Formation Flashcards
Offer - Definition
An objective manifestation of a present intent to K
Demonstrated by a promise, undertaking, or commitment; definite and certain terms; and communication to offeree
Offer - Objective Manifestation of Intent
Offer must give offeree a reasonable expectation that offeror is willing to enter into a K
Would a reasonable person believe the communication is an offer inviting acceptance?
Offer - Definite and Certain Terms
Terms included must be sufficient to allow a court to enforce the K (e.g. quantity, time for performance, price, etc.)
Vague terms or terms of negotiation are insufficient
Offer - Communication to an Identified Offeree
Offeree must know of the offer and have the power to accept it
Offer - Communication to an Identified Offeree (Advertisements)
Generally not offers, unless highly specific as to quantity and clearly indicate who may accept
Offer - UCC Offers
Quantity must be certain or capable of being made certain
Missing terms OK, particularly price, if parties clearly intended to make a K and there is a reasonably certain basis for giving a remedy
Termination of Offer - Definition
An offer may be terminated by an act of a party or by operation of law
Termination of Offer - Acts of Parties (3)
1) Revocation by Offeror
2) Rejection by Offeree
3) Lapse of Time
- Offeror can set a time limit for acceptance, at the end of which offeree’s power of acceptance automatically terminates
Termination of Offer - Operation by Law (3)
1) Death or insanity of either party
2) Destruction of proposed K’s subject matter
3) Supervening Illegality
Revoking Offers & Irrevocable Offers - Definition
An offeror may revoke her offer, which effectively terminates the offer and the offeree’s power of acceptance
Revoking Offers & Irrevocable Offers - Methods of Revocation (2)
1) Unambiguous statement by the offeror to the offeree
2) Oferee becomes aware of offeror’s unambiguous conduct or statement indicating an unwillingness or inability to contract
Revoking Offers & Irrevocable Offers - Limitations on Revocation
Revocation is only effective upon receipt by offeree
Offer cannot be revoked once it has been accepted
Revoking Offers & Irrevocable Offers - Limitations of Revocation (Unilateral Ks)
Start of performance makes the offer irrevocable for a reasonable time to complete performance
Start of performance must go beyond mere preparation
Revoking Offers & Irrevocable Offers - Irrevocable Offers (Option K)
Promise to keep an offer open
Common Law: Consideration required in exchange for option
UCC: No consideration required
Revoking Offers & Irrevocable Offers - Irrevocable Offers (UCC Firm Offers)
A merchant’s offer made in a signed writing that assures the offer will be held open is irrevocable for the time stated: no consideration is required
If no time stated, irrevocable for up to three months
Revoking Offers & Irrevocable Offers - Irrevocable Offers (Detrimental Reliance by Offeree)
Reliance must be reasonable
Rejection of Offer - Definition
Revocation by offeree terminated the offer and the offeree’s power of acceptance
Rejection of Offer - Methods (4)
1) Express Rejection
2) Counteroffer
3) Conditional Acceptance
4) Acceptance with Additional Terms
Rejection of Offer - Express Rejection
Effective when Received
Rejection of Offer - Counteroffer
Terminates original offer and becomes a new offer
- Bargaining or requests for information are not counteroffers
Rejection of Offer - Conditional Acceptance
Terminates original offer and becomes a new offer (look for terms such as “if,” “provided,” “so long as,” etc.)
- E.g. offer to mow lawn; offeree says “I accept if you also trim the hedges”, this is a new offer; offeree is now offeror
Rejection of Offer - Conditional Acceptance (Exception)
A condition that would be included anyway (e.g. implied warranty) does not terminate original offer
Rejection of Offer - Acceptance with Additional Terms (Common Law)
Acceptance must MIRROR the offer; acceptance with additional terms creates a rejection and counteroffer
Rejection of Offer - Acceptance with Additional Terms (UCC - K Involving Non-Merchant)
Terms of offer govern, K is formed, but additional terms are excluded and considered mere proposals to modify the K
Rejection of Offer - Acceptance with Additional Terms (UCC - Both Parties are Merchants)
Additional terms become part of the K unless certain exceptions apply
Acceptance - Definition
Acceptance arises upon offeree’s clear expression of assent to the terms of the offer
- Offeror Controls Method: Offeror is the master of the offer and can dictate the manner by which an offer is accepted
Acceptance - Mirror Image Rule (Common Law)
Acceptance must mirror the offer’s terms; it cannot add, omit, or change terms of the offer
Acceptance - UCC Acceptance (2 Issues)
1) Acceptance with Additional Terms
2) Acceptance by Shipment
Acceptance - UCC Acceptance (Acceptance with Additional Terms - Are both parties merchants? Yes!)
K is formed with additional terms unless either:
a) Additional terms MATERIAL change the offer,
b) Offer expressly limits acceptance to the offer’s terms, or
c) Offeror objects within a reasonable time
Acceptance - UCC Acceptance (Acceptance with Additional Terms - Are both parties merchants? No!)
K is formed, but without additional terms
Acceptance - UCC Acceptance (Acceptance by Shipment)
A merchant may accept an offer to buy goods either:
a) providing a promise to ship goods (usually written confirmation), or
b) Promptly shipping conforming goods
- Shipment of Nonconforming goods: acts as an acceptance, but may give rise to breach
Mailbox Rules - Definition
Offers and acceptance transmitted via mail (however, the mailbox rule does not apply to email) become effective upon either dispatch or receipt
Mailbox Rules - Offers
Effective upon receipt
- Rejections and counteroffers are also effective upon receipt
Mailbox Rules - Acceptance
Effective upon dispatch
Mailbox Rules - Method of Communication
Unless otherwise provided, offers invite acceptance in any reasonable manner under the circumstances
- E.g. A sends offer to B via e-mail and B accepts via text message; valid K had been formed
- If acceptance is via instantaneous two-way communication (e.g. phone), it is treated as if the parties are in each other’s presence
Mailbox Rules - Limitations
If the offer stipulates acceptance is not effective until received, the offer controls (i.e. offeror can opt out of mailbox rules)
If offeree send both a rejection and acceptance, first to arrive controls
Mailbox Rules - Limitations (Option Ks)
Acceptance is effective upon receipt
Mailbox Rules - Revocation
Revocation is effective only upon receipt (i.e. mailbox rules do not apply)
Acceptance by Performance - Definition
Unless acceptance is limited by terms of the offer, offeree may accept by partial performance (for bilateral Ks) or complete performance (for unilateral Ks)
Acceptance by Performance - Unilateral Ks
Complete performance required
- Offeree 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
Acceptance by Performance - Unilateral Ks (Revocability)
Offer may become irrevocable upon the start of performance until completion
Acceptance by Performance - Unilateral Ks (Notice only required upon Completion)
Offeree is not required to give notice upon start of performance, but must notify offeror within a reasonable time upon completion
Acceptance by Performance - Bilateral Ks
Partial performance gives rise to acceptance
- Offeree must make offeror aware of acceptance
Acceptance by Performance - Offers Requiring Acceptance by Promise (2)
An offer requiring acceptance by promise may still be accepted by performance if:
1) Offeree begins to perform; and
2) Offeror knows offeree has begun performance and acquiesces
Note: An offer may always limit methods of acceptance
Consideration & Substitutes for Consideration - Definition
Consideration is bargained-for exchange of legal value between parties; there must be a benefit to promisor or detriment to promise
- Required element of every K
Consideration & Substitutes for Consideration - “Bargained-for Exchange”
The promise must induce the detriment and the detriment must induce the promise
Detriment = an obligation to do or refrain from doing something one would otherwise not be obligated to do or refrain from doing
Consideration & Substitutes for Consideration - Bargained-for Exchange (Pre-existing Duty)
A promise to perform a pre-existing duty or obligation generally does not constitute consideration
Consideration & Substitutes for Consideration - Bargained-for Exchange (Pre-Existing Duty - Exception)
Promise to pay a debt after the SOL has run is binding
Consideration & Substitutes for Consideration - Invalid Consideration
The following do not constitute consideration:
1) Promises of gifts or conditional gifts
2) Illusory Promises: A promise where there is no obligation to perform (e.g. A promises to do B’s chores if he has time)
