K formation

Question 1

Offer

Answer 1

An offer is: (1) an promise/commitment to enter in a K, (2) with certain and definite terms, and (3) communicated to the offeree.

Question 2

Certain and definite terms: 
Missing price 
Subject matter (real estate, UCC quantity + requirements Ks quantity, employment/services Ks)

Answer 2

Missing price: CL - no offer. UCC - courts may read in “reasonable” price for sales of goods.
Subject matter:
Real estate: offer must ID the land the price
UCC quantity: must be certain or capable of being made certain (if requirements/output K - B may increase requirements but NOT for a quantity unreasonably disproportionate to prior demands)
Employment/services: duration must be accepted (if not, construed as at-will K), and nature of work to be performed must be specified.

Question 3

Communicated to the offeree

Answer 3

Oferree must have knowledge of the offer

Question 4

4 ways to terminate an offer

Answer 4

(1) Lapse of time
(2) Revocation
(3) Rejection
(4) Death/termination by operation of law

Question 5

Lapse of time

Answer 5

Offer terminates after a stated term or after a reasonable time has passed (e.g. 1 month)

Question 6

Revocation: General rule
Direct revocation
Indirect revocation
When does it become effective?

Answer 6

Offeror may revoke offer anytime before acceptance.
Direct revocation: offeror indicates directly to offeree that he changed his mind
Indirect: revoked if (1) offeror engaged in conduct that indicates he changed his mind, (2) offeree is aware of the conduct (must be communicated by reliable source)
Effective: when received; does not matter if recipient doesn’t read the communication

Question 7

4 exceptions where an offer CANNOT be revoked:

Answer 7

(1) Option K
(2) Merchant’s firm offer
(3) Detrimental reliance
(4) Beginning to perform a unilateral K

Question 8

Option K

Answer 8

An option K is a promise to keep an offer open that is supported by consideration

Question 9

Merchant’s firm offer

Answer 9

If a (1) merchant (2) offers to sell or buy goods in a signed writing, and (3) the writing gives assurances that it will be help open, the offer is not revocable for lack of consideration during the time stated. If no time stated, for a reasonable time NEVER to exceed 3 months.

Note: If the time stated is >3 months, and no consideration, offer is only irrevocable for 3 months. But if the offer is supported, then analyze under an option K

Note: Signature is defined broadly

Question 10

Detrimental reliance

Answer 10

When (1) reliance if foreseeable by the offeror, and (2) the offeree does so rely on the offer to her detriment, then (3) the offer is irrevocable as an option K for a reasonable length of time.

Question 11

Beginning performance under unilateral K

Answer 11

An offer to a unilateral K is irrevocable for a reasonable time necessary to complete performance once performance has begun. Mere preparation is usually not sufficient (but may constitute detrimental reliance).

Note: Offeree can withdraw at any time prior to completion, bc acceptance isn’t made until performance is complete.

Question 12

Rejection (3)

Answer 12

3 general ways to reject an offer:

(1) Express: a statement by the offeree that she does not intend to accept the offer.
(2) Counteroffer: an offer by the offeree to the offeror that contains the same SM as the OG offer but differs in its terms operates as a rejection/new offer. Mere bargaining/inquiry will not terminate the OG offer.
(3) Condition acceptance: operates as a rejection and counteroffer

Question 13

Death/termination by law

Answer 13

Death by either party before acceptance terminates a revocable offer (death does not terminate a K or an irrevocable offer).
Others: destruction of the proposed K’s SM, supervening illegality.

Question 14

Acceptance

Answer 14

A manifestation of assent to the terms of the offer. The language of the offer controls the manner of acceptance.

Question 15

Acceptance of unilateral Ks + notice

Answer 15

Requires complete performance; starting performance is not enough, but may create an option K. Generally, offeree is not required to give the offeror notice that he’s begun performance, but is required to notify him within reasonable time after completion. No notice required if (1) offeror waived it, or (2) offer’s performance would normally come to offeror’s attention within a reasonable time.

Question 16

Acceptance of bilateral Ks (silence, improper performance, mirror image rule)

Answer 16

An offer can generally be accepted in any reasonable manner, either by (1) a promise to perform, or (2) by beginning performance. Under the CL, the acceptance must mirror the terms of the offer.
Silence as acceptance: generally not treated as acceptance; but if because of prior dealings/trade practices it would be commercially reasonable for the offeror to consider silence an acceptance, court may so find.
Improper performance: acceptance AND breach

Question 17

Acceptance under UCC: offer to buy goods for current or prompt shipment (shipment of conforming vs. nonconforming goods)

Answer 17

May be accepted either by a promise to ship or by a shipment of conforming or nonconforming goods.
If nonconforming: shipment of nonconforming goods is acceptance and breach UNLESS the S notifies the B that the shipment is an accommodation. B can accept or reject the accommodation goods. IF B rejects, S is not in breach and may reclaim the goods.

Question 18

Battle of the forms (offeree’s additional or changed terms)

Answer 18

An offeree’s additional or changed terms does not prevent acceptance if (1) BOTH parties are merchants, (2) change is not material, and (3) the offeror does not object within a reasonable time. If the offer expressly limits acceptance to the terms of the offer, a K is formed but additional terms drop out. Material = likely to cause hardship or surprise to offeror.

Question 19

Battle of the forms continued:
If only one merchant
If additional term is “material”
If offeror rejects new terms in reasonable time
If acceptance is made conditional on acceptance of the new terms

Answer 19

If one merchant: K formed but additional terms drop
If additional term is material: K formed but additional terms drop
If offeror rejects new terms in reasonable time: K formed but additional terms drop
If conditional acceptance: rejection; operates as a new offer.

Question 20

Timing of acceptance: mailbox rule

Answer 20

Acceptance is effective at the moment of dispatch, provided that the mail is properly addressed and stamped, unless (1) offer stipulates acceptance is not effective until received, (2) option K is involved (i.e. acceptance isn’t valid until receipt), (3) offeree sends a rejection and THEN sends an acceptance (whichever arrives first is effective), and (4) If offeree sends an acceptance and then rejection, the acceptance is effective UNLESS the rejection arrives first AND the offeror detrimentally relies on it.

Question 21

Consideration

Answer 21

A K requires valid consideration. There must be (1) bargained-for exchange between the parties, and (2) it must be of legal value. A promise for a promise is sufficient.

Acts or forbearance: valid if it benefits promisor
Past/moral: doesn’t satisfy bargain requirement

Question 22

Modifications (CL, UCC, debt)

Answer 22

CL: under the preexisting duty rule, a modification requires new consideration. Except: (1) promise to ratify a voidable K, (2) preexisting duty is owed to a 3P rather than promisor, (3) there’s an honest dispute as to the duty, or (4) new, unforeseen circs make modification equitable.

UCC: Modifications made in GF don’t require consideration.

Debt: partial payment of undisputed debt is not consideration, but early payment, or payment in different form may constitute consideration. Also, if collector is barred from collecting by SOF, but debtor promises in writing to pay it, it’s enforceable w/o consideration.

Question 23

Mutuality / illusory promises (e.g. outputs K)

Answer 23

Consideration must exist on both sides of a K; if only one party is bound to perform, the promise is illusory and will not be enforced.

Outputs K: “All widgets you produce” is OK. “All widgets I want” is illusory.