Formation Flashcards
Contract
Definition: any legally enforceable agreement
express contract
contract created by the parties’ words (oral or written)
implied-in-fact contract
created by the parties’ conduct.
(e.g. person goes into barbershop and sits into the chair)
Restitution (Quasi-Contract)
- Protects against unjust enrichment whenever contract law yields an unfair result.
- Measured by reasonable fair market value of the benefit that P/counter-claimant conferred.
- NOT measured by the k terms. (e.g. $10 mil per movie in k, only did one movie. You don’t automatically get $10 mil. Ct must determine fair mkt value the p gave to the movie company).
- It is the remedy of last resort
Bilateral Contract
Contract where an offer can be accepted in any reasonable way,
i.e. an offer is open as to the method of acceptance.
Unilateral Contract
An offer can be accepted only by performing.
Cannot make a mutual promise an acceptance.
How to determine if a contract is a unilateral contract
Look for 3 magic words:
- offer
- only by
- or a reward offer.
Otherwise, assume it’s bilateral.
Offer
- a manifestation of an intention to be bound
- (as judged by a reasonable person/objective standard).
- first step of agreement formation process
Advertisement Rule
Advertisements are not an offer unless there’s a quantity and they indicate how you can accept
Indefiniteness
terms that are too indefinite to be enforced e.g. reasonable price
Indefiniteness exceptions:
- open price term in sales K
- Court will read in reasonable price for sale of goods but not CL.
- Outputs and requirements kx-
- Must be in good faith. No unfair surprise, e.g. can’t multiply order by 10 in one year. EVEN if in good faith. 1-3% is fine, but multiplying orders is likely not enforceable
Output kx
buyer buys all seller’s inventory
Requirements kx
buyer buys all the buyer needs
Bid
this term always means there’s an offer.
Termination Methods
- lapse of time
- revocation
- rejection
- death
Lapse of time
- as stated in K or after a reasonable time has passed.
- Watch out for dates separated by more than one month.
Revocation rule
- an offer can be revoked any time before acceptance.
- Offer terminates once revoked.
Revocation types
Direct and Indirect
Direct revocation
the offeror indicated directly to the offeree that he has changed his mind about entering the deal
Indirect revocation
The offeror engages in conduct that indicated she’s changed her mind and the offeree is aware of the conduct
e.g. offer to paint house, drive by and see it’s already painted
When offers are irrevocable
- option kx
- firm offers
- foreseeable reliance before vs after acceptance
- Beginning performance of a unilateral contract
Option contract (CL)
a promise to keep the offer open that is paid for. (need consideration). Nominal consideration works
Firm offer (UCC)
Any kind of merchant promises in signed writing to keep an offer open.
UCC Firm offer timeline
- Can’t be more than 3 months unless consideration is paid.
- Firm offers for more than 3 months still valid for the first 3 months.
- If no time period fixed in firm offer, it’s a reasonable time.
Foreseeable reliance before vs after acceptance
- Very rare.
- If person performs before accepting, offer still revocable.
- But, if general contractor relies on subcontractor’s bid, it is irrevocable.
Starting to perform a unilateral contract
- Once offeree starts to perform per unilateral k, offeror cannot revoke.
- But, mere preparation is not the start of performance
Timing of revocation
A revocation is effective on receipt (no mailbox rule)
Effect of rejection of offer
- an offer terminates when the offeree rejects it;
- Watch out for offeree response that looks like acceptance but are actually rejections
- e.g. counteroffers, conditional acceptances, and additional terms.
Counteroffer vs. bargaining
- Operates as a rejection, but mere bargaining does not.
- e.g. I will only pay 100k to 101k offer is counteroffer as to price and rejection.
- But QUESTION like “Will you pay 100k”? is mere bargaining. Period=CO. Question mark=mere bargaining
Conditional acceptance
- Operates as a rejection and counteroffer.
- Agreeing on the condition of some other benefit.
- Not acceptance with article 2 either
Acceptance adding terms/varying offer under CL
Acceptance must mirror the offer (mirror image rule).
If offeree adds terms, it’s a rejection!
UCC Battle of the forms
No acceptance if offeror says acceptance is conditional to mirror image acceptance.
Offeree’s term is included only if:
- both parties are merchants
- Not a material change, and
- no obj to it within a reasonable time.
UCC Battle of the Forms Material Changes
- Disclaimers=material change
- Delivery=not material change, but can keep term out if objected to w/in a reasonable time.
- If fact pattern says term is customary within that industry, it is not a material change.
Death revocation
- Death of either party before acceptance terminates a revocable offer.
- But, death doesn’t automatically terminate a contract, nor an irrevocable offer.
- Obligation goes to the estate of the dead party
This controls the manner of acceptance
language of the offer
Starting performance as acceptance
- Bilateral K
- starting performance is acceptance and carries with it an implied promise to finish the job.
- Unilateral k
- Starting performance is not acceptance; only completing performance is acceptance
Improper performance as acceptance
simultaneous acceptance and breach.
Offeree’s silence as acceptance
- Silence is NOT acceptance.
- But, custom can create duty to speak.
- e.g. custom between parties that silence was acceptance in past kx.
Timing of acceptance
- Generally acceptance is effective when mailed (mailbox rule)
- Accept then reject, acceptance effective.
- Reject then accept, it’s whatever offeror gets first
Exceptions to mailbox rule
- Offer states otherwise
- Irrevocable offer
- Rejection sent first, then acceptance
Consideration
- Definition: Bargained-for legal detriment/benefit.
- Can be a promise in exchange for a promise, performance, or even forbearance
- Can be refraining from something you have a legal right to do
- e.g. reading a certain book
Past consideration
This does not count as consideration
VA past consideration rule
promise to pay for previously performed acts will be enforceable if promise performed at request of promisor
Adequacy of consideration
this is irrelevant in terms of consideration
Contract modification under CL:
- new consideration is required to modify a k.
- Performing a pre-existing duty is not enough.
- Tip: Look for someone asking for more $$ to do the exact same thing that they originally promised to do.
CL contract modification Exceptions
- modification that is fair and equitable in light of an unanticipated change in circumstances;
- a third party offers something to mitigate the issue (This is enforceable.)
When Pre-existing duty rule does not apply
Does not apply when duty is owed to a third person.
UCC contract modifications
- consideration is not req to modify kx.
- Must have good faith.
Consideration and debts
- Partial payment of a debt that is due and undisputed= no consideration.
- Time-barred debt- A written promise to pay a debt, collection of which is barred by SoLs, is enforceable even without consideration
Promissory estoppel as a substitute for consideration
- Foreseeable reliance may make a promise enforceable, even w/o consideration.
- Only choose this as an answer if there is no consideration!
