Formation

Question 1

What are the three elements required to form a contract?

Answer 1

(1) Parties in agreement (Offer + Acceptance)

(2) Intent to be legally bound (presumed in commercial Ks)

(3) Consideration

Question 2

What kinds of contracts MUST be in writing

Answer 2

Guarantees
Sale of Land
Consumer Credit Agreements

Question 3

What kinds of contracts require no consideration?

Answer 3

Contracts by Deed (e.g., promises to make a gift in a deed)

Question 4

How long do you have to sue: Simple Contract v. Deed

Answer 4

Simple Contract: 6 years from breach
Deed: 12 years from breach

Question 5

When is a communication an “offer”

Answer 5

(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

Question 6

How can you revoke an offer

Answer 6

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.

Question 7

When is an offer properly revoked?

Answer 7

When it is received by the offeree

NOTE: Assuming there is no collateral K keeping the offer open.

Question 8

When can you revoke an offer in a unilateral K?

Answer 8

Before performance has started. Once performance has begun, the K is irrevocable.

Question 9

How can an offeree terminate an offer?

Answer 9

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.)

Question 10

Who may accept an offer?

Answer 10

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

Question 11

What are valid methods of acceptance?

Answer 11

(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)

Question 12

Does acceptance need to be communicated to the offeror?

Answer 12

Bilateral K: Yes (unless waived by seller)

Unilateral K: Acceptance via actual performance, but must notify them within a reasonable time after completion

Question 13

What is the postal rule?

Answer 13

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

Question 14

When is acceptance effective if done via email?

Answer 14

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.

Question 15

Who wins the “Battle of the Forms”?

Answer 15

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

Question 16

What is the effect of a prevail clause (e.g., “our terms in this form will prevail over any terms you seek to introduce)

Answer 16

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.

Question 17

Does the intent to be legally bound to a contract need to be expressed by both parties?

Answer 17

No, it can be implicit

Question 18

What is the rebuttable presumption between family members/married couples/social circles when entering into a contract?

Answer 18

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

Question 19

What is the rebuttable presumption in commercial settings when entering into a contract?

Answer 19

Strong presumption that the parties intend to be legally bound.

Rarely rebutted, since most commercial contracts are in writing

Question 20

Can a minor be held to a contract?

Answer 20

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

Question 21

Exceptions to the rule that contracts are voidable by minors

Answer 21

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.

Question 22

Can a person who lacks the requisite mental capacity be held to a contract?

Answer 22

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.

Question 23

Exception to the rule that contracts are voidable by mentally incapacitated people.

Answer 23

Contracts for necessities

Question 24

When is past consideration sufficient?

Answer 24

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

Question 25

Situations where partial payment of a debt modifies/creates a new contract.

Answer 25

• 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)

Question 26

Elements for Promissory Estoppel

Answer 26

(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