Formation

Question 1

What determines whether you apply Article 2 of UCC or common law?

Answer 1

Art. 2: sale of movable goods

Common law: all other Ks

If mixed K (e.g. goods and services), look to primary purpose.

Question 2

What statute applies to leased goods?

Answer 2

Art. 2a of the UCC

Question 3

What is a contract?

Answer 3

legally-enforceable agreement (not all agreements are enforceable)

Question 4

What are the two ways contracts can be created?

Answer 4

Express contract: oral or written

Implied contract: created by parties’ conduct

Question 5

What are the two main types of contracts?

Answer 5

Bilateral: offer can be accepted in any reasonable way (e.g. promise for a promise)

Unilateral: offer can be accepted only by performing.

Question 6

What is an offer?

Answer 6

Manifestation of intent to be bound (“I promise” not “I would consider…”)

Needs certainty and definiteness.

Offeree must know of the offer to accept.

Question 7

If there is no price term, can it still be an offer?

Answer 7

Yes, courts will read into it a “reasonable price” except for the sale of real property.

Question 8

What are requirements and outputs contracts and when are they excused?

Answer 8

Requirements K: buyer agrees to purchase all of its requirements from seller

Outputs: seller agrees to sell all of its production to buyer

Only excused if they become unreasonably disproportionate (not merely a fluctuation in the price) to a stated estimate or any normal or comparable prior output or requirements

Question 9

When does an offer terminate?

Answer 9

Lapse: after a stated term or reasonable time

Revocation by offeror: generally any time before acceptance

• Direct revocation: offeror indicates revocation directly to offeree
• Indirect Revocation: (a) offeror engages in conduct that indicates he intended to revoke offer and (b) offeree is aware of the conduct

Question 10

What are the exceptions when an offer cannot be revoked at any time?

Answer 10

• Option: promise to keep offer open in exchange for consideration
• Firm Offer (Art. 2):
  (a) merchant promises
  (b) signed writing
  (c) to keep offer open
  note: can only be a firm offer for 3 months. If no specified time, add in “reasonable” (but not to exceed 3 months)
• Foreseeable reliance before acceptance; generally, offeror excepts offeree to accept first then rely, but not always doable (e.g. contractor using subcontractor’s bid in its bid)
• start of performance of a unilateral contract (not mere preparations)

Question 11

When does a rejection of an offer occur?

Answer 11

• counteroffer: operates a rejection, but mere bargaining does not (e.g. asking if you would take less)

conditional acceptance (e.g. I accept on the condition that…): operates as a rejection and counteroffer

acceptance varying offer (only for common law): mirror image rule- acceptance must mirror offer

Question 12

What is the difference in acceptance varying offers for common law and Art. 2?

Answer 12

Common Law: mirror image rule- acceptance must match offer, unless last shot rule

Art. 2: if both parties are merchants, Battle of the Forms

Question 13

How does Battle of the Forms play out (Art. 2 only) if both parties are merchants?

Answer 13

If both parties are merchants,
then the offer varying acceptance is still a K unless acceptance is expressly made conditional on the original specific terms.

Different Terms: knocked out if they conflict and filled with UCC default terms

Additional terms: included if they do not make a material change (think, surprise!) and no objection by offeror within a reasonable time

Question 14

What happens if one party dies before acceptance?

Answer 14

Death of either party before acceptance terminates a revocable offer but not an irrevocable offer.

Question 15

Can an offer limit how it must be accepted?

Answer 15

Yes, if the offer says it can only be accepted a certain way, it can only be accepted that way.

Question 16

Does starting performance constitute an acceptance?

Answer 16

Bilateral K: it is acceptance and carries with it an implied promise to finish job

Unilateral K: starting performance is not acceptance (but does make offer irrevocable); only completing performance is an acceptance, but can get unjust enrichment for work you did

Question 17

Does improper performance (e.g. offering to paint house orange and then painting it green) constitute an acceptance?

Answer 17

Yes. Both an acceptance and breach.

Question 18

Can offeree’s silence constitute an acceptance?

Answer 18

Generally not, unless it would be reasonable based on prior dealings or course of performance.

Question 19

What is the timing of when acceptance, revocation, rejection are valid?

Answer 19

Acceptance (mailbox rule): when sent (unless it is an irrevocable offer (e.g. firm offer, option) then it is accepted when received
Rejection: on receipt
Revocation: on receipt

If rejection sent by offeree, then acceptance sent, whatever gets there first controls.

Question 20

What is a merchant?

Answer 20

Broadly defined. Pretty much any person who conducts general business (but must be acting in business capacity).

Sometimes required to be a merchant with respect to a particular kind of goods involved in the transaction (e.g. implied warranty of merchantability)

Question 21

What is a quasi-contract?

Answer 21

Not a contract at all, but constructed by courts to prevent unjust enrichment on behalf of one party.

Question 22

Are ads offers?

Answer 22

They are generally not offers unless there is a definite quantity or the offer targeted specific persons (e.g. 50 coats for $100 each to all UT students)

Question 23

What terms are required in a real estate transaction?

