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Prep Course - Contracts > Formation > Flashcards

Formation Flashcards

1
Q

Key question in the formation of a K, in the course of the volley:

A

At what point do the parties have a legally enforceable K?

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2
Q

The manifestation of an offer can be:

A

oral
written
or
made via conduct

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3
Q

An offer is NOT about

A

Inward thoughts or subjective intentions - IRRELEVANT unless they are reasonably apparent to the other party.

Ex. a seemingly serious offer to sell a piece of property made secretly in jest will be an actual offer.

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4
Q

Preliminary negotiation

A

A generic term that applies to the give-and-take that occurs during bargaining. Does NOT constitute an offer

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5
Q

An invitation for an offer

A

Does not constitute an offer. An advanced state of preliminary negotiation, where the communicating party is closing in on a deal but wants the other party to commit first.

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6
Q

Self-limiting rewards

A

Reward offers that indicate the task to be rewarded can be performed only once.

Ex. “will pay $100 for finding my lost dog”

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7
Q

Open-field rewards

A

Reward offers that indicate the task to be performed can be performed by multiple parties (potentially)

Ex. Carbonic Smoke Ball case, where they promised to pay $100 to anyone who used their product and still got the flu.

EXCEPTION: language in the offer that specifies a limitation on how many can accept it.

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8
Q

General rule - auctions

A

The auctioneers are inviting offers, and the responsive bids are the offers

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9
Q

Exception to the general rule of auctions:

A

If the auction is held “without reserve”, then the auctioneer is making an offer to sell to the highest bidder.

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10
Q

For an offer to be terminated via revocation, the revocation must:

A
  1. occur prior to acceptance
    AND
  2. be effectively communicated.
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11
Q

An indirect revocation will terminate the offeree’s power of acceptance so long as:

A
  1. the offeror has taken definite action inconsistent with the intention to enter the proposed contract
    AND
  2. the offeree acquires reliable information of the offeror’s inconsistent action
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12
Q

Functional equivalents rule

A

When an offer is made by advertisement in a newspaper or magazine (or some sort of public notification), the power of acceptance is terminated when the notice of revocation is communicated by advertisement or other general notification equivalent to that used for the offer and no better means of communication is reasonable.

So, if you offer via newspaper ad, you can revoke the offer via newspaper ad. A particular offeree loses the POA even if he is completely unaware of the revocation

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13
Q

Can an offeror revoke an offer any time before acceptance, even if they promised to hold it open?

A

YES. Dickenson v. Dodds. Even if he expressly promised to hold it open, can revoke at any time.

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14
Q

How to prevent revocation of an offer:

A
  1. common law option contract

2. firm offer under UCC

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15
Q

Three elements to form an enforceable options contract

A
  1. an offer
  2. a subsidiary promise to keep the option open
  3. some valid mechanism for securing enforcement of the subsidiary promise (consideration)
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16
Q

General rule - construction contracts

A

Where a general contractor uses a particular subcontractor’s bid to formulate his own, an implied option contract is created via promissory estoppel; prevents the subcontractor form revoking the bid

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17
Q

UCC “Firm Offer” Rule

A

A merchant can make a firm offer (irrevocable offer) to either buy or sell goods WITHOUT consideration so long as:

  1. the offer is made by a merchant
  2. the offer is made in a writing signed by the merchant,
    AND
  3. the offer expressly states by its terms that it will be held open
    If these requirements met, offer is irrevocable either for stated period of time in the firm offer, or for a reasonable time if no time is specified.
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18
Q

A merchant (UCC)

A

Defined in terms of their special knowledge or skill with respect to the practices or goods involved in a transaction.

A person may be considered a merchant even if he only has knowledge of the goods, or knowledge of the practices.

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19
Q

Shelf life of a firm offer

A

3 MONTHS. Any firm offers that state they will be held open longer than 3 months will become revocable after the first 3 months.

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20
Q

How to establish an irrevocable offer for longer than 3 months?

A

Create a common law option contract. So need a promise to hold it open, plus some form of consideration.

