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Contracts > Formation > Flashcards

Formation Flashcards

1
Q

In order to form a contract you need what?

A

Offer, acceptance and consideration

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2
Q

A contract for the sale of land/for services neglects to include the price. Is that an issue?

A

Yes, an offer under common law must state the price in order to be valid

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3
Q

A contract governed under the UCC (goods) does not include a price term. Will the offer be valid and, if so, what should the parties assume about price?

A

Inclusion of a price term is NOT necessary for sale of goods. Where the contract offer is silent on this point, the price will be a “reasonable price at the time of delivery.”

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4
Q

A person makes an offer to sell another person goods for a fair price and in a manner that will be appropriate and fair to the buyer and the seller. Is this a valid offer?

A

No, a vague offer shows insufficient commitment to enter into a contract

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5
Q

Which terms must be included for the sale of goods? And what is the one exception to this rule under UCC?

A
  • quantity terms are usually required for the sale of goods

- the one exception is OUTPUT CONTRACTS where a commitment of exclusivity is sufficient (e.g. all of your X)

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6
Q

In terms of an offer for employment (governed under common law), what term will be implied into the offer of the duration of the contract is not specified?

A

The contract will be termination at will

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7
Q

What must services contracts specify to be a valid offer?

A

The nature of services. Otherwise it’s not a valid commitment

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8
Q

If the contracts terms for performance of a service are too vague to ordinarily be considered an offer, how could this be cured so that a contract may still be created?

A

The vague term may be cured by part performance

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9
Q

Although an advert won’t usually be considered an offer to enter into a contract, what is the exception to this rule?

A

The advert can be an offer if it specifies the quantity the person is selling and EXPRESSLY indicates who can accept

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10
Q

Although a price quotation won’t usually be considered an offer to enter into a contract, what is the exception to this rule?

A

Price quotation may be an offer if provided in response to an enquiry

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11
Q

What terminates an offer?

A
  • lapse of time
  • death
  • destruction of subject matter
  • revocation
  • rejection
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12
Q

A person makes an offer to sell person B goods on 1 Jan 2008. Person B doesn’t commit at first and the offeror believes that the buyer isn’t interested. On 10 Jan 2009 (1 year later), person B tells A that he is accepting her offer. Will this create a valid contract?

A

No, the offer lapsed after a reasonable amount of time.

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13
Q

How can a person revoke their offer?

A

By (1) unambiguous words, or (2) unambiguous conduct

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14
Q

Can an offeror revoke their offer by selling the goods to a third party when the offer is still open for person B (offeree) to accept and the offeree learns of the sale to to third party?

Would the answer change if the offeree wasn’t aware of the sale to the third party?

A
  1. Yes, assuming the offer is not irrevocable, revocation can occur where:
  • the offeree receives correct information
  • from a reliable source
  • that the offeror has done an act that would indicate to a reasonable person that the offeror no longer wishes to make their offer

Then this revokes the offer

  1. It does, however, require offeree awareness. So if A sells and B doesn’t know, the offer isn’t revoked, but B can no longer obtains the goods, so can sue for damages
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15
Q

In what circumstances can an offer not be revoked (options question)?

A
  1. Offeror promises not to revoke the offer/keep it open; AND
  2. That promise is supported by consideration
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16
Q

Does the merchant firm offer rule apply to UCC and under common law?

A

No, only to sale of goods

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17
Q

Under the merchant firm offer rule, does the offeree need to offer consideration to keep the offer open?

A

No. Unlike options, no consideration is required (provided other conditions are met)

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18
Q

In order for a merchant to make a firm offer that cannot be revoked, what requirements need to be in place?

A
  1. An offer to sell goods
  2. Signed, written promise to buy OR sell the goods
  3. The offeror is a merchant (not offeree)
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19
Q

If a merchant makes a firm offer, for how long does it last?

A

Offer cannot be revoked for 3 months.

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20
Q

If a merchant makes a firm offer to a buyer and promises to keep that offer open for 6 months, will this invalidate the offer?

A

No, but the offer will only remain open for 3 months

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21
Q

In order to create a merchant’s firm offer, does the offeror need to promise to keep the offer open?

A

No, the promise only needs to be in relation to buy or sell goods.

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22
Q

If a party relies on another person’s offer in what circumstances can the offer not be revoked?

A
  1. Offeree relies on the older
  2. That reliance is reasonably foreseeable
  3. And the offeree suffers a detriment as a result
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23
Q

For a unilateral contract, when a party starts performance, can the offeror change their mind and revoke the offer?

