Intro, Offer, Acceptance, & Consideration

Question 1

Governing law: CL or UCC?

Answer 1

a) UCC governs “sales of goods”. If UCC applies, it trumps any contrary common law rule
i) Sales = any transaction in which the seller transfers title of goods to buyer
ii) Goods = any movable item. Does not include intangibles (goodwill, IP), money, legal claims, services, or real property

b) Hybrid cases (involves both sale of goods + service contracts (Ks)) –> determined by predominate purpose of the transaction (Majority rule)
i) Contract language – Was K described as a goods K?
ii) Nature of supplier’s business – i.e., Best Buy sells goods
iii) Value of goods v. services – i.e., $30 in goods but $2 services?

c) Even if UCC, common law still applies unless UCC contradicts it

Question 2

Offer

Answer 2

To be an offer, party’s communication must meet two elements:

a) Outward manifestation (oral, written, or via conduct) +
b) Signal that acceptance will conclude the deal (power of acceptance)

Question 3

Multiple Offers

Commercial Advertisements

Answer 3

Commercial Advertisements

i) American Rule: Ads, catalogs, price lists are invitations for offers, since responses may exceed available supply of goods or services
(1) Exception: Language that identifies who gets limited supply of goods even if there is an excess demand (i.e. first come, first served, or first 10 customers)

Question 4

Multiple Offers

Reward Offers

Answer 4

Reward Offers = Offers because they are communications that promise $ in exchange for performance of specific tasks

Question 5

Termination of Offers

4 ways to terminate

Answer 5

Offer creates the power of acceptance in the offeree, 4 ways to terminate this power:

• lapse
• death or incapacity
• revocation of offer by offeror
• termination by offeree’s rejection

Question 6

Termination of Offers:

1. Lapse

Answer 6

a) Lapse: after time stated in offer or after a reasonable time. Reasonable time determined by:
i) Subject matter and market conditions; and
ii) Degree of urgency and means of transmission

Question 7

Termination of Offers

2. Death or Incapacity

Answer 7

Death or incapacity

Question 8

Termination of Offers

3. Revocation of offer by Offeror

Answer 8

Offeror may revoke an offer at any time, for any reason, but must meet 2 requirements:

(1) Must be revoked before acceptance; +
(2) Revocation must be communicated to the offeree
(a) Direct revocation – offeror directly communicates to offeree an intent to withdraw the offer
(b) Indirect revocation – 2 requirements:
(i) Offeror takes action that is inconsistent with the intent to go through with the offer and
(ii) Offeree learns of such action from reliable source

Question 9

Termination of Offers

3(a). Revocation of offer by Offeror: Preventing Revocation

Answer 9

(1) Option Contract (common law) - Elements
(a) Offer +
(b) Separate promise to keep it open +
(c) Valid mechanism for enforcing subsidiary promise –> consideration is most common way

(2) Reliance/Construction: Courts will hold offers open when the offeree has detrimentally relied on them, such as when general contractors rely on subcontractor’s bids in forming their own bids on a project.

(3) Firm offer under UCC – Irrevocable offer by merchant to buy or sell goods without consideration
(a) 3 requirements:
(i) Offer made by a merchant +
(ii) In a writing signed by the merchant +
(iii) Expressly stating it will be held open
(b) Irrevocable for time stated or reasonable time, BUT no longer than 3 months even if stated otherwise
(i) Longer than 3 months need consideration

Question 10

Termination Of Offers

4. Termination by Offeree’s Rejection 3 ways

Answer 10

i) Outright rejection

ii) Rejection via counteroffer: counteroffer = rejection + new offer
(1) Offeree can test the waters by making a mere inquiry (e.g., 10k isn’t out of the question but it’s a little high given the age, would you consider a lower offer?)

iii) Rejection via non-conforming acceptance
(1) Mirror image rule (common law): Acceptance must mirror the terms, and any variation is counteroffer (and rejection of initial offer)

Question 11

Offer and Acceptance under Unilateral Contracts

Answer 11

Offer seeking performance in return (i.e., reward offers)

 i) Common Law --> Offeror free to revoke until offeree completed performance
 ii) Modern / Majority rule --> Once offeree begins performance, an option K is created and offeror may not revoke

Question 12

Offer and Acceptance under Bilateral Contracts

Answer 12

Offer seeking acceptance by a promise. A promise is being exchanged for a promise
i) Once promises are exchanged –> both parties are bound

Question 13

Two General requirements for acceptance under CL

Answer 13

a) Acceptance must mirror terms of offer +

b) Acceptance must be communicated to the offeror
i) If offer stipulates means of communicating acceptance, do that, if silent, free to use any reasonable means of transmission.