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21
Q

Mirror image rule

A

At common law, requires that acceptance must mirror the terms of the offer, and ANY variation results in a counteroffer and rejection of the initial offer.

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22
Q

Mirror image rule in UCC?

A

NOPE - recognizes a binding contract despite the presence of a nonconforming acceptance in two circumstances:

  1. shipment of nonconforming goods
  2. battle of the forms
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23
Q

When is an offeror bound under a unilateral contract?

A
  1. Only when the offeree COMPLETES performance in accordance with the terms of the offer
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24
Q

Is an offeree bound by a unilateral contract?

A

NO. The offeree is NEVER bound to perform bc he has never promised to perform.

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25
Q

Revocation of the Offer in a unilateral contract - common law

A

Offeror free to revoke the unilateral offer up until the moment when the offeree completes performance.
Unless stated, apply modern rule on MBE, not this.

26
Q

Revocation of the Offer in a unilateral contract - modern rule

A

Once the offeree begins performance, an option contract is created and the offeror may not revoke. HOWEVER - the offeree still needs to complete the performance in order for the offeror to be bound, and offeree could walk away at any time still.

27
Q

Mere preparations - modern rule of unilateral offer revocation

A

An offeror may revoke under the modern rule where the offeree is engaged in “mere preparations” to perform rather than the performance itself.

28
Q

Can a contract leave a price to be fixed by the seller at a later date?

A

YES. UCC 2-305(2) permits a contract to leave the price term to be fixed by the seller at a later date, but requires the price to be set in good faith.if the price is NOT set in good faith - the buyer may himself set a reasonable price - UCC 2-305(3)

29
Q

When only one party is mistaken as to a material aspect of the transaction, is that a defense to formation of the contract?

A

NO. Unless the non-mistaken party knew or should have known of the mistake.

30
Q

Sale of “specialty goods” - exception to the Statute of Frauds

A

If the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the normal course of the seller’s business, no writing is required.

31
Q

Is parol evidence of collateral agreements admissible?

A

YES

32
Q

Part performance of a land contract

A

Taking possession of the land and paying at least part of the purchase price. Is an exception to the Statute of frauds. As long as someone took possession and paid part of the purchase price for land, don’t need a written agreement in order to have an enforceable contract.

33
Q

Does the mailbox rule apply to unilateral contracts?

A

NO. Just bilateral contracts

34
Q

Requirements for acceptance under common law

A
  1. the acceptance must mirror the terms of the offer (mirror image rule),
    AND
  2. the acceptance must be communicated to the offeror
35
Q

How does an offeree communicate acceptance of the offer?

A

If the offer is silent as to the means of communication, the offeree is free to use any reasonable means of transmission

36
Q

A means of transmission (of the offeree’s acceptance) is reasonable if it is:

A
  1. the means used by the offeror
  2. the means customarily used in similar transactions,
    OR
  3. a means of communication that is equivalent in expeditiousness and reliability to the means used by the offeror
37
Q

Three instances where the requirement that acceptance be communicated may not apply:

A
  1. Acceptance by silence
  2. Acceptance by performance
  3. Acceptance by mail or other correspondence.
38
Q

Acceptance by silence

A

Generally, CANNOT constitute acceptance.
Exceptions:
1. where the offeree takes the benefit of the offer’s services with a reasonable opportunity to reject them and with reason to know the offeror’s intention
2. where the offeror has given the offeree reason to understand that acceptance may be communicated by silence, in which case the offeree’s silence will operate as acceptance if he intends as such, AND
3. where, bc of previous dealings or other circumstances, it is reasonable that the offeree should notify the offeror if he does not intend to accept, in which case his silence will operate as acceptance

39
Q

Acceptance by performance

A

In a unilateral contract, acceptance is effective upon the offeree’s completion of the requested performance whether or not the offeree notifies the offeror

40
Q

Mailbox Rule

A

Acceptance by mail is effective upon DISPATCH so long as the acceptance is properly posted, with the correct address and postage amount.

Once it’s sent - creates a binding contract. Offeree cannot withdraw acceptance. ONLY applies to ACCEPTANCES - not offers.