A

No, the start of performance means the offer can no longer be revoked.

However, actions in preparation to start performance are not the same as performance itself.

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24
Q

Broadly, what are the 4 types of irrevocable offers?

A
  1. Options
  2. Merchant firm offers
  3. Reliance placed on offer
  4. Performance for unilateral contract
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25
Q

When a party makes a counter offer for a contract for services, what is the result?

A

The counter offer = rejection of original offer (which can no longer be accepted) + new offer

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26
Q

On the bar, what words should you look for when the facts are asking about conditional acceptance of an offer (under the rules of rejection)?

A

If, only if, provided that, so long as, but on the condition that…

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27
Q

When a party conditionally accepts an offer, what is the result for a contract governing by the UCC?

A

Rejection + NO new offer.

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28
Q

When a party makes an offer and the offeree accepts but asks to change the terms, what is the result for a contract governing by UCC?

A

It depends on whether the alteration is MATERIAL.

Rule for Non-Material change = contract formed and new terms IS part of it

Rule for Material change = contract formed on the original offer and new terms is NOT part of it

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29
Q

In a contract for the sale of goods (UCC) where a conditional acceptance is involved, can the rejected offer still be accepted? And if so, on whose terms?

A
  1. Yes by words or by conduct (I.e. shipping goods to the buyer.)
  2. It won’t include the condition sought — usually on the original terms of the offer
30
Q

What is the mirror image rule?

A

Requires an absolute and unequivocal acceptance of each and every term of the offer. Any different term in the acceptance makes the response a rejection and counter offer.

31
Q

Under common law (service contract), if a response to an offer adds or seeks to amend the terms, will the offer be accepted with the change?

A

If the change is NON-MATERIAL then this is not a rejection and the non-material change will be incorporated.

Material change = rejection and new offer

32
Q

Does the UCC adopt the mirror image rule?

A

No, it adopts the Battle of the Forms rule

33
Q

For a contract for the sale of goods, if party A (offeror) makes an offer and party B (offeree) accepts but also asks for a material alteration, will party B have accepted the contract and will it be for the original offer or the revised contract terms?

A

Material alteration by offeree = contract, but original offer controls. It does not include party B’s proposed change

34
Q

For a contract for the sale of goods, if party A (offeror) makes an offer and party B (offeree) accepts but also asks for a NON material alteration, will party B have accepted the contract and will it be for the original offer or the revised contract terms?

A

Contract created and non-material change will be part of it

35
Q

What counts as a material change?

A

A change that substantially effects economic risk, benefits or remedies under the contract

36
Q

When a party conditionally accepts an offer if they can alter the terms of the contract, what is the result for a sale of goods contract?

A

UCC rule =

Rejection but NO counter offer. Original contract could still be formed if offeror ships the goods to B anyway

37
Q

What is the rule regarding start of performance when it comes to accepting a contract?

A

Start of performance is acceptance, even where the offeree doesn’t expressly communicate their acceptance

38
Q

For unilateral contracts, does START of performance mean acceptance by the offeree?

A

No, only completion of performance

39
Q

Under the Mailbox rule, when is a communication said to have been “received” by the recipient?

A

(1) It comes to the person’s attention, (2) it is delivered at a place of business through which the contract was made.

40
Q

Under the Mailbox rule, does a person need to read a communication in order for it to have been “received”?

A

No

41
Q

Under the Mailbox rule, if a party wants to accept an offer and he sends the offeror a letter stating the same, at what point is the acceptance valid (when sent by sender or received by offeror)?

A

Acceptance is effective once sent

42
Q

Under the Mailbox rule, if the offeree sends a letter first rejecting the offer, but then changes their mind and sends another letter accepting the offer, which communication controls?

A

Whichever is received first controls

43
Q

To which type of contracts does the Mailbox rule not apply?

A

Option contracts

44
Q

What is the definition for consideration?

A

A bargained for legal detriment

45
Q

In order to incur a legal detriment, does the offeror need to confer an economic benefit?

A

No

46
Q

Is peace of mind valid consideration?

A

Yes

47
Q

Does the amount of consideration matter to form a contract?

A

Generally no. The courts will not enquire into the adequacy of consideration, provided that it meets the test

48
Q

Is gratification of influencing the mind of another sufficient consideration?

A

Yes

49
Q

Are conditional promises valid consideration?

A

Yes, no matter how unlikely the contingency, unless the condition is entirely in the promisor’s control.

50
Q

What is the rule regarding past consideration?

