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Contracts > Formation, Offer, Acceptance, Consideration > Flashcards

Formation, Offer, Acceptance, Consideration Flashcards

1
Q

Determining if a contract is for a good or service

A

1) Language of K
2) Nature of Supplier’s business
3) Relative value of goods vs service

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2
Q

Even in a sale of goods, the common law will apply unless:

A

the UCC provides contrary provisions

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3
Q

Three categories of contractual obligations:

A

1) Express: oral or written agreements
2) Implied in fact: formed by the conduct, not by words
3) Implied in law: one party bestows a benefit on another and it is unjust for the beneficiary to retain it.

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4
Q

Quantum Meruit

A

Traditionally, a cause of action for the implied in fact contract to recover reasonable value of the benefit

Today: extended to implied in law contracts

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5
Q

When is a signed writing required?

A

1) Rules pertaining to merchant’s firm offers
2) Statute of Frauds requirement
3) Electronic contracts (electronic signatures are legally sufficient)

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6
Q

Two requirements for something to constitute an offer:

A

1) Outward manifestation (oral, written or made via conduct); and
2) Signal that acceptance will conclude the deal

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7
Q

Preliminary negotiations:

A

Generic term for the give and take during bargaining

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8
Q

Invitation for an offer:

A

Advanced stage. Closing in on a deal, but the party wants the other side to make an offer first.

Ex: “How much do you want to pay for these goods?”

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9
Q

Multiple offerees - Commercial ads:

A

Ads, catalogs and price lists are not offers but rather invitations for offers.
The exception is for ad language identifying a limited number.

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10
Q

Multiple offerees - Reward Offers:

A

1) Self-limiting (only paid once)
2) Open field (could be performed by many)
Exception - limiting how many can accept.

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11
Q

Multiple offerees - Auctions:

A

Auctioneer invites offers and bids are offers unless the auction is deemed “without reserve”

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12
Q

How to terminate power of acceptance - lapse of time:

A

Lapse of time occurs at the time stated or if not stated, within a reasonable time.
Reasonable time factors:
- subject matter and market conditions
- degree of urgency and means of transmission

Face to face conversation rule: generally lapses at end of conversation unless the offer states otherwise.

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13
Q

Termination of power of acceptance by death or incapacity

A

By the death or incapacity of either party.

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14
Q

Termination by offeror’s revocation

A

The American Rule of Free Revocability: an offeror may revoke at any time for any reason so long as:

1) revoked before offer accepted
2) revocation communicated (direct or indirect. Indirect = offeror takes some action inconsistent with intention to go through with the deal and the offeree learns of action through reasonable source).

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15
Q

Revocation of offer made to multiple offerees:

A

Functional Equivalents Rule:

  • offeror revokes by communicating in a functionally equivalent way to the way that offer was made (exception: if better means could be used)
  • Legal effect: terminates power of acceptance EVEN IF offeree unaware
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16
Q

Preventing revocation: Option Contracts

A

Common Law (Dickinson v. Dodds): Could revoke even if offer has been held open.
Today, prevent revocation with
1) Common law option contract:
- Offer; subsidiary promise to keep offer open; and some valid mechanism for enforcing the subsidiary promise

*Sell by date may just be a lapse date and not a promise to keep the offer open

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17
Q

Nuances of option contracts:

A

Signed writing with a false recital:

1) Majority rule: recital is rebuttable
2) Minority rule: option K will be enforced even if recital is false
3) Promissory estoppel: courts will sometimes enforce if there has been detrimental relaince

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18
Q

Construction contracts - General contractor’s reliance on a subcontractor’s bid:

A

If the General Contractor relies on a subcontractor’s bid to formulate his own, promissory estoppel applies to protect general contractor from subcontractor revoking

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19
Q

Preventing revocation with a firm offer under the UCC:

A

UCC 2-205

1) Offer to buy or sell made by merchant
2) Offer made in writing and signed
3) Offer expressly states it will be held open

Becomes irrevocable for the stated time or for a reasonable time.
Has a shelf life of 3 months. If the offer says it is open for 4 months, it is only irrevocable up to 3 months.

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20
Q

Revocation due to offeree’s rejection: terminates power of acceptance:

A

1) Outright rejection
2) Rejection via counteroffer
3) Rejection via non-conforming acceptance (mirror image rule - mirror the terms of the offer and any variation results in counteroffer and is a rejection)

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21
Q

A counteroffer is:

A

A rejection of the offer while creating a new offer.

Exception is Mere Inquiry: test the waters of a different price without rejecting)

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22
Q

Revival of offer after rejection or lapse:

A

By language or conduct restating offer or giving more time to decide

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23
Q

Unilateral vs bilateral contracts:

A

Unilateral K: I make a promise and seek from you only your performance in exchange. Offeror is bound only when offeree’s performance completed and offeree is not bound.