Answer 23

• identify the land with particularity

- price

Question 24

Do all terms have to be included in a contract for it to be valid?

Answer 24

No. There must be essential terms only. What “essential” is depends on the type of contract.

Question 25

What terms are required in a sale of goods?

Answer 25

Quantity only

price will be filled in by market

Question 26

What terms are required in an employment or services contract?

Answer 26

• nature of the work

if no duration is listed, it is assumed to be terminable at will

Question 27

If price is not listed in the contract, what is the gap-filler?

Answer 27

a reasonable price at the time of delivery

except for land Ks

Question 28

If time for performance is not specified in the contract, what is the gap-filler?

Answer 28

performance must be within a reasonable time

Question 29

Can vague terms be subject to gap-fillers?

Answer 29

No. Gap-fillers only apply to missing terms. If essential terms is too vague or ambiguous, no contract exists.

*But, part or full performance can make contract valid

Question 30

How can an offeror revoke an offer?

Answer 30

• regular offer: by communicating the revocation to the offerree (revoked when received, not read)
• offer by publication: if offer made by publication, then it can only be revoked by publication through comparable means (revoked when published, not when read)

Question 31

What is the maximum length a firm offer can stay open for?

Answer 31

3 months

• but option contracts can be held option for as long as parties specify

Question 32

What does “starting performance” mean when determining whether a unilateral offer is revocable?

Answer 32

Performance has to actually start.

Mere preparations are not enough, but may constitute detrimental reliance.

Question 33

What happens if a counter offer is given?

Answer 33

It constitutes a rejection and a new offer.

• But a mere inquiry (“Would you mind lowering your price?”) is not a counteroffer

Question 34

What happens if offeree makes a rejection under an option contract?

Answer 34

The option contract does not automatically terminate within the option period unless offeror detrimentally relied on the offeree’s rejection.

Question 35

How are contracts terminated by operation of law?

Answer 35

• at time of death/incapacity of either party (unless option K)
• destruction of proposed K’s subject matter
• supervening illegality

Question 36

Is offeree’s power of acceptance transferable?

Answer 36

Generally no, unless the offeree paid consideration to keep the offer open (e.g. option contract).

Question 37

Is notice required to accept an offer in a unilateral offer?

Answer 37

No notice is required until a reasonable time after performance has been completed,

BUT

no notice required then if (a) offeror waived notice or (b) offeree’s performance would normally come to offeror’s attention within a reasonable time

Question 38

Under the UCC, how can an offer be accepted?

Answer 38

• promise to ship conforming or non-conforming goods

- current or prompt shipment of conforming or non-conforming goods

Question 39

What happens under the UCC if an offer is accepted by shipping non-conforming goods?

Answer 39

The acceptance still stands, but there is a breach by seller unless seller notifies buyer that shipment of non-conforming goods is accommodation.

• the “unless” part does not apply if acceptance was by promise to ship and then non-conforming goods were shipped

Question 40

How does Battle of the Forms play out (Art. 2 only) if one or both parties are non-merchants?

Answer 40

If any party to the K is a non-merchant, additional/different terms do not become part of the contract unless offeror expressly agrees.

Question 41

Under the UCC, when is a sale by auction accepted?

Answer 41

When the auctioneer announces by the fall of the hammer or similar term.

Question 42

Can auctioneer withdraw goods before acceptance?

Answer 42

Only if they are “with reserve”

Question 43

What is required for consideration?

Answer 43

• bargained-for exchange between the parties (benefit to promisor induces detriment to promisee and vice versa)

Question 44

Is past consideration enforceable?

Answer 44

No.

Exception: when past consideration is unenforceable because of a technical defense (e.g. statute of frauds), the obligation will be enforceable if new promise made in writing or if the obligation is partially performed.

Question 45

What is the pre-existing duty rule?

Answer 45

Promising to perform an already-existing duty is not consideration, unless:

(a) promise is to ratify a voidable obligation (e.g. promise to go through with a K despite other party’s fraud);
(b) pre-existing duty is owed to third-person
(c) written promise to pay time-barred (by SOL) debt
(d) honest dispute as to the duty; or
(e) fair and equitable in view of circumstances not anticipated.

Question 46

Does the pre-existing duty rule apply under the UCC?

Answer 46

No, just need a good-faith modification

Question 47

When will a promise to refrain from suing on a claim be valid consideration?

Answer 47

if claimant in good faith believed the claim was valid

Question 48

Is a promise to choose alternative courses illusory?

Answer 48

Yes, unless every available alternative involves legal detriment to the promisor.

Question 49

What is an illusory promise?

Answer 49

When only one party is actually bound to perform

Court wills often read “best efforts” into contracts to make them non-illusory (e.g. “I will buy your house if I get funding”)

Question 50

What is promissory estoppel?

Answer 50

Promise still enforceable without consideration if

(a) promisor reasonably should have expected action/forbearance; or
(b) such action or forbearance is induced.

*But remedy may be limited as justice requires