Question 14

2 Exceptions to requirement that acceptance be communicated

Answer 14

i) Unilateral K: Acceptance is effective only by completing performance, no communication is required unless offer provides otherwise
ii) Acceptance by mail
(1) Common law Mailbox Rule: acceptance by mail is effective upon dispatch if properly posted.
(a) Applies only to acceptances and not to any other communication (i.e., not to revocations or rejections)
(b) Default rule – it applies unless the offer provides otherwise

 (2) Mailbox Rule and Option Contracts: mailbox rule is not applicable and acceptance is only effective upon receipt (Restatement/majority rule)
 (3) Hard Case: Offeree mails rejection and then mails acceptance --> Mailbox rule won’t apply, whichever reaches offeror first controls

Question 15

UCC Acceptance by Seller’s Shipment

Answer 15

a) Seller can accept Buyer’s offer to purchase goods for prompt or current shipment in 3 ways:
i) Promise to ship goods in conformity with offer;
ii) Prompt or current shipment of goods in conformity;
iii) Shipment of non-conforming goods = valid acceptance of offer, simultaneously an acceptance and breach
(1) Exception: If seller sends non-conforming as “an accommodation,” –> it’s a counteroffer- buyer free to accept or reject. Keeping = accepting

Question 16

Battle of the Forms

UCC 2-207 Generally

Answer 16

a) Buyer places order (offer), and seller’s acceptance form contains terms which differ or are absent from buyer’s order –> unless acceptance is expressly made conditional on assent to the additional / different terms (conditional acceptance), the nonconforming acceptance = an effective acceptance of the offer and a valid, enforceable K is formed
i) Dickered terms: Those specific to agreement (quantities, price) generally will match
ii) Boilerplate terms: Standard terms that appear in parties’ respective forms (arbitration, warranties) less likely to match

Question 17

Battle of the Forms

UCC 2-207: Transaction w/ at least 1 consumer

Answer 17

i) Transaction involving at least 1 consumer : Additional/different are mere proposals for addition to K
(1) Not part of K unless offeror expressly agree to the additional terms

Question 18

Battle of the Forms

UCC 2-207: Transaction where both parties are MERCHANTS

Answer 18

Transaction where BOTH parties are merchants: difference between additional and different terms

(1) Additional terms become part of K unless:
(a) Offer expressly limits acceptance to terms of offer;
(b) Offeror objects to the additional terms within reasonable time; OR
(c) The additional terms would materially alter the K
(i) Would result in surprise or hardship if incorporated without express awareness of the other party

(2) Different terms (purport to change the existing term of offer)
(a) Knock out rule (Majority): Omit BOTH offeror’s original provision and the offeree’s differing provision
(b) Minority: Different terms of the acceptance treated as mere proposals for addition

Question 19

Conditional Acceptance

Answer 19

i) If acceptance is made expressly conditional on assent to additional / different terms –> nonconforming acceptance is NOT effective to form a K, it’s a counteroffer
ii) What constitutes conditional acceptance?
(1) Majority Rule: Clear and conspicuous language that tracks the language of 2-207
(2) Minority Rule: Response must clearly communicate that offeree is unwilling to proceed unless and until offeror agrees to the new terms

Question 20

Consideration Generally

Answer 20

Promise is unenforceable unless it is supported by consideration

Question 21

Consideration

Majority/ Restatement Rule

Answer 21

Promise is supported by consideration if based on a bargained for exchange –> there was something (goods or services) that was promised and bargained for by the parties

Question 22

Consideration

Benefit/Detriment

Answer 22

(minority rule) Whether there is a benefit to the promisor and/or a detriment to the promisee

Question 23

Consideration

Legal Detriment Test

Answer 23

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

Question 24

Consideration

Inadequacy of consideration

Answer 24

If consideration is present but it’s too small compared to the value of the promise its exchanged for –> no defense, courts don’t police the equivalence or fairness of the exchange

Question 25

Consideration

Insufficient Consideration

Answer 25

No consideration for a particular promise, no bargain

Question 26

Consideration

Illusory Promises

Answer 26

Promise of performance that leaves performance to the discretion of the promising party –> does NOT constitute consideration

Question 27

Consideration

Gratuitous Promises

Answer 27

Promise to make a gift, generally unenforceable due to insufficient consideration

 a) Exception: Gratuitous transfers are legally binding, require present intent to give gift + actual or symbolic delivery
 b) Recitals of consideration (ex: for value received I promise to pay you $1,000 on Monday) --> If no value received, no consideration
      i) Minority will enforce option Ks based on a signed writing

Question 28

Consideration

Past or Moral Consideration Generally

Answer 28

A promise in exchange for something already given or already performed is NOT supported by consideration.

Question 29

Consideration

Past or Moral Consideration Generally: Exceptions (these are enforceable

Answer 29

i) A written promise to pay a debt that has expired past the statute of limitation;
ii) Written promise to pay a debt discharged by bankruptcy;
iii) Material benefit test (minority rule): promise made based on past benefits enforceable if:
(1) Promisee conferred the benefit on the promisor (not a third party); +
(2) The benefit is material
iv) Exception: Not enforceable if benefits were previously contracted for by the promisor

Question 30

Consideration

Past or Moral Consideration: Promissory Estoppel 4 Requirements

Answer 30

Promisee that reasonably relies to his detriment on gratuitous promise may be able to enforce that promise even without consideration. 4 Requirements:

i) A promise
ii) Foreseeable reliance
iii) Actual reliance (must be induced by the promise)
iv) Injustice without enforcement