Bilateral K: I make a promise and seek from you a promise in exchange. Once promises are exchanged, both parties are bound.

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24
Q

Revocation of offer in a unilateral K:

A

Common Law: Offeror free to revoke up until moment offeree actually completed performance

Modern Law: Once offeree begins performance, offeror cannot revoke because an option contract has been created. (Courts split over this):

  • Some courts say offeree is still free to abandon
  • Some say acceptance still effective only on completion in accordance with the terms
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25
Q

In a unilateral contract, mere preparation:

A

does not constitute acceptance

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26
Q

Acceptance under common law:

A

Acceptance must mirror terms of offer

Must be communicated to offeror either by stipulated means of accepting or if silent, by any reasonable means

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27
Q

Three exceptions to acceptance being communicated:

A

1) Acceptance by silence
- Offeree takes benefit of offeror’s service w/ opportunity to reject and knows that
- Offeror has given offeree reason to know that acceptance may be communicated by silence
- Based on previous dealings
2) Unilateral K
3) Mailbox Rule

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28
Q

Mailbox Rule:

A

Common law: Acceptance by mail is effective on dispatch
-Applies only to acceptances
Consequences of the rule:
1) Offeror may not revoke once acceptance has been dispatched
2) Once offeree dispatches, acceptance is binding and offeree may not withdraw acceptance
3) Offeror bound, even if acceptance is lost (so long as properly addressed)

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29
Q

Nuances of Mailbox Rule:

A

1) Rule applies to any means of transmission that anticipates reasonable delay between dispatch and receipt
2) Mailbox rule is default unless offer says otherwise
3) Simultaneous dispatch of identical offers - not legally relevant, only effective to create through receipt
4) Mailbox Rule & Option K: Majority says mailbox rule doesn’t apply - only effective with receipt.

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30
Q

Mailbox Rule where both rejection and acceptance mailed:

A

MB Rule doesn’t govern if rejection is mailed first.

  • If acceptance reaches offeror first, there is a contract.
  • If rejection reaches offeror first - no contract, power of acceptance terminates
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31
Q

UCC - How might seller accept buyer’s offer (including by sending nonconforming goods)?

A

1) Promise to ship goods in conformity with the offer
2) Prompt or current shipment in conformity with the offer
3) Shipping non-conforming goods
- If an accommodation, just a counteroffer
- Absent accommodation language, it has the effect of both accepting the offer and forming a binding a contract AND breaching that contract (b/c not all the goods were shipped).

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32
Q

A contract is unenforceable unless supported by a promise, which has:

A

some value and must be exchanged for something else of value, such as counter promise or performance given to promisor by promisee as quid-pro-quo

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33
Q

A gratuitous promise:

A

is a promise to make a gift and lacks consideration.

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34
Q

Difference between “want of consideration” and “failure of consideration”

A

Want of consideration: Absence of a bargained-for exchange. Synonyms: lack of consideration; no consideration; not supported by consideration; insufficient consideration

Failure of consideration: Failure to perform (Breach of K)

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35
Q

When is a promise supported by consideration?

A

If based on a bargained-for exchange

36
Q

What is the legal detriment test?

A

Promisee is doing something he had a legal right not to do or is forgoing some activity that he had a legal right to engage in

37
Q

What is inadequacy of consideration?

A

When a person claims he was not paid enough.

ML: Courts do not police equivalence of fairness.

Exception: Some JX - element of securing specific performance is showing there was a fair or adequate exchange

38
Q

Difference between insufficient consideration and inadequacy of consideration:

A

Insufficient = no consideration, so no bargain

Inadequacy = there is consideration, just not enough so the deal is unfair

39
Q

Illusory promise:

A

Promise to perform that leaves performance at discretion of promisee. Is of no value at all

40
Q

While a promise to make a gift is not enforceable, an executed gift is:

A

legally binding and enforceable

41
Q

Can the requirement of consideration be satisfied by false recitals?

A

No.

In a minority of JX, a written option contract that contains a false recitation will be enforceable.

42
Q

What is a condition on a gratuitous promise, and is it enforceable?

A

A condition is something a promisee must do to avail herself of promisor’s gift. This does NOT amount to consideration.

43
Q

Past or moral consideration:

A

Promise for something already given or performed not supported by consideration.
Exceptions:
1) Written promise to pay debt barred by statute of limitations is enforceable
2) Written promise to pay a debt discharged by bankruptcy is enforceable

44
Q

Minority rule for “material benefit” for past benefit conferred:

A

Will be enforceable so lng as:
1) Promisee conferred benefit on promisor and not a 3d party; and
2) Benefit is material
Limit: Promise on past benefits not enforceable if previously contracted for by promisor.