A

A task that’s already been carried out cannot be consideration

51
Q

If party A wants to modify a Services contract where they already have a legal obligation to perform a task under that agreement, can the parties modify without new consideration?

A

No, under common law a modification of a pre-existing legal duty requires new consideration

52
Q

Does the modification of a contact for sale of goods require new consideration?

A

No. Good faith promises are enforceable without new consideration

53
Q

In what circumstances is a promise not to sue valid consideration?

A

Claimant reasonably and in good faith believes they have a valid claim

54
Q

What is a surety contract? And does it require consideration?

A

A promise to pay the debts of another

Requires consideration

55
Q

A surety makes a promise to the creditor to pay the debts of another in three circumstances: (1) before the creditor pays, (2) at the time the creditor pays, or (3) after the creditor pays. Which of these promises count as valid gratuitous consideration?

A

Only (1) and (2)

56
Q

Even if there is no consideration, a rule of consideration substitute exists. What conditions have to be met to satisfy this rule?

A

(1) a written promise to satisfy an obligation for which there is a legal defence, and
(2) promissory estoppel (a promise, reasonable reliance, and unjust not to enforce)

57
Q

When can the parties make a contract restatement (a promise modifying a duty under a contract not fully performed on either side)?

A

(1) modification needs to be fair and equitable in light of the circumstances
(2) the situation was not anticipated by the parties at the time the contract was made

58
Q

If a person lacks capacity, can they still enter into a contract?

A

Generally no (unless it involves necessities under a quasi-contract)

59
Q

Under contract law, when might duress occur?

A

Party threatens to breach an existing contract and the other has not other reasonable source of supply

60
Q

In order to claim that a contract is unconscionable, what must a party prove?

A

At the time of the agreement (not later), the party must feel either:

  • procedural unconscionability with the agreement process
  • substantive unconscionability (like oppressive terms)
61
Q

A non-compete clause in a contract will be valid if it is what three things?

A
  1. There is a reasonable business need
  2. It’s for a reasonable time-period/duration
  3. Reasonable in geographic scope
62
Q

If both parties make a mistake about the contract, in which circumstances can they not perform?

A
  1. The mistake was to facts at the time of the contract
  2. It concerned a basic assumption about the contract
  3. The mistake has a material effect on the contract, and
  4. It would be unfair for the person seeking relief to bear the risk of the mistake
63
Q

What are the four limbs that have to be met to raise misrepresentation in a contract?

A
  1. A party made a statement about existing facts before the contract was entered into.
  2. The statement was false
  3. The statement was material
  4. The statement induced the contract (I.e. reliance)
64
Q

To what type of contracts does the Statute of Fraud defence apply?

A

The following ORAL contracts:

  • surety agreements
  • services not capable of being performed within a year
  • land contracts
  • goods for more than $500
  • marriage contracts
65
Q

For an oral contract dealing with a land transfer (SoF), what type of transfers are not covered?

A

Leases of 1 year or less

66
Q

Under the SoF, a person who enters into an oral agreement to sell goods for +$500 will have a valid defence subject to the following 4 exceptions:

A

Specifically manufactured goods (unsuitable for resale)

Contracts admitted in court

Payment/delivery of goods

Merchant confirmatory memo

67
Q

If the parties make an oral agreement to transfer land, contrary under the SoF defence, how can the plaintiff provide objective proof that the contract is valid?

A

By showing two of three things: (1) improvements to land, (2) payment or (3) possession

68
Q

What counts as objective proof for a service contract that may defeat the SoF defence?

A

Full performance of the service contract (part not sufficient)

69
Q

For any of the contracts falling under the statute of fraud defences, what may also count as objective proof of the existence of the contract?

A

A judicial admission

Or a writing signed by the Defendant

70
Q

What is the Equal Dignity Doctrine?

A

As a matter of law, some contracts must be in writing

71
Q

What is the MEE summary for formation of a contract? There are 6 points you should mention.

A
  1. State whether the contract is governed by common law or the UCC
  2. Formation requires: offer, acceptance and consideration
  3. An offer is an expression of a promise, undertaking or commitment to enter into a contract
  4. The terms of the offer must be certain and definite
  5. The offer must be communicated to the offeree
  6. Once an offer is made, it can be accepted or rejected, unless it terminates.
72
Q

For specifically manufacturer goods, worth over $500, if a manufacturer starts work on creating these goods and the buyer cancels the contract when the manufacturer is 50% complete, what can the manufacturer recover?

A

The full contract price, not just for the amount of work carried out.

Contracts (7 decks)

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