Formation Flashcards
Offer
1) Manifestation of an intention to contract which can be either words or conduct showing commitment.
2) Would a reasonable person believe that his or her assent creates a contract?
Missing Price in offer
1) Ok under UCC, “gap filler” will allow court to provide a reasonable price for the goods
2) voids a land contract, price and description required under SOF
Vague or Ambiguous Material Term of price in Offer
Not an offer under either UCC or CL: court will not fill in price terms that the parties attempted and fail to contract for
“reasonable”, “appropriate”, “fair”
Requirements Contracts: generally
UCC: A contract for the sale of goods can state the quantity of goods to be delivered under the K in terms of the buyers requirements or seller’s output or in terms of exclusivity
Requirements Contracts: not unreasonably disproportionate limitation on increases
Buyer may increase requirements so long as the increase is in line with prior demands
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Not an offer unless
1) reward
2) specific as to quantity and expressly indicates who can accept
Termination of Offer
1) Lapse of time
2) Revocation by offeror
3) Rejection by offeree
4) Death of party prior to acceptance
Offer Revocation
Generally offers may be freely revoked until accepted.
1) unambiguous statement by offeror to offeree of unwillingness or inability to contract OR
2) unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of
Timing: NO MAILBOX RULE, only effective when received
Offer Revocation: exceptions
1) option contract: where offeror has (a) promised to keep offer open AND (b) the promise is supported by consideration
2) Merchant firm offer rule (UCC): (a) 3 month time limit, (b) offer buy or sell goods, (c) signed, (d) written promise to keep the offer open, (e) party is a merchant
3) Reliance: offer cannot be revoked if there has been detrimental reliance by the offeree that is reasonably foreseeable
4) Start of performance of a unilateral contract: Brooklyn Bridge (mere preparation not enough)
Offer rejection
Words or conduct by offeree –> Don’t mess with stuff that is dead
1) counteroffer: terminates the offer and becomes a new offer, distinguish from bargaining
2) conditional acceptance: terminates the offer and becomes a new offer, “if”, “but”, “provided”, “so long as”, “on condition that”
3) additional terms (common law only): mirror image rule, an acceptance that adds new terms is treated like a counteroffer
BUT: under UCC additional terms are ok so long as they are not material
Additional Terms: acceptance under UCC
1) response to an offer that adds new terms is generally treated as an acceptance BUT they cannot show conditional acceptance
2) if both parties merchants, generally the additional term is a part of the agreement
3) EXCEPTIONS:
(a) additional term is not part of the contract between merchants if it materially changes the offer
(b) additional term is not part of the contract between merchants if the offeror objects to the change
4) If one or both parties are not merchants, then the additional term is merely a proposal that i to be separately accepted or rejected
Lapse of Time: Offers
1) Time stated or reasonable under the facts and circumstances
2) If too long offer is dead
Death of a Party Prior to Acceptance
Generally, death or incapacity of either party terminates the offer
EXCEPTIONS:
1) option contract
2) part performance of offer to enter into a unilateral contract
Who can accept an offer
1) person who knows about the offer
2) the person to whom it was made
NOTE: offers cannot be assigned but options can be unless otherwise noted
Acceptance: performance by offeree
This will generally always be an acceptance of both bilateral and unilateral contracts.
Notice of performance is required when
1) offer provides for it
2) when offeree has reason to believe that offeror will not learn of the acceptance
Acceptance: part performance by offeree
Start of performance is an acceptance of an offer to enter into a bilateral contract.
BUT it is not acceptance to enter into a unilateral contract because they require full performance.