45
Q

Requirements for Promissory Estoppel:

A

1) A promise
2) Foreseeable Reliance
3) Actual Reliance
4) Injustice without enforcement

46
Q

Contracts under the Statute of Frauds

A

Must be evidenced in writing and signed by party against whom enforcement is sought.

47
Q

MY LEGS (Categories of Statute of Frauds)

A 
Marriage 
Year (Ks that will take longer than 1 year to perform)
Land 
Executor (duty of decedent)
Guarantee or suretyship
Sale of goods at price of $500+
48
Q

Contracts not to be performed within one year:

A

Measuring date: date of making the contract, rather than the date of beginning performance

Within one year, determine whether at time of formation it is at all possible to complete the required performance

49
Q

One year rule for contracts - frequently tested situations:

A

Contracts that can be breached or excused within a year of formation - that is true of ANY contract and is IRRELEVANT.

What matters is not whether the K can be breached within a year, but whether it can be performed in full within a year.

Lifetime or Permanent K of Employment: NOT governed by 1 year rule because death is possible within the first year

50
Q

Types of Land sale contracts

A

Contract for future sale requires signed writing

Present conveyance of land promised for money is outside the land provision (deeds)

Real estate brokerage agreement: Service K, so no SoF issue

Leases of real property: Ks within the land provision

51
Q

Guaranty/Surety Agreements - 2 Exceptions:

A

1) When creditor discharges the original debtor from his obligation on the faith of a 3d party to pay the debt
2) Main Purpose Doctrine: when the main purpose of making a promise is to protect promisor’s own interest

52
Q

When is the statute of frauds requirement satisfied?

A

Writing Requirement: No requirement that entire agreement be in writing. Just need memo during, before or after K formation.

Ex: Letter from one party to a 3d party, written offer, letter from party repudiating but so admitting the agreement

53
Q

What needs to be included in a writing to satisfied?

A

Identity of parties, nature and subject matter, essential terms (price, date of performance)

54
Q

Description of land to satisfy statute of frauds:

A

Old case law required formal description. Today, addresses or other descriptions suffice.

55
Q

Tacking multiple documents together to satisfy the statute of frauds:

A

1) if all documents signed, or a signed document incorporates unsigned documents by reference

2) If not, must have:
- At least 1 signed writing unambiguously establishing contractual relationship
- Signed and unsigned documents clearly refer to same subject matter
- Clear and convincing evidence of acquiescence by the party against whom enforcement is sought

56
Q

(Land Sale Ks) Statute of Frauds can be satisfied sometimes through part performance:

A

Any combination of the following or just one will work:

1) Payment of all or part of purchase price
2) Taking possession
3) Making substantial improvements

57
Q

(One-Year Ks) Statute of Frauds can be satisfied sometimes through part performance:

A

Fully performed: Oral K not to be performed in 1 year becomes enforceable after full performance

Partially performed: Oral K not enforceable. Quantum meruit could get around the partial performance problem

58
Q

(Sale of Goods) Statute of Frauds can be satisfied sometimes through part peformance:

A

Can be satisfied by partial performance

59
Q

Alternative basis for enforcement if Statute of Frauds not satisfied?

A

-Recovery of benefits conferred

-Promissory Estoppel
detrimental reliance; one party promises to create a writing the other party relies;
if no specific assurances of creating a writing but a party relies anyway, a slim majority of cases says you need strong evidence of reliance while a substantial minority says preempted by SoF requirement

60
Q

In court admission to satisfy UCC Statute of Frauds:

A

Admits in pleading, testimony, or otherwise in court that a K was made. Enforceable K up to quantity admitted

61
Q

Merchants’ Confirmation - Satisfying UCC S of F

A

2 Merchants enter oral agreement and one sends a written confirmation.
-S of F satisfied against recipient merchant if he fails to object within 10 days of receipt.

The confirmation is sufficient against the sender if signed with a quantity term
Writing is a confirmation of the K
Sent within a reasonable time of formation
Based on the real agreement between parties
The recipient actually receives it.

62
Q

Signed writing to satisfy UCC statute of frauds:

A

Need: A writing signed by party against whom enforcement is sought. Significant to indicate a K between the 2 parties was made.