41
Q

In the mail - acceptance is effective when?

A

Upon DISPATCH so long as the acceptance is properly posted with the correct address and postage amount

42
Q

In the mail - offers, revocations, rejections, and counteroffers are effective when?

A

ONLY upon RECEIPT by the other party.

43
Q

Can a party request assurance of due performance and suspend its own performance when there are reasonable grounds for insecurity, and withhold performance pending receipt of assurances of performance by the other party?

A

YES - under UCC 2-702. Would be a justifiable suspension of performance.

44
Q

Can a seller, upon discovering the buyer’s insolvency, withhold delivery except for cash?

A

YES

45
Q

Battle of the Forms

A

occurs when the terms on the buyer’s form doesn’t match the terms in the seller’s form. Dealing with commercial parties.

46
Q

Last Shot Doctrine

A

at common law

The last shot fired controls the terms of the K

47
Q

Dickered vs. Boilerplate terms

A

Dickered - transaction-specific terms, identifying particular goods to be sold, quantities, price. Typically mirrored.

Boilerplate - standard terms that appear in the parties’ respective forms. Much less likely to match

48
Q

Additional terms

A

terms that address a NEW topic, not addressed in the offer

49
Q

Different terms

A

terms that purport to change an existing term of the offer

50
Q

Effect of “additional” terms (and exceptions)

A

automatically become part of the K EXCEPT in 3 circumstances:

  1. the offer expressly limits acceptance to its own terms
  2. offeror objects to the additional terms within a reasonable time
  3. if the additional terms would materially alter the K
51
Q

What constitutes a “material alteration” of the K?

A

terms that would result in surprise or hardship if incorporated without the express awareness of the other party

52
Q

Effect of “different” terms

A

Majority - KNOCKOUT RULE - they knock each other out, omitted from the K

Minority - different terms will be treated as mere proposals for change. Offeror will prevail.

53
Q

Written Confirmations - between merchants

additional and different

A

Additional terms AUTOMATICALLY in the K unless:

  1. they materially alter the K
  2. the receiving party objects to them in a reasonable time

Different terms are mere proposals that the other party is free to accept or reject

54
Q

Written confirmations - NOT between merchants

A

Any additional terms are mere proposals for addition to the K which the receiving party is free to accept or reject.

55
Q

Conditional acceptance

A

If the acceptance is made expressly conditional on assent to the additional or different terms, the nonconforming acceptance will NOT be effective to form a K - will be a counter.

56
Q

What constitutes conditional acceptance?

A

Majority - clear and conspicuous lang that tracks the lang of 2-207 will be treated as conditional acceptance

Minority - the response must clearly communicate that the offeree is unwilling to proceed unless the offeror agrees to the new terms.

57
Q

What if a seller ships nonconforming goods as an ACCOMMODATION?

A

Then it’s not an acceptance - it’s a counteroffer

58
Q

Under UCC, in what 3 ways can a seller accept buyer’s offer?

A
  1. promise to ship conforming goods (acknowledgement)
  2. prompt or current shipment of conforming goods
  3. ship nonconforming goods (counts as both acceptance and breach)
59
Q

Does the UCC impose upon the buyer a duty to return nonconforming goods?

A

NOPE. It’s the seller’s obligation to retrieve the goods or provide instructions to the buyer as to how the goods are to be returned.

60
Q

When a general contractor relies on the bid of a subcontractor to make their own bid, what kind of K is created?

A

An option K

61
Q

Conditional acceptance

A

A condition precedent to acceptance - so no contract will be validly formed unless and until the condition is satisfied.

Ex. the wine sent to the restaurant, where the restaurant owner said they were interested in the wine, but his chief wine steward would have to approve it before any payment would be forthcoming to the wine people. The steward’s approval was a condition subsequent to acceptance, and without his approval, there was no contract.

62
Q

If the contract doesn’t specifically state the payment terms, will the court impose a constructive term?

A

Yes, they will. Courts will allow payment in the form of cash or check, unless a different course of dealing has already been established.

Prep Course - Contracts (10 decks)

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