrawn after auctioneer calls for bids unless no bid is received within reasonable time

When seller bids: Winning bidder can avoid sale, or pay price of last good-faith bid, if auctioneer:

• knowingly accepts bid by or on behalf of seller OR
• procures seller’s bid to drive up price of goods

Exceptions – seller can bid:

• at forced sale OR
• if seller gives notice reserving right to bid

Completion of sale

• When auctioneer announces end of sale (eg, by fall of hammer)
• If bid is made contemporaneously with end-of-sale announcement, auctioneer has discretion to continue bidding

Question 37

Special UCC Rules for goods sold at auction

Answer 37

If goods are auctioned in lots, each lot represents a separate sale. Whether the goods can be withdrawn once the auctioneer calls for bids depends on the type of auction:

• at a reserve auction—which is presumed unless a no-reserve action is announced—the auctioneer may withdraw goods from auction prior to completion of the sale
• at a no-reserve auction—which must be specifically announced—goods cannot be withdrawn from auction after the auctioneer calls for bids unless no bid is received with a reasonable time

Question 38

During a reserve auction, can the auctioneer withdraw goods from auction prior to completion of the sale (e.g., before the auctioneer’s hammer falls)?

What about at a no-reserve auction?

Answer 38

During a reserve auction, the auctioneer may withdraw goods from auction prior to completion of the sale (e.g., before the auctioneer’s hammer falls).

At a no-reserve auction, goods generally cannot be withdrawn after the auctioneer calls for bids.

Question 39

Effect of new terms in reply to offer (visual)

Answer 39

Question 40

Is consideration

Question 41

When may a bidder retract his bid?

Answer 41

A bidder may retract his bid until the auctioneer announces the completion of the sale.

As with any other revocation of an offer, the bidder must convey his withdrawal to the auctioneer. So long as the withdrawal is communicated to the auctioneer prior to the auctioneer announcing the completion of the sale, the auctioneer must allow the bidder to withdraw his bid.

Regardless of whether the seller does or does not retain the right to withdraw an item from sale at the auction (i.e., the sale is with or without reserve), the bidder retains the right to withdraw a bid.

Question 42

How do you revoke an advertisement that is a general publicized offer?

Answer 42

An advertisement is a general offer, not a mere invitation to negotiate, if it (1) specifies the subject matter, quantity, and price and (2) places a reasonable limit on who may accept the offer.

A revocation of a general offer is only effective if it is publicized at least as heavily as the offer.

Question 43

Is an auctioneer’s acknoledgement of a bid constitute acceptance of that bid?

Answer 43

NO.

The auctioneer’s acknowledgement of a bid does not constitute acceptance of that bid.

Instead, a bid is treated as having been rejected by the auctioneer’s acknowledgement of a higher bid.

Consequently, the withdrawal of a higher bid does not automatically reinstate the next lower bid.