Need a quantity term. Without that, K is unenforceable unless: a) other language provides way to determine quantity b) output or requirements K

Under the UCC, a written offer does not satisfy writing requirement unless “firm offer”

63
Q

Partial Performance to satisfy UCC statute of frauds

A

Applies to:

1) Goods for which payment has been both made and accepted
2) Goods which have been received and accepted

Partial performance doesn’t apply unless action by BOTH parties indicates a K

64
Q

Divisible vs indivisible goods:

A

Divisible: only enforceable up to quantity actually delivered and paid for

Indivisble: Partial payment renders K fully enforceable

65
Q

Specially manufactured goods to satisfy UCC S of F:

A

5 Elements:

1) Goods specially manufactured for buyer
2) Goods not suitable for sale to others in ordinary course of seller’s business
3) Seller has substantially begun to manufacture, or made commitments to procure, the goods
4) The action to manufacture/procure occurred under circumstances indicating the goods are for buyer
5) Actions occurred before seller learned of buyer’s revocation

66
Q

How an the UCC statute of frauds requirement be satisfied?

A

1) Signed writing - by the party against whom enforcement is sought. Needs a quantity term
2) Merchant’s confirmation - between 2 merchants, an oral agreement and one sends other an agreement
3) In court admission (judicial estoppel)
4) Partial performance
5) Specially manufactured goods

67
Q

Alternative basis of enforcement for S of F for Construction Ks:

A

Virtually all courts will protect a general contractor via promissory estoppel even if the K was for more than $500 in goods

68
Q

Limits on the Statute of Frauds:

A

Only effect of successful statute of frauds defense is to defeat enforcement of K against non-signing party. K may still be valid for other purposes. Examples:

  • Help establish legal claim apart from Breach of K
  • May help establish a defense to a legal claim apart from breach of K
  • May provide evidence of services already rendered
69
Q

Default Rules:

A

Judges apply default rules when a K doesn’t address an issue, but the parties are free to put the default rules aside in the K.

70
Q

Implied Warranties (default rules)

A

1) Warranty of title
2) Warranty of merchantability
3) Warranty of fitness for a particular purpose

71
Q

Warranty of title:

A

1) Title
2) Rightful transfer
3) No liens attached (free and clear)

Only excluded/modified by:

1) Specific language
2) Circumstances where buyer knows seller doesn’t claim title free and clear

72
Q

Warranty of merchantability:

A

Goods are fit for ordinary purpose of which goods would be used. Only applies to merchants.

Displace by: Conspicuous disclaimer in writing or other language/circumstances that would be understood to exclude it

73
Q

Warranty of fitness for particular purpose:

A

Goods fit for buyer’s purpose
Only applie: seller has reason to know of buyer’s intended use and buyer is relying on seller’s expertise

Negated by: disclaimer in writing, clear and conspicuous or patent defects that are obvious

74
Q

Express Warranties:

A

By seller that the goods will conform to some standard. Seller expressly or impliedly makes them as part of the basis of the bargain.

Includes any affirmation of fact or promise; description of goods; sample or model

Seller doesn’t have to say “warranty” or “guarantee” BUT mere affirmation of value doesn’t create a warranty

75
Q

Missing terms under UCC (default rule)

A

Missing Price Term: reasonable price at the time K was made
Missing time term: Reasonable time
Missing place of delivery: Seller’s place of business

76
Q

Good faith and fair dealing under UCC:

A

Good faith = honesty in fact

Good faith for merchants = honesty in fact and observance of reasonable commercial standards and fair dealing in the trade.

Open price (to be fixed by one party) - fix in good faith.
Satisfaction: Determination of parties performance as complete must be done in good faith.

Open quantity term: Only allowed for output Ks and requirement Ks

77
Q

Output contract:

A

Buyer agrees to buy all of seller’s output of a particular good

78
Q

Requirement contract:

A

Seller promises to provide buyer with all of buyer’s requirements for a particular good.

79
Q

Ambiguous language - objective vs subjective:

A

Objective meaning trumps subjective.

Exceptions:

1) One party has reason to know of other party’s mistake, the innocent party wins
2) At time of contracting both parties have same subjective understanding - then that subjective understanding controls.

80
Q

Parol Evidence Rule:

A

When parties have adopted a writing as their agreement, and intend that the writing represent their full agreement, no evidence can be admitted to vary, contradict, add to, or subtract from the obligations as they are stated in the writing.

81
Q

Parol Evidence Rule exceptions:

A

Fraud, Mistake, Illegality, Duress, Partial Integration, Conditions Precedent

82
Q

The parol evidence rule doesn’t apply to agreements:

A

Entered into subsequent to the execution of the written document, so evidence of such agreements would be admissible.

83
Q

If a contract has a “no oral modifications” clause:

A

evidence of subsequent agreements may be inadmissible, even though the agreement does not violate the parol evidence rule

84
Q

Parol evidence is admissible to:

A

explain or interpret the terms of a written K or ambiguous terms

85
Q

When would evidence of conditions precedent be barred by parol evidence rule?

A

When the parties orally agreed to a condition precedent and evidence that the condition failed where both parties’ obligations would be discharged by the failure of that condition.

Contracts (6 decks)

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