Acceptance: Offeree promises to perform
1) Most offers may be accepted by a promise to perform
2) Except for offers that expressly require performance or reward offers
Acceptance: Offeror and Offeree are at different places and there are conflicting communications
1) Mailbox rule: acceptances are valid when put in the mail with the correct address and postage
2) Three rules:
(a) communications are effective only when received
(b) acceptance is effective when sent
(c) if rejection is sent first, ignore rule (b)
Acceptance: Seller of Goods sends “wrong goods”
1) General rule: acceptance and breach
2) Accommodation Exception: Counteroffer and no breach when goods are sent with letter of explanation
Acceptance: Offeree is silent
1) Generally, silence is not acceptance
2) EXCEPTIONS:
(a) custom indicates silent acceptance is reasonable
(b) offeree by words or conduct agrees that silence is acceptance then silence is acceptance
Modification
1) Common law: need consideration (preexisting legal duty rule)
2) UCC: good faith test
3) Common law: contract provisions requiring all modifications to be in writing should be ignored
4) UCC: contract provisions requiring written modifications are effective unless waived
Lack of Capacity
1) infant under 18
2) mental incompetents: lack ability to understand agreement,
3) intoxicated persons if the other party has reason to know of the intoxication
Void/Voidable from lack of capacity
1) person without capacity has right to disaffirm
2) affirmation is implied when retains benefits after reaching capacity
3) liability for necessaries: person without capacity is legally obligated to pay for things that are necessary such as food, clothing, medical care or shelter but that liability is based on quasi-contract law instead of contract law
Statute of Frauds: when applies
MYLEGS
1) Promise in consideration of marriage: not merely a promise to marry but a promise to do something/or not do something if marry
2) Service contract not capable of being performed within 1 year from the time of the contract (does not include lifetime contract b/c could die)
3) Transfer of interest in Land for more than 1 year
4) Promise by executor or administrator to pay obligation of estate from own funds: cannot be out of estate’s funds
5) Sale of goods $500 or >
6) Surety: promise to pay the debt of another
(a) Main purpose exception: when the promise had to do with the main purpose of the contract, think owner of house telling painter she will pay for paint
Statute of Frauds: satisfaction by performance, services and land
1) Services: full performance by either party, partial performance is not enough
2) Land: part performance by buyer of real estate can satisfy the statute, need 2 of the following 3
(a) payment in full or close to full
(b) possession
(c) improvements
Statute of Frauds: satisfaction by writing
1) Common law: all material terms test (who and what) and must be signed by the person to be charged (D)
2) UCC: writing must contain quantity term (how many) and signed by D
3) Merchant Confirmatory Memo rule: both parties must be merchants, and the person who receives a signed writing with a quantity term that claims there is a contract fails to respond within 10 days
Statute of Frauds: satisfaction by Judicial admission
1) admission by D acknowledging the agreement
2) appeared in pleadings, testimony, response to discovery
Statute of Frauds: Equal dignity rule
When authorizing a person to execute a contract for you, the authorization must be in writing if the contract to be signed is within the SOF
Statute of Frauds: Modification
If the modified deal falls under the SOF, then the modification must be in writing
Subject Matter illegal
Contract is void
Purpose is illegal
agreement only enforceable by the person who didn’t know of the illegal purpose
Misrepresentation
1) false assertion of fact
2) concealment of facts
3) no requirement of fraud
Economic Duress
1) improper threat
2) V has no reasonable alternative
Unconscionability
1) applicable to both common law and UCC
2) empowers a court to refuse to enforce all or part of an agreement
3) unfair surprise and oppressive terms when contract was made
4) decided as a matter of law by court, not jury
Ambiguity in words of agreement
NO Contract if:
1) parties use a material term that is open to at least two reasonable interpretations
2) each party attaches different meaning to the term
3) neither party knows or has reason to know the term is open to at least two reasonable interpretations
Mutual mistake of material fact
NO contract if:
1) both parties are mistaken
2) on a basic assumption of fact and
3) the fact materially affects the agreed exchange
NOTE: value not considered enough, because not an assumption of fact
Unilateral Mistake of material fact
1) Generally courts reluctant to allow a party to avoid a contract for a mistake made by only one party
2) EXCEPTION: palpable or obvious mistakes, if the other party to the contract knows or should have known of the mistake, courts grant relief to the mistaken party
3) EXCEPTION: mistakes discovered before significant reliance by the other party
Statute of Frauds: satisfaction by performance, goods
1) Goods: generally part performance of a contract satisfies the SOF but only to the extent of the part performed
2) Specially Manufactured goods exception: if a contract is for the sale of goods that are to be specially manufactured, then the SOF is satisfied as soon as the seller makes a “substantial beginning” of making or obtaining the goods.
