Formation Flashcards
What are the three elements required to form a contract?
(1) Parties in agreement (Offer + Acceptance)
(2) Intent to be legally bound (presumed in commercial Ks)
(3) Consideration
What kinds of contracts MUST be in writing
Guarantees
Sale of Land
Consumer Credit Agreements
What kinds of contracts require no consideration?
Contracts by Deed (e.g., promises to make a gift in a deed)
How long do you have to sue: Simple Contract v. Deed
Simple Contract: 6 years from breach
Deed: 12 years from breach
When is a communication an “offer”
(1) Offeree has a reasonable expectation that the offeror is willing to enter into a contract on the basis of all material terms contained in their offer
(2) It must be an expression of a promise/commitment to do something (rather than an invitation to treat)
(3) The offer be definite and certain in it’s essential terms
(4) The offeree must have knowledge of the offer
How can you revoke an offer
Directly, by comminicating that to the offeree any time before acceptance.
Indirectly, if the offeree receives (1) correct information, (2) from a reliable source, (3) of acts of the offeror that would indicate to a reasonable person that the offeror is revoking the offer.
When is an offer properly revoked?
When it is received by the offeree
NOTE: Assuming there is no collateral K keeping the offer open.
When can you revoke an offer in a unilateral K?
Before performance has started. Once performance has begun, the K is irrevocable.
How can an offeree terminate an offer?
Express rejection (effective when received)
Counteroffer (but not a mere inquiry)
Lapse of time (either the time stated in the offer, or a reasonable time thereafter)
By operation of law (Death of either party, destruction of K’s subject matter, etc.)
Who may accept an offer?
The person (or class of persons) to whom the offer was addressed.
- Power of acceptance cannot be assigned
- Agents can accept on behalf of principal
What are valid methods of acceptance?
(1) If done in any reasonable manner, by any reasonable medium under the circumstances.
(2) If done as stipulated by the offeror (unless an alternative method is no less advantageous to the offeror)
(3) Unilateral K: Upon completion of the requested act.
(4) Acceptance by conduct (e.g., by actually delivering the goods, assuming the offeror knows about it)
Does acceptance need to be communicated to the offeror?
Bilateral K: Yes (unless waived by seller)
Unilateral K: Acceptance via actual performance, but must notify them within a reasonable time after completion
What is the postal rule?
Acceptance by post is effective AT THE MOMENT OF POSTING, unless:
(1) the letter is not properly addressed/stamped
(2) it was not reasonable for the acceptance to be done by post
(3) The offer stipulated that acceptance is not effective until received
When is acceptance effective if done via email?
The Postal rule applies ONLY to acceptance, and applies ONLY to physical mail.
Acceptance via email and other instantaneous methods of communication are effective when actually received/opened by the offeror.
Who wins the “Battle of the Forms”?
Contract is formed after the last set of terms has been sent and not objected to, and performance has begun.
I.e., whoever fired the last shot wins
What is the effect of a prevail clause (e.g., “our terms in this form will prevail over any terms you seek to introduce)
Generally ineffective, because once the other party sends back their terms on a different form, this is a rejection by counteroffer of the whole original offer.
Does the intent to be legally bound to a contract need to be expressed by both parties?
No, it can be implicit
What is the rebuttable presumption between family members/married couples/social circles when entering into a contract?
That the parties do not intend to be legally bound by their agreements.
It is a rebuttable presumption, but if one party KNOWS the other doesn’t intend to be bound, there is no contract
What is the rebuttable presumption in commercial settings when entering into a contract?
Strong presumption that the parties intend to be legally bound.
Rarely rebutted, since most commercial contracts are in writing
Can a minor be held to a contract?
Any contract entered into by a minor (less than 18) is voidable by the minor, unless they ratify/adopt the contract once they turn 18. There are exceptions to this rule.
Note: Minors can still enforce contracts
Exceptions to the rule that contracts are voidable by minors
Any contract entered into for:
(1) Necessary goods and services at a reasonable price
(2) Employment
(3) Acquiring a permanent interest in property
will be enforceable against the minor.
Can a person who lacks the requisite mental capacity be held to a contract?
The contract is voidable by the person with limited mental capacity ONLY IF the other party knew that when the contract was entered into.
The mentally incapacitated person can ratify the contract if/when they later recover.
Exception to the rule that contracts are voidable by mentally incapacitated people.
Contracts for necessities
When is past consideration sufficient?
When there is an implied understanding of payment coming later, but the amount has not been fixed yet (i.e., if you walk my dog I will pay you something).
Conditions:
- Act must have been done at the promisor’s request
- Parties understood that the act would be compensated for
- Payment would be legally enforceable if it were made in advance
Situations where partial payment of a debt modifies/creates a new contract.
- If the debt is disputed in good faith/is uncertain, then agreeing to fix a number to that debt is sufficient consideration.
- Payment at a different time or place
- 3P makes the payment
- Payment is made via other means (services instead of money)
Elements for Promissory Estoppel
(1) A clear and unequivocal promise (express or implied)
(2) That the promisee relies on
(3) It is inequitable for the promisor to go back